An important aspect of marketing and selling a company's product is the product label. The product label is very important not only for selling a product but also for communicating to the consumer information, company image, values, and the perceived value of the product. Therefore, when a company designs a label it must take all of these factors into consideration. In addition to the marketing aspect, certain legal requirements must be met in order for the label to be compliant with federal regulations.

SPECIFIC LABEL INFORMATION

Although some products can be identified adequately by brand name alone, many require more complete identification of their nature and use. In short, the purpose of the label is to provide useful and relevant information about the product, as well as to help to market the product. Processed foods, patented drugs, textiles, and numerous other products are required by law to carry a fairly complete list of their ingredients. This specific information is extremely important so that consumers—for example, those who are allergic to certain ingredients—do not use a product that may harm them.

Companies may also provide additional in formation on their labels that is not legally required. One reason to do so is that consumer groups often publicly protest about the lack of information on labels and request more. A company might decide that it is less expensive to make minor adjustments to its product label than to undergo continued public scrutiny. Furthermore, when a competitor starts including more information or redesigns its label to make it more user-friendly a company might decide to modify its own label to prevent losing sales.

Labels today also include unit pricing, open dating, and nutritional labeling. Unit pricing shows the price per unit of standard measure (weight or volume), allowing consumers to compare values among competing products—for example, comparing an expensive brand-name product to a less expensive generic product with similar ingredients. Unit pricing is most often found on the store shelf rather than on the product package. Open dating informs consumers about the expected life of the product so they can avoid products that may be spoiled. This information is especially important for such perishable items as milk, eggs, and other products with a short shelf life. Nutritional labeling specifies the amount of calories, total fat, cholesterol, dietary fiber, sodium, minerals, vitamins, and protein in processed foods. The label also discloses the percentage daily values per serving for each item based on a 2000-calorie-per-day diet. This information can be useful for consumers who have either special dietary needs or are trying to maintain a healthy balanced daily diet.

Product labels also provide other useful information for consumers. One of the most common features on any label is directions on how the product should be used, or if food, prepared. An example would be directions on clothing indicating how to clean and store the items. Another example would be directions on either prescription or over-the-counter medications that provide information on how many pills should be taken and warn of possible drug interactions. Moreover, most products that could be toxic if ingested have a warning about this on the package as well as instructions on what to do in case of an emergency. This type of label has two main purposes. The first is to help the consumer in case the product is improperly used. The second is to help prevent lawsuits by consumers who misuse products. Generally speaking, more disclosure about the potential hazards of a product provides the company greater legal protection. Nevertheless, no product warning, even a detailed one, can completely prevent all lawsuits.

Most companies also use one or more of three other labels on their products. The first type, known as a grade label, identifies the quality of the product by a letter, such as "grade A," or with a word, such as "prime." The second type, an informative label, uses phrases such as "Keep refrigerated after opening" to help consumers use the product appropriately. The third type, a descriptive label, describes the benefits or positive attributes of the product.

LEGAL ISSUES

The federal government sets forth legal requirements which form a key element of product label design. Federal regulations regarding products and food have become progressively more numerous since the 1960s, due in large part to consumer activism and media attention. The most important of these regulations and laws are discussed here.

At the turn of the twentieth century, responding to consumer pressure, the federal government created two government regulatory bodies: the Food and Drug Administration (FDA), which regulates interstate commerce in foods and drugs, and the Federal Trade Commission (FTC), whose role is to combat deceptive and unfair trade practices. Both agencies have broad powers to interpret and enforce laws and regulations. In addition, each agency has the power to investigate alleged violations of law and to impose significant fines on companies found to be violating the law. The mere publicity that a company is being investigated by either the FDA or FTC for alleged infractions of the law could hurt sales and, in turn, company profits. Therefore, most companies make a strong effort to comply with federal laws that regulate product labels and advertising.

A list of the laws designed to protect consumers follows:

• Robinson-Patman Act: This Act prohibits price discrimination.
• Wheeler-Lea Amendment to the Federal Trade Commission Act: This amendment controls deceptive and misleading advertising.
• Federal Hazardous Substance Labeling Act (1960): This act requires warnings on the labels of all household-use products that contain potentially hazardous ingredients.
• Child Protection Act (1966): This act strengthens the Federal Hazardous Substance Labeling Act by prohibiting the sale of dangerous toys and other articles that are used by children, especially those items containing electrical, mechanical, or thermal hazards.
• Fair Packing and Labeling Act (1966): The primary purpose of this act is to outlaw deceptive packaging of certain consumer goods. The other intent is to adequately inform consumers of the quantity and composition of product contents and to promote packaging practices that facilitate price comparisons by consumers. In order to comply with the law, companies must include the following information on the label: name of commodity and manufacturer, net quantity of contents expressed in the appropriate category (ounces/grams, pints, liters), and relevant ingredient information.
• National Traffic and Motor Vehicle Safety Act (1966): This act authorizes the federal government to establish and enforce safety standards for all new and used automobiles and tires.
• Cigarette Labeling Act (1965): This act requires that all cigarette packages and ads contain the statement: "Warning: The Surgeon General has determined that cigarette smoking is dangerous to your health."
• Consumer Product Safety Act (1972): This act established the Consumer Product Safety Commission and gave it broad powers to carry out product tests, set safety standards, ban or seize hazardous products, and issue both civil and criminal complaints against business firms that fail to meet product safety requirements.
• Federal Trade Commission Improvement Act (1975): This act expanded the authority of the FTC in various ways; in particular, it gave the FTC the power to set rules concerning warranties on consumer products and empowered it to provide consumers with redress in the form of class-action lawsuits.
• Nutrition Labeling and Education Act (1990): The purpose of this act is to clarify and strengthen the FDA's legal authority to require nutrition labeling on foods and to establish the circumstances under which claims may be made about the nutrients in foods. The act covers only nutrients or substances in food that "nourish"; it does not in any way regulate non-nutrient substances in foods. Moreover, the act requires that labels disclose the amount of specified nutrients in foods. Every covered food would have a uniform nutrition label disclosing the amount of calories, fat, salt, and other nutrients. In order to make this information meaningful, the act requires the FDA to issue standards providing that uniform servings be noted on the food label. Where the full labeling is impractical, the act provides for an exemption or requires that the information be provided in a modified form. An example of who would qualify for this exemption is a restaurant. It would be extremely difficult and expensive for a restaurant to comply with the act; therefore, restaurants are excluded.