Pepsi Uses Games to Mask Doritos Ads for Teens, Groups Say

PepsiCo Inc.’s Frito-Lay unit uses online video games and concerts to disguise marketing campaigns for its Doritos chips aimed at teenagers, consumer groups said in a complaint to U.S. regulators.

The Federal Trade Commission should investigate PepsiCo and Frito-Lay for deceptive and unfair digital marketing practices, including collecting teens’ personal information “without meaningful notice and consent,” according to the complaint filed today by the Washington-based Center for Digital Democracy, Consumer Watchdog and two other groups.

“Frito-Lay has infiltrated the lives of teens by developing covert advertising campaigns centered on things teens love,” including video games and music, according to the complaint. The digital campaign influences teens to buy Doritos, a salty snack high in calories and fat that contributes to adolescent obesity, the complaint alleges.

PepsiCo is the world’s largest snack maker, controlling almost two-thirds of the U.S. salty snacks market. The company’s Frito-Lay North America unit, with brands including Doritos, Cheetos and Lay’s potato chips, accounted for $13.4 billion of the company’s $57.8 billion in global sales last year.

“We haven’t received a copy of the filing or any documents from the organizations,” Aurora Gonzalez, a Frito-Lay spokeswoman, said in an e-mail last night before the complaint was filed. “Without seeing the documents first hand I wouldn’t want to conjecture on the allegations.”

“Frito-Lay has infiltrated the lives of teens by developing covert advertising campaigns centered on things teens love,” including video games and music, according to a draft complaint from the Center for Digital Democracy, Consumer Watchdog and two other groups. Photo: Christopher Powers/Bloomberg Close

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“Frito-Lay has infiltrated the lives of teens by developing covert advertising campaigns centered on things teens love,” including video games and music, according to a draft complaint from the Center for Digital Democracy, Consumer Watchdog and two other groups. Photo: Christopher Powers/Bloomberg

Gonzalez didn’t immediately return calls and e-mails today.

‘Whole New Frontier’

The FTC has received the complaint will “review it carefully,” Elizabeth Lordan, an agency spokeswoman, said in an e-mail. The complaint is the first filed to the FTC about digital marketing to teens, Lordan said.

Food companies that once relied primarily on television to reach children are now using a variety of digital media in their marketing campaigns, Mary Story, a professor specializing in child and adolescent nutrition at the University of Minnesota, said in an interview.

“It’s a whole new frontier that parents are not really aware of and there’s just not regulation at all about these new types of marketing,” said Story, who isn’t involved in the complaint. Story directs the Robert Wood Johnson Foundation Healthy Eating Research Program, which has provided grant funding to the Center for Digital Democracy.

Rihanna Video

Within the food industry, PepsiCo stands out for “aggressively using the most sophisticated tools to target teens in far-reaching ways,” Jeff Chester, executive director of the Center for Digital Democracy, said in an interview.

“Pepsi has purposely created immersive environments that are designed to influence the attitudes and behaviors of young people, including at the subconscious level,” he said. “‘I don’t think anyone has come close to what Pepsi has done.”

The “immersive” Doritos marketing campaigns have included Hotel 626 and Asylum 626, online interactive games that provide a horror-film experience, and a website featuring video of pop singer Rihanna, according to the complaint. Such campaigns conceal the nature of the marketing and are deceptive, the complaint says.

President Barack Obama’s administration is trying to reduce a child obesity rate that has almost tripled since 1980 to 17 percent, or 12.5 million Americans, William Dietz, the Centers for Disease Control and Prevention’s director of nutrition and obesity programs, said last week at a joint hearing of two House Energy and Commerce subcommittees.

Industry Resistance

A working group of officials from the FTC, CDC and two other agencies in April proposed voluntary guidelines for advertising to children for food with added sugars, salt and saturated fat.

The regulators, facing resistance from food companies including Nestle SA (NESN) and Kellogg Co. (K), are now scaling back those guidelines to address concerns raised by industry and lawmakers, David Vladeck, director of the FTC’s Consumer Protection Bureau, said at last week’s hearing.

The final guidelines will recommend restricting food ads targeted at children younger than 12, rather than anyone under age 18 as originally proposed, Vladeck said.

“The FTC still has a 20th-century mindset when it comes to protecting consumers in today’s digital environment,” Chester said. “They have been lagging and foot-dragging, and consumers, especially teens, are being placed at risk.”

The other two groups filing the complaint are Consumer Action, a nonprofit advocacy group founded in 1971, and The Praxis Project, a Washington-based nonprofit that seeks to promote community health.

To contact the reporters on this story: Eric Engleman in Washington at eengleman1@bloomberg.net; Duane D. Stanford in Atlanta at dstanford2@bloomberg.net

To contact the editor responsible for this story: Michael Shepard at mshepard7@bloomberg.net

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