Phusion Projects was accused by the Federal Trade Commission of mislabeling its flavored malt drink Four Loko. The FTC investigated the company’s implied claims that consumers could safely drink one 23.5-ounce can at a sitting and that each can contained the alcoholic equivalent of one to two 12-ounce beers and concluded that those claims were misleading. The FTC found that a single Four Loko can had as much alcohol as four to five beers and that drinking one can on a single occasion would amount to binge drinking. Several states banned the drink and Phusion removed the caffeine and other stimulants. In 2013, the FTC ordered Phusion to put on the back of Four Loko cans containing more than two servings (a “serving” equals 0.6 ounces of alcohol) an “Alcohol Facts” panel that discloses alcohol content, serving size and the number of servings per can. Resealable containers are required for Four Loko drinks containing more alcohol than the equivalent of two and one-half servings.
a. Many public comments to the FTC called for banning Four Loko from the market. Should the FTC do so? Explain.
b. From the FTC point of view, what consumer benefit was achieved by the order?