Transcript Chapter 1 - EdYOUcation

Regulation of Advertising
and Promotion
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Advertising is regulated through
Self
Regulation
Federal
Regulation
State
Regulation
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The Pharmaceutical Industry Has Developed
Advertising Guidelines
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Many Marketers Have Their Ads Reviewed by
Law Firms
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Self-regulation of Advertising
Advertisers and
Agencies
Industry Trade
Associations
Voluntary self regulation by the advertising
industry, business, and media to maintain
consumer trust and confidence and limit
government interference
Business (BBB)
NARB
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Media
The National Advertising Review Council
is an Important Self-Regulatory Body
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Sources of NAD Cases (2004)
Competitor
challenges
61%
NAD monitoring
32%
Local BBB
challenges
1%
Consumer
challenges
6%
0
10
20
30
40
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50
60
70
Mission of the ERSP
To enhance consumer confidence in electronic
retailing
To demonstrate a commitment to meaningful and
effective self-regulation
To discourage advertising and marketing in the
electronic retailing industry that contains
unsubstantiated claims
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Some TV Network Guidelines for
Children’s Advertising
Must not over glamorize product
Mom to buy…”
No exhortative language, such as “Ask mom
Generally no celebrity endorsements
Can’t use “only” or “just” in regard to price
Generally no comparative or superiority claims
No costumes or props not available with the toy
Three-second establishing shot of toy in relation to child
No shots under one second in length
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Appraising Self-Regulation
Encourages truthful, ethical and
responsible advertising
Perspective of
Advertisers,
Agencies and
Media
Effective regulatory mechanism
Preferable to government intervention
Often results in more stringent standards
than those imposed by legislation
Takes too long to resolve complaints
Problems with budgeting and staffing
Lack of power or authority
Self-serving to advertiser and media
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Perspective
Of Critics
Test Your Knowledge
Which of the following is a common complaint often
lodged about the self-regulation of advertising?
A)
The NAD/NARB has a limited budget and
staff.
B)
It often takes the National Advertising
Division a long time to resolve a
complaint.
C)
Self-regulation is viewed as being selfserving to the advertising industry.
D)
Self-regulation lacks the power and
authority to be a viable alternative to
government regulation.
E)
All of the above are common complaints
often lodged about the self-regulation of
advertising.
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Malt Beverages Are Advertised on Television
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The Center For Science in the Public Interest
Opposes Liquor Advertising on TV
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Federal Government Agencies Involved in
the Regulation of Advertising and Promotion
Federal
Communications
Commission
(FCC)
Federal Trade
Commission
(FTC)
Food and Drug
Administration
(FDA)
Bureau of
Alcohol Tobacco,
and Firearms
U.S. Postal
Service
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Advertising and the First Amendment
Freedom of speech or
expression is the most basic
federal law that governs
advertising and promotion
Speech promoting a
commercial transaction
is protected but must
be truthful
Freedom of speech must
be balanced against competing
interests such as advertising
of harmful products
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Federal Trade Commission
Created By FTC Act
(1914)
Wheeler Lea
Amendment (1938)
Made Deceptive
Practices Unlawful
Three Major Divisions
• Bureau of Consumer
Protection
• Bureau of Economics
• Bureau of
Competition
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The Concept of Unfairness
Causes substantial physical
or economic injury to
consumers
Could not reasonably be
avoided by consumers
Must not be outweighed by
countervailing benefits to
consumers or competition
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Deceptive Advertising: Key Elements
Likelihood of misleading
consumer
Perspective of reasonable
consumer
Materiality –
misrepresentation or
practice is likely to affect
consumers’
purchase decision
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Puffery: Some Examples
Advertising or other sales presentations which praise
the item to be sold with subjective opinions,
superlatives, or exaggerations, vaguely and generally,
stating no specific facts
Bayer –
“The wonder
drug that works
wonders”
BMW –
“The ultimate
driving
machine”
Nestle –
“The very best
chocolate”
Snapple –
“Made from
the best stuff
on earth”
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Ways the FTC Deals With Deceptive
Advertising
FTC Programs to Prevent
Deceptive Advertising
Affirmative
Disclosure
Advertising
Substantiation
FTC Programs to Deal With
Deceptive Advertising After It Occurs
Cease and
Desist Orders
Corrective
Advertising
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Federal Regulation by the FTC
1970’s
FTC very powerful and active regulator
1980
1980
FTCImprovements
Improvements Act
FTC
Actpassed
passed
1980’s and 1990’s
FTC becomes less active
2000 to present
FTC focused on enforcement of existing regs
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Additional Federal Regulatory Agencies
The Federal
Communications
Commission
The Food and Drug
Administration
Additional Federal Regulatory Agencies and
Departments That Also Regulate
Advertising and Promotion
Bureau of Alcohol,
Tobacco, and
Firearms
The U.S. Postal
Service
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Test Your Knowledge
The _____ is a federal agency that was founded in
1934 to regulate broadcast communication that
include the radio, television, telephone, and telegraph
industries.
A)
Federal Trade Commission
B)
Federal Communications Commission
C)
Fairness Doctrine
D)
U.S. Postal Service
E)
National Association of Broadcasters
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The Nutrition Labeling and Education Act
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Suing a Competitor Under the Lanham Act
Elements
Required
To Win a False
Advertising
Suit
Under the
Lanham Act
False statements have been made about
advertiser’s product or your product
The ads actually deceived or had the
tendency to deceive a substantial segment
of the audience
The deception was “material” or
meaningful and is likely to influence
purchasing decisions
The falsely advertised products or services
are sold in interstate commerce
You have been or likely will be injured as a
result of the false statements, either by
loss of sales or loss of goodwill
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State Regulation
In addition to recognizing decisions
by the federal courts regarding false
or deceptive practices, many states
have special controls and regulations
governing the advertising of specific
industries or practices.
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Regulation of Sales Promotion
Contests and
Sweepstakes
Rules and details must
be disclosed to
consumers
Cannot require
purchase to enter
Premiums
Cannot misrepresent
their value
Care must be taken with
special audiences such
as children
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Regulation of Trade Allowances
Trade Allowances
Must not violate any
stipulations of the
Robinson-Patman Act
Co-op funds must be
equal and nondiscriminatory
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Regulation of Direct Marketing
Self-regulation occurs through
various industry groups
FTC and US Postal Service police
direct-response advertising closely
Telemarketing faces increased
regulation including the
Telephone
Consumer
Protection Act of
1991
Pay-per-call Rule
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Development of
“Do-not-call”
Registry by FTC
The FTC Protects Consumers
From Unwanted Calls
Created by the Federal Trade
Commission to allow consumers to
limit the calls they receive from
telemarketers
Does not cover calls from political
organizations, charities, telephone
surveyors, or companies with which
the consumer has an existing
relationship
Took effect in October 2003. Over
90 million consumers registered
Companies calling consumers on
the registry subject to a fine of up
to $11,000 per incident
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Issues Regarding Marketing on the Internet
Banning
unsolicited emails
(SPAM)
Privacy issues
such as
profiling and
collecting personal
information
information
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Protecting children
when
they are online
Test Your Knowledge
Which of the following statements accurately describes
how marketing on the Internet is regulated?
A)
Database management is the only area of
Internet marketing that has caused the
FTC to examine the need for Internet
marketing regulation.
B)
Voluntary industry codes are in place and
have eliminated any concerns that
consumers should have about Internet
marketing.
C)
At the present time, states are providing
the regulatory bodies for monitoring
Internet marketing.
D)
Currently marketing on the Internet is
not subject to any formal government
regulation.
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Children’s Online Privacy Protection Act
Enacted to protect the privacy
of children when they are
using the Internet
Places restrictions on collecting
information from children via
the Internet
Privacy policies must
be posted on home pages
and area where information
is collected
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