Transcript Document

Regulations and
Ethical Concerns
Chapter 14
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Chapter Objectives
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5.
What legal restrictions apply to marketing
communications?
Which governmental agency is most
responsible for enforcing laws regarding
IMC programs?
What enforcement tactics can be used to
make organizations comply with marketing
communications laws?
Are the major complaints about unethical
marketing activities fair charges?
How should the concepts of ethics, morals,
and social responsibility apply to marketing
communications programs?
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A Salty Situation
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Humans need sodium
Concern about sodium content of foods
Health concerns about sodium
Food industry slow to respond
• Salt provides flavor
• Salt preserves food
• Fast-foods and restaurants
• Consume more than 3,000 milligrams/day
• Low salt foods
• Lays
• Campbell’s
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Chapter Overview
•Legal environment
•Marketing communication regulations
•Federal Trade Commission
•Industry oversight of marketing
•Ethics and social responsibility
•Ethical concerns
•Responding to ethical challenges
•Social responsibility
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Regulatory Agencies
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Federal Trade Commission (FTC)
Food & Drug Administration (FDA)
Federal Communications Commission (FCC)
US Postal Service (USPS)
Bureau of Alcohol, Tobacco, and Firearms (ATF)
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Federal Trade Commission
(FTC)
• Created in 1914 by passage of Federal Trade Commission
Act.
• Original intent was to enforce anti-trust laws.
• FTC authority expanded in 1938 with Wheeler-Lea
Amendment.
• Given power to
 Stop unfair and deceptive advertising practices
 Levy fines
• Granted FTC access to courts to enforce their decisions.
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Unfair and Deceptive
Marketing Practices
• An advertisement or communication is
deceptive or misleading if:
 A substantial number of people or typical
person is left with false impression or
misrepresentation.
 The misrepresentation induces people or
the typical person to make a purchase.
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Deception versus Puffery
• Puffery
 An exaggerated statement
 Not factual statement
• Claim is a factual statement
• Puffery statements include
 Best, greatest, and finest
 Better – puffery or claim?
• Papa John’s – “Better ingredients, better pizza”
• Hunt’s – “Only the best tomatoes grow up to be
Hunt’s”
• Progresso – “Discover the better taste of Progresso”
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Substantiation of Claims
• Claim or promise must be substantiated
• Endorser must be truthful
• Must represent endorser’s personal
experience or opinion
• Expert endorsement must be based on
legitimate tests
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Substantiation of Claims
Principles Used by FTC and Courts
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Consumers read ads broadly
Evidence must be for actual product
Evidence from accepted experts
FTC and courts will consider totality of evidence
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FTC Investigations
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Consumers
Businesses
Congress
Media
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FTC Actions
1. Consent order
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Company agrees to stop, but does not
admit guilt
2. Administrative complaint
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Filed if no consent order agreement
Formal proceeding
Administrative judge
Both sides submit evidence
 Cease and desist order
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FTC Actions
(Continued)
1. Consent order
2.
3.
4.
5.
 Administrative complaint
Cease and desist order
Full Commission
U.S. Court of Appeals
U.S. Supreme Court
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FTC Alternative Actions
• Court system to stop unfair and deceptive practices
 Company violates a cease and desist order
 Actions of company so severe immediate action is needed
• Other legal entities, such as state/federal attorney
generals
• Corrective advertising
 Used rarely
 Used when discontinuing false ads is not enough
• Trade regulation rulings
 Applies to entire industry
 Holds public hearing
 Accepts both oral and written arguments
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Industry Regulations
• Council of Better Business Bureau
 Bureau keeps record of complaints
 Provide summary report on companies
• Agencies of the CBBB
 National Advertising Division (NAD)
 National Advertising Review Board (NARB)
 Children’s Advertising Review Unit (CARU)
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National Advertising Division
(NAD)
• Receives complaints
• Role is to investigate validity of complaint
• Collects information and evaluates
 If guilty, requests discontinuation of ad
 No legal authority
• Most companies abide by ruling
• Hears 225-250 cases a year
• Rulings
 Ad not fully substantiated – 50% to 60%
 Ad fully substantiated - less than 5%
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National Advertising Review Board
(NARB)
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Appeal from NAD or not resolved
Advertising professionals and civic leaders
Order similar to “Consent Order” of FTC
Appeals or refusals to accept go to FTC
Business-to-business disputes common
Only 4 referrals to FTC in last 25 years
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Children’s Advertising Review Unit
(CARU)
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Cases involving children 12 and under
Online privacy practices of Web sites
Operates similar to the NAD
Prescreens ads directed to children (2005)
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Advantages of
Industry Regulations
• Lower cost.
• Faster resolution.
• Heard by attorneys and business professionals
with experience in advertising.
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Ethics and Social Responsibility
• Morals – beliefs or principles
individuals hold about what is right
and wrong.
• Ethics – moral principles that serve
as guidelines for individuals and
organizations.
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Concerns and Criticisms
of Marketing
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7.
Cause people to buy more than they can afford.
Overemphasizes materialism
Increases the costs of goods and services.
Perpetuates stereotypes
Make unsafe products, such as alcohol and tobacco,
seem attractive.
Often offensive.
Advertising to children is unethical.
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Ethical Issues in Marketing
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Brand infringement
Medical marketing
Gifts and bribery
Spamming and cookies
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Responding to Ethical Challenges
• Hedonism
• Homeostasis
• Law
• Religion
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Ethical Frameworks
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Utilitarianism
Individualism
Rights approach
Justice approach
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Models of
Social Responsibility
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Invisible hand of the marketplace
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Government duty
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Ethical or enlightened management
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Ethics Programs
• Ethics training programs
• Codes of ethics
• Ethics consulting systems
 Ethical hotlines
 Whistle-blower
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International Implications
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Legal systems vary
Common law
Civil law
Theocratic law
Ethics and moral
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