Pepsi faces digital deception accusations

Written by The Financial Times | Updated: Oct 21 2011, 07:21am hrs
By David Gelles and Alan Rappeport in New York

PepsiCo is under fire from consumer advocacy and privacy groups for allegedly using deceptive digital marketing practices to lift sales of unhealthy snacks to children.

In a complaint to the US Federal Trade Commission filed on Wednesday, the groups allege that Pepsi disguised its marketing efforts as video games and online entertainment, used viral marketing in violation of FTC rules, and collected personal information without any notice and consent.

Pepsi designed these ad campaigns knowing full well that a teen would not know it was an ad, said Jeffrey Chester, executive director of the Center for Digital Democracy, one of the groups behind the complaint. In doing so, he said, Pepsi violated Section 5 of the FTC Act that bans false advertising.

In one campaign, Pepsi gave teens access to a website with exclusive content from pop singer Rihanna if they entered a code found on a bag of crisps. In another, it created an online house of horrors that collected personal information including a users birthday and phone number. Pepsi declined to comment.

The complaint comes as food and beverage companies are coming under pressure to take more responsibility for the obesity crisis in the US. Last April, the Food and Drug Administration, the Centers for Disease Control and Prevention, and the agriculture department released a set of voluntary guidelines that asked companies to promote healthy foods. It also urged them to avoid advertising targeted at children for unhealthy products.

The food industry has resisted the plan as overly restrictive, saying it is not possible to discern what age group ads are targeting.

The criticism of Pepsis marketing practices is a sensitive issue for Indra Nooyi, the companys chief executive, who has made a focus on nutrition central to the companys goals. Ms Nooyi has set a goal of tripling the companys annual revenues from nutritional products to $30bn by 2020.

However, the company has focused its advertising on younger consumers through its next generation campaigns. Last northern summer, Pepsi sought to tie its products more closely to the video gaming community, embedding special codes inside packages of Mountain Dew and Doritos tortilla chips that can be used while playing Modern Warfare 3.

Parry Aftab, executive director of WiredSafety, a watchdog group not involved in the complaint, said her group had looked into Pepsis marketing practices but not found any problems. Just because a company is selling products that are not healthy, it doesnt mean we should stop them from communicating through games, she said. We need to pick our battles.

The Financial Times Limited 2011