The popular Nickelodeon cartoon character SpongeBob SquarePants is a master of all media. In 2003 alone the adventurous yellow sponge generated $1.5 billion in licensing revenues for Nickelodeon’s parent company Viacom Inc. In television ads and in the aisles of supermarkets, he extols the virtues of Rice Krispies treats, Pop-Tarts, Cheez-Its, a cereal bearing his name, Eggo waffles and E.L. Fudge cookies. But if a group of Massachusetts plaintiffs have their way, SpongeBob and children’s other favorite characters are going to have to step out of the food-marketing spotlight.

Consumer watchdogs Center for Science in the Public Interest (CSPI) and Campaign for a Commercial-Free Childhood (CCFC), along with two Massachusetts parents, are suing Kellogg Co. and Viacom in a Massachusetts court. They are asking the court to enjoin the companies from hawking high-fat, sugar-filled foods with marketing specifically targeted to young children. They are claiming statutory damages in excess of $2 billion.

Whether the lawsuit has any legs is up for debate. But even if it doesn’t, it puts companies on notice that consumers are becoming increasingly critical of marketing that targets children and are willing to sue if they don’t like what they see. As childhood obesity continues to soar to epidemic proportions, the issue is not going to go away.

“This lawsuit is just the first step,” says Steve Gardner, director of litigation for CSPI. “There will be more lawsuits unless companies sit down and talk to us about fixing some of these problems.”

Feeding Frenzy

The Massachusetts lawsuit lashes out at Kellogg and Viacom under the state’s unfair and deceptive advertising law, which is modeled on the FTC Act. The claim has two prongs: that advertising targeted to children younger than 8 is deceptive because young children cannot understand the intent of the ads, and that food advertising targeted to children is unfair because it deliberately interferes with parents’ prerogative to choose healthy foods for their children.

“Really young children can’t tell the difference between an advertisement and a TV program,” says Dr. Susan Linn, co-founder of CCFC and a psychologist at Harvard Medical School. “But thanks to the prevalence of product placement, neither can I.”

The suit asks the court to enjoin the companies from advertising the least nutritious junk foods to audiences where 15 percent or more of the audience is younger than 8, and to completely enjoin them from marketing junk foods through Web sites, toy giveaways, contests and other techniques aimed at that age group.

The consumer groups involved in the suit don’t want to stop with Kellogg and Viacom. Their ultimate goal is to set such restrictions for all food manufacturers and marketers. Their ideal outcome is an agreement similar to the master tobacco settlement–i.e. a binding agreement to limit the food industry’s advertising practices.

“Trying to stop these practices will be our focus for many years to come,” Gardner says. “This will come in the form of class actions on behalf of affected groups in combination with our other advocacy efforts.”

But whether practices in the food industry give rise to the kind of potential liabilities that forced big tobacco into that settlement is up for debate. The plaintiffs argue that the problems food marketing presents are just as grave.

“If we know that childhood obesity is a major epidemic and we know that advertising and marketing impacts children’s eating habits, what is the possible justification for these companies to aggressively market junk food to children?” Linn asks.

Yet experts in the grocery manufacturing industry aren’t worried about the suit getting very far.

“The proponents of the lawsuit are just opposed to commercialism,” says William MacLeod, partner at Collier Shannon Scott and outside counsel to the Grocery Manufacturers Association. “All I can gather about this lawsuit is that they don’t like the advertising and they want a judge to say the same. That just doesn’t go very far in a court of law.”

Regulatory Solutions

However, litigation might not be the only thing the food industry has to worry about when looking at its advertising practices going forward. Since the 1970s, various legislative initiatives to regulate marketing to kids have been under consideration.

Interest in a legislative solution to the childhood obesity problem got some renewed attention thanks to a recent report from the Institute of Medicine, a division of the non-profit National Academy of Sciences, that showed that food advertising aimed at kids gets them to prefer–and request–fatty junk foods.

A previous roadblock to legislation that would regulate food advertising was a lack of definitive proof that advertising had any effect on children’s eating habits. When the FTC tried to make special rules with regards to advertising to kids in 1978, it abandoned the idea when Congress stepped in to require the commission to show a causal relationship between advertising and children’s eating habits. The December 2005 study may provide such proof.

In light of this, legislation that would expand the FTC’s authority with regard to advertising to children is once again on the table. A portion of a Senate bill currently under debate (S-1074) includes a provision put forth by Iowa Sen. Tom Harkin to expand the FTC’s authority to monitor and regulate advertising to children.

“Right now, the FTC has more authority to regulate advertising to adults than to children,” a member of Harkin’s staff says. “Senator Harkin views that as a perverse situation, and this bill would seek to rectify that.”

But others argue that the self-regulatory mechanisms in the food industry are working perfectly well.

The Children’s Advertising Review Unit (CARU) of the National Advertising Review Board is an industry-funded self-regulatory body that evaluates advertising targeted to children for truthfulness and age-appropriateness.

“CARU’s compliance rate runs at about 97 percent,” says CARU Director Elizabeth Lascoutx. “And none of the noncompliant advertisers are food marketers. In addition, CARU refers noncompliant companies to the FTC.”

Preventative Measures

Plaintiffs scoff at the contention that self-regulation is adequate and say they will continue to fight for limits on the food industry even if Congress and the FTC do not act.

“We’d like to see the government doing this for us,” Gardner says. “We are only going to the courts because the other branches of government are failing to regulate out-of-control practices.”

Some companies have already decided that advertising junk foods to children poses too many downsides. Kraft Foods, for instance, has phased out its advertising for unhealthy products such as Kool-Aid, Oreos and Lunchables in TV shows and other media that are viewed primarily by children ages 6 to 11. Kraft also has a policy to never advertise to children under 6. If the Massachusetts lawsuit manages to gain any momentum, many other companies will be following in Kraft’s footsteps.

But MacLeod warns that while the threat of suits against food manufacturers and advertisers looms overhead, it’s important that food manufacturers remember the good they can do–for the public and themselves–with their advertising and marketing efforts.

“The real importance of these suits to the food industry is that it can distract attention from what really needs to be done,” MacLeod says. “It’s as important as ever that people get news of new products and new formulations of existing products that will help them eat more healthily. Limiting advertising is not the answer.”