Transcript Wells, Burnett, Moriarty

Ch. 3. Advertising
and Society
1
Advertising’s Legal and
Regulatory Environment
2
Advertising under
First Amendment Right/Protection?
• First Amendment case law
– Congress shall make no law “abridging the
freedom of speech, or of the press; or the right
of people peaceably to assemble, and to petition
the Government for a redress of grievances”
– Advertising as commercial speech
– First Amendment extends to commercial
speech, but not absolutely
– Supreme Court:
• freedom of expression must be balanced
against competing interests
– Court has generally found that only truthful
commercial speech is protected.
3
Laws and Regulations by Federal Agencies
(table 3.3, p. 71)
– Federal Trade Commission
– Food and Drug Administration
Oversees package labeling and ingredient listings for
food and drugs, determines safety of food and
cosmetics
– Federal Communications Commission
Issues and can revoke licenses to broadcasting stations.
Can ban messages, including ads, that are deceptive or
in poor taste.
Take action against the media
– U.S. Postal Service (direct mail, magazine ads);
– Bureau of Alcohol, Tobacco, and Firearms
(advertising for alcoholic beverages)
– U.S. Patent Office (trademark registration to
protect against patent infringement)
– Library of Congress (copyright protection)
4
Advertising and the FTC
– Established by Congress in 1914
– the Wheeler-Lea Amendment in 1938
– Five-member commissioners including one
chairperson (7-year term, Deborah Platt Majoras)
– Investigate companies that engage in unfair or
deceptive practices
– Regulate acts and practices that deceive businesses or
consumers
– Issue cease-and-desist orders against such practices
– Fine people or groups that violate rules
– Encourage consumer groups to participate in rulemaking
5
Major Areas of Advertising that
the FTC focuses
• Deception
– Deceptive acts include:
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Deceptive pricing
False criticisms of competing products
Deceptive guarantees
Ambiguous statements
False testimonials
Partial disclosure of important facts
– Current policy on deception:
• “High probability” that consumer will be
mislead
• Perspective: a “reasonable consumer”
• Deception must lead to material injury
6
FTC Deceptive and unfair advertising remedies
(Enforcement Methods)
1. Consent decrees: FTC notifies advertiser of
its finding and asks the advertiser to sign an
agreement to stop the deceptive practice
2. Cease-and-desist orders:
• Can be issued if an advertiser refuses to sign
a consent decree
• FTC and accused parties go before an
administrative law judge
• Appeals to the five-member commission
** Corrective advertising
• If FTC determines a campaign has
perpetuated lasting false beliefs, the
offending advertiser must produce messages
that correct these beliefs
• (Listerine mouthwash case in 1977)
7
FTC Deceptive and unfair advertising remedies
(Enforcement Methods)
• Consumer Redress:
– The Magnuson-Moss Warranty-FTC
Improvement Act of 1975---- cancellation or
reformation of contracts, refund of money or
return of property, payment of damages, and
public notification
• Advertising Agency Legal
Responsibility
– Is advertising agency liable for deceptive
advertising along with the advertiser?
8
Social Responsibility
and Self-Regulation
– balance company profits,
consumer-want
satisfaction, and public
interest
1. Self-Displine: in-house ad
review procedures by
attorneys
2. Industry Self-Regulation
3. Public and Community
Review: consumer
activist groups.
9
Industry Self-Regulations
National Advertising Review Council (1971)
– by several professional associations with the council of Better
Business Bureaus
–
To negotiate voluntary withdrawal of national advertising that
professionals consider to be deceptive.
• National Advertising Division of the Better Business Bureau
(NAD):
– Children’s Advertising Review Unit (CARU)
• National Advertising Review Board (NARB): “appeal office”
• *** cannot order an advertiser to stop running an ad.
cannot impose a fine.
cannot anyone from advertising.
10
NARB Appeal Process
11
Media Regulation: “Clearance
Process”
• Regulation before its placement in the media
by in-house clearance department or officer.
• Media companies have a right to reject any ad
that it deems in poor taste, misleading,
deceptive, controversial to their readers or
viewers.
12
Questions for
Discussion
• In recent years, the concept of cause
marketing has emerged. Companies align
their products with a cause like breast
cancer or protecting the environment, and in
turn, hope to generate more sales as a result.
• Is this ethical? Why or why not?
• Are you more likely to buy a product
associated with a “good cause”? Why or
why not?
13