Chương 21: Regulation-of-advertising-and-promotion

Dismissed Hearing before Administrative Law Judge (ALJ) Advertiser or commission rejects order Case resolved Advertiser and FTC agree Appeals court Hearing before commissioners Dismissed[r]

Regulation of Advertising and Promotion

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McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

Voluntary self regulation by the advertising industry to

maintain consumer trust and confidence

maintain consumer trust and confidence and limit

government interference

The NAD is an important self-regulatory body

Sources of NAD Cases (2001)

Decisions on NAD Cases (2001)

TV Network Guidelines for Children’s Advertising

Must not over glamorize product

No exhortative language, such as “Ask Mom to buy

No realistic war settings

Generally no celebrity endorsements

Can’t use “only” or “just” in regard to price

Show only two toys per child or maximum of six per commercial

Yes

5-sec “island” showing product against plain background at end

Animation restricted to one-third of a commercial

Generally no comparative or superiority claims

No costumes or props not available with the toy

No child or toy can appear in animated segments

Three-second establishing shot of toy in relation to child

No shots under one second in length

Must show distance a toy can travel before stopping on its own

4As Policy on Comparative Ads

1 The intent and connotation of the ad should be to

inform and never to discredit or unfairly attack

competitor, competing products, or services

2 When a competitive product is named, it should be

one that exists in the marketplace as significant

competition

3 The competition should be fairly and properly identified

but never in a manner or tone of voice that degrades the competitive product or service

4 The advertising should compare related or similar

properties or ingredients of the product, dimension to dimension, feature to feature

5 The identification should be for honest comparison

purposes and not simply to upgrade by association

4As Policy on Comparative Ads

6 If a competitive test is conducted, it should be done by

an objective testing source, preferably an independent one, so that there will be no doubt as to the veracity of the test

7 In all cases the test should be supportive of all claims

made in the advertising that are based on the test

8 The advertising should never use partial results or

stress insignificant differences to cause the consumer to draw an improper conclusion

9 The property being compared should be significant in

terms of value or usefulness of the product to the

consumer

10 Comparatives delivered through the use of

testimonials should not imply that the testimonial

is more than one individuals thought unless that

individual represents a sample of the majority

viewpoint

Appraising Self-regulation of advertising

¾ Advertisers, agencies and the media view self-regulation as an effective mechanism and preferable to

government intervention

¾ Concerns over self-regulation

ƒ Time needed to resolve complaints

ƒ Budgeting and staffing limitations

ƒ Lack of power or authority

ƒ Self-serving to advertisers and media

Questioning the effectiveness of media regulation of liquor advertising

self-Federal Regulation of Advertising

¾The First Amendment

ƒ Freedom of speech or expression

ƒ Commercial speech protected

¾Federal Trade Commission Act (1914)

ƒ Created the FTC to help enforce antitrust laws

¾Wheeler-Lea Amendment of 1938

ƒ Amended FTC Act to make unfair or deceptive practices unlawful

Concept of Unfairness

Basis for determining unfairness

is that a trade practice:

1 Causes substantial physical or

economic injury to consumers

2 Could not be reasonably avoided by

consumers

3 Must not be outweighed by

countervailing benefits to consumers

or competition

Three key elements of deception:

¾ Likelihood of misleading consumer

¾ Perspective of reasonable consumer

¾ Materiality – information will influence

consumer choice

Definition of deceptive advertising by the FTC:

“The commission will find deception if there is a misrepresentation, omission, or practice that is likely to mislead the consumer acting reasonably in the circumstances

to the consumer’s detriment.”

Examples of puffery:

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”

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

FTC Programs Addressing Deceptive Advertising

Affirmative disclosure

¾Requires advertisers to include information in their ads so consumers will be aware of all consequences, conditions, and limitations

Advertising substantiation

¾Advertisers provide supporting documentation for their claims as proof the claims are truthful

Cease and desist orders

¾Stop the claim until resolved with FTC

Corrective advertising

¾Run additional advertising designed to remedy the deception contained in previous ads

Proposed complaint and consent order

written

Staff Investigations

Dismissed

Proposed complaint and consent order

written

Staff Investigations

Dismissed

Hearing before commissioners

Dismissed

Advertiser or FTC apeal

If substantial evidence of violation, cease and desist order written by ALJ

Dismissed

Hearing before Administrative Law Judge (ALJ)

Advertiser or commission rejects order

Case resolved

Advertiser and

FTC agree

Appeals court

Hearing before commissioners

Dismissed

Advertiser or FTC apeal

If substantial evidence of violation, cease and desist order written by ALJ

Dismissed

Hearing before Administrative Law Judge (ALJ)

Advertiser or commission rejects order

Other Federal Agencies That Regulate

Advertising and Promotion

Federal Communications Commission

– Jurisdiction over broadcast communications; radio, television, telephone, and telegraph industries

Food and Drug Administration

– Authority over labeling, packaging, branding,

ingredient listing, and advertising of packaged food and drug products

U.S Postal Service

– Control over advertising that uses mail and ads that involve lotteries, obscenity, or fraud

Bureau of Alcohol, Tobacco & Firearms

– Enforces laws, develops regulations, and responsible for tax collection for the liquor industry

The Lanham Act

The Lanham ActLanham Act prohibits any false description or

representation including words or other symbols tending

falsely to describe or represent the same

Companies/ brands that have been involved in Lanham Act cases include:

• Alpo and Ralston Purina dog food

• Gillette and Wilkinson razor blades

• Prego and Ragu spaghetti sauce

• Duracell and Energizer batteries

Elements required to win a false advertising lawsuit under the Lanham Act

1 False statements have been made about advertiser’s

product or your product

2 The ads actually deceived or had the tendency to

deceive a substantial segment of the audience

3 The deception was “material” or meaningful and is likely

to influence purchasing decisions

4 The falsely advertised products or services are sold in interstate commerce

5 You have been or likely will be injured as a result of the false statements, either by loss of sales or loss of

goodwill

State Regulation of Advertising

¾ In addition to federal rules and regulations, advertisers must concern themselves with state and local laws and regulations

¾ The National Association of Attorneys

General (NAAG) has been involved with:

¾Airfare advertising

¾Car rental price advertising

¾Nutrition and health claims advertising

Regulation of other sales promotion

• Contests and sweepstakes

– Cannot be classified as a lottery

– Cannot be required to give up something of value to participate (consideration)

• Premiums

– Cannot misrepresent their value

– Must take care with special audiences (kids)

• Trade Allowances

– Must be available on proportionally equal terms

Regulation of Direct Marketing

¾ FTC and US Postal Service police

direct-response advertising closely

¾ Telemarketing faces increased regulation

including the:

¾ Telephone Consumer Protection Act of 1991

¾ Pay-per-call rule

¾ Development of “do-not-call” registry by FTC

¾ Self-regulation occurs through various industry groups

Regulation of marketing on the Internet

Restrictions have been proposed with regard to privacy including:

ƒ Banning unsolicited email,

ƒ Disclosing marketers identity,

ƒ Giving consumers the right to bar

marketers from selling or sharing personal information

ƒ Children’s Online Privacy and Protection Act (COPPA) – places restrictions on

collecting information from children over the internet