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  • Chapter Twenty One Regulation of Advertising and Promotion © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  • Relation to text This slide relates to material on p. 711 of the text. Summary Overview Numerous guidelines, rules, regulations and laws constrain and restrict advertising. This slide shows the various sources through which advertising and promotion are regulated. These include: Self-regulation Federal regulation State regulation Use of this slide This slide can be used to introduce the regulation of advertising and promotion. More detailed discussion on how advertising and other forms of promotion are regulated will follow.
  • Relation to text This slide relates to the material on pp. 711-12. Summary Overview This slide shows an ad run by the law firm of Kinney & Lange, which specializes in advertising law. Many companies, as well as advertising agencies, use the law firms to review their ads for potential legal problems and to represent them if they have an advertising related problem. Use of slide This slide can be used as part of a discussion of legal and regulatory issues impacting advertising. Law firms such as Kinney & Lange can be a valuable resource for marketers, as well as advertising agencies, as they can review their ads to ensure that they meet regulatory guidelines.
  • Relation to text This slide relates to material on pp. 712-716 of the text. Summary Overview This slide shows the various segments of the advertising industry that are involved in self- regulation. These include: Advertisers and agencies – ads are usually examined to make sure messages are consistent with the corporate image and do not mislead or deceive consumers Industry trade associations – many trade and industry associations develop their own advertising guidelines and codes that member companies are expected to abide by Media – most media maintain some form of advertising review process and may reject any ads they regard as objectionable Business (BBB) NARB – efforts of the business community to sustain high standards of truth, accuracy, and social responsibility by advertisers Use of slide This slide can be used to discuss the various groups who are involved in self-regulation of advertising and promotion. Most advertisers, agencies, and the media recognize the importance of maintaining consumer trust and confidence. Advertisers also view self-regulation as a way to limit government interference, which they believe results in more stringent and troublesome regulations.
  • Relation to text This slide relates to the material on pp. 716-18 Summary Overview This slide shows a page from the web site of the National Advertising Division of the Council of Better Business Bureaus. The NAD works closely with the National Advertising Review Board (NARB) to sustain truth, accuracy and decency in national advertising. Use of slide This slide can be used as part of a discussion of the NAD/NARB which together form the National Advertising Review Council. This council plays an important role in the self-regulation of advertising and has become the advertising industry’s primary self-regulatory mechanism. The NAD acts as the investigative arm of the NARC.
  • Relation to text This slide relates to material on p. 716 and Figure 21-1 of the text. Summary Overview This slide shows the sources of the cases brought before the National Advertising Division (NAD) of the Council of Better Business Bureaus for 2001. The NAD is the first level that investigates the truthfulness and accuracy of an ad. The NAD’s advertising monitoring program is the source of many of the cases it reviews. It also reviews complaints from consumers and consumer groups, local BBB’s, and competitors. As this slide shows, competitor challenges account for two-thirds of the NAD cases Use of this slide This slide can be used to discuss the NAD and the types of cases it reviews. Product performance claims, superiority claims against competitive products, and all kinds of scientific and technical claims made in national advertising are often the source of cases investigated by the NAD.
  • Relation to text This slide relates to material on pp. 718-720 and Figure 21-3 of the text. Summary Overview This slide shows a sampling of the TV networks’ guidelines for children’s advertising. Guidelines that advertisers targeting children must follow include: Must not over glamorize product No exhortative language, such as “Ask mom to buy” 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 toy in relation to child No shots under one second in length Use of this slide This slide can be used to discuss the media’s self-regulation for children’s advertising. Many of the rules apply to toys, but the networks also have special guidelines for food commercials targeting children as well as commercials that offer premiums to kids.
  • Relation to text This slide relates to material on p. 721 of the text. Summary Overview This slide reviews two perspectives on self-regulation of advertising including the advertisers and media perspective and the critics’ perspective. Perspective of advertisers, agencies, and media: Encourages truthful, ethical, and responsible advertising Effective regulatory mechanism Preferable to government intervention Often results in more stringent standards than those imposed by legislation Perspective of critics of self regulation: Takes too long to resolve complaints Problems with budgeting and staffing Lack of power and authority Self-serving to advertiser and media Use of this slide This slide can be used to discuss the two perspectives relative to self-regulation of advertising. Those in favor of self-regulation feel it is an effective mechanism for controlling advertising abuses and avoiding the use of offensive, misleading, or deceptive practices. Those opposed do not believe advertising can nor should be controlled solely by self-regulation.
  • Relation to text This slide relates to the opening vignette to Chapter 21 as well as the material on pp. 718-21. Summary Overview This slide shows an ad that was run in the northeast edition of the New York Times in the form of an open letter sent to Seagram CEO Edgar Bronfman, Jr. criticizing the company’s decision to break the 48 year voluntary ban against hard liquor advertising on television. In the full-page ad, 58 health-advocacy and consumer organizations and individuals urged the Seagram Company to stop running television commercials for its hard-liquor products. The ad was run on August 2, 1996 which was a few months after Seagram’s issued a statement that it was ending the practice of not advertising on television. Use of slide This slide can be used to discuss the self-regulation of advertising, particularly by for alcoholic beverages. The opening vignette to Chapter 21 discusses the controversy surrounding the decision by the Distilled Spirits Council of the United States (DISCUS) to overturn the self-imposed ban on broadcast advertising by hard liquor companies. One group that has been very critical of this decision and has led the opposition against it is the Center for Science in the Public Interest. CSPI is a non-profit health-education and advocacy organization widely recognized for its studies of nutrition, food safety and alcohol. The open letter was signed by numerous health, anti-drug, and religious groups assembled by the CSPI.
  • Relation to text This slide relates to the opening vignette to Chapter 21 as well as the material on pp. 718-21. Summary Overview This slide contains a commercial for Smirnoff Ice, an alternative malt beverage brand owned by Diageo PLC. Malt beverages such as Smirnoff Ice, Skyy Blue, and Bacardi Silver are considered to be beers rather than hard liquor from a self-regulatory perspective. Thus, the major television networks as well as local stations will allow advertising for these brands to be aired. The spot shown here was developed specifically for the Hispanic market. Use of slide As discussed in the opening vignette to Chapter 21, various public interest groups such as MADD and the Center for Science in the Public Interest have expressed concern over the introduction of malt beverages, which carry the names of liquor brands but follow industry guidelines for the advertising of beer, which are far less restrictive than those for distilled spirits. You might discuss whether limitations should be placed on the advertising of malt beverages by the television networks.
  • Relation to text This slide relates to material on pp. 722 of the text. Summary Overview This slide shows the various federal agencies involved in the regulation of advertising and promotion, which are: Federal Trade Commission (FTC) Federal Communications Commission (FCC) Food and Drug Administration (FDA) Bureau of Alcohol, Tobacco, and Firearms Use of slide This slide can be used to introduce the various federal agencies involved in the regulation of advertising and promotion. Many of the regulations come under the jurisdiction of the Federal Trade Commission. In addition, depending on the advertiser’s industry and product or service, the other agencies listed may have regulations that affect advertising.
  • Relation to text This slide relates to material on pp. 722-723 of the text. Summary Overview This slide shows that marketers have basic rights to advertise their products and services under the First Amendment to the U.S. Constitution. Some of the basic issues regarding advertising and the First Amendment are shown here and include: Freedom of speech or expression is the most basic federal law that governs advertising and promotion Freedom of 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 Use of this slide This slide can be used to discuss how advertising is protected by the First Amendment. For years, freedom of speech protection did not include advertising and other forms of speech that promoted a commercial transaction. However, the courts have extended the First Amendment protection to include commercial speech, which is speech that promotes a commercial transaction. There have been a number of landmark cases over the past three decades where the federal courts have issued rulings supporting the protection of commercial speech by the First Amendment.
  • Relation to text This slide relates to material on pp. 723-724 of the text. Summary Overview This slide provides an overview of the Federal Trade Commission. Some important facts related to the Federal Trade Commission are shown in this slide. These include: Created by FTC Act (1914) Wheeler Lea Amendment (1938) made deceptive practices unlawful Three major divisions of the FTC are: Bureau of Consumer Protection –seeks to prevent business practices that restrain competition and is responsible for enforcing antitrust laws Bureau of Economics – helps the FTC valuate the impact of its actions and provides economic analysis and support to antitrust and consumer protection investigations and rule makings Bureau of Competition – protects consumers from deceptive and unsubstantiated advertising Use of this slide This slide can be used to discuss the various aspects of the FTC. The basic responsibility of the FTC is to protect both consumers and businesses from anticompetitive behavior and unfair and deceptive practices. These practices will be discussed in more detail in subsequent slides.
  • Relation to text This slide relates to material on pp. 725-730 of the text. Summary Overview This slide shows the key essential elements of deceptive advertising, which are: Likelihood of misleading consumer – the omission or practice must be likely to mislead the consumer Perspective of reasonable consumer – the act or practice must be considered from the perspective of the reasonable consumer Materiality – misrepresentation or practice is likely to affect consumers’ purchase decision Use of this slide This slide can be used to discuss the key essential elements of deceptive advertising. For years the term deception was criticized for being vague and all encompassing. These three elements were established in 1983 and have helped the commission determine which ads warrant a FTC challenge.
  • Relation to text This slide relates to material on pp. 725-726 of the text. Summary Overview This slide defines and shows some examples of what is known as puffery. Puffery has been legally defined as “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.” Some examples of puffery are shown here including: Bayer - “The wonder drug that works wonder” BMW – “The ultimate driving machine” Nestle – “The very best chocolate” Snapple – “Made from the best stuff on earth” Use of this slide This slide can be used to discuss the concept of puffery and show some examples of companies using puffery to advertise their products. Advertisers commonly use puffery and it has generally been viewed as a form of poetic license or allowable exaggeration. The FTC takes the position that because consumers expect exaggerations or inflated claims in advertising they recognize puffery and don’t believe it.
  • Relation to text This slide relates to material on pp. 726-733 of the text. Summary Overview This slide shows the ways in which the FTC deals with deceptive advertising. These include both prevention and dealing with deception after it occurs. FTC programs to prevent deceptive advertising Affirmative disclosure – require advertisers to include certain types of information in their ads so the consumer can be aware of all the consequences, conditions, and limitations associated with the use of the product or service Advertising substantiation – requires advertisers to have supporting documentation for their claims and to prove the claims are truthful FTC programs to deal with deception after it occurs Cease and desist orders – requires that advertisers stop the specified advertising claim within 30 days and prohibits the advertiser from engaging in the objectionable practice until after a hearing Corrective advertising – requires the advertiser to run additional advertising designed to remedy the deception or misinformation resulting from the use of deceptive advertising Use of this slide This slide can be used to discuss the ways the FTC deals with deception by taking steps to prevent it before it occurs as well as by programs that are designed to stop deceptive acts or practices and remedy them.
  • Relation to text This slide relates to material on pp. 738-739 of the text. Summary Overview The Lanham Act gives companies the ability to sue a competitor for deceptive advertising. This slide shows the elements that are required to win a false advertising suit under the Lanham Act, which are: 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 Use of this slide This slide can be used to discuss the Lanham Act and its significance to advertising. More and more companies are using the Lanham Act to sue competitors for false advertising claims, particularly since comparative advertising has become so common.
  • Relation to text This slide relates to material on pp. 740-742 of the text. Summary Overview This slide deals with the regulation of the sales promotion. Specific areas of sales promotion that are regulated include: Contests and sweepstakes Cannot require a purchase to enter Rules and details must be disclosed to consumers Premiums Cannot misrepresent their value Care must be taken with special audiences such as children Use of this slide This slide can be used to discuss the regulation of sales promotion. The Federal Trade Commission regulates many areas of sales promotion through the Marketing Practices Division of the Bureau of Consumer Protection. Many promotional practices are also policed by state attorneys general and local regulatory agencies
  • Relation to text This slide relates to material on pp. 742-744 of the text. Summary Overview This slide summarizes the regulation of direct marketing. Some of the characteristics of the regulation of direct marketing are: Self-regulation occurs through various industry groups FTC and US Postal Service police direct marketing offers very closely Telemarketing faces increased regulation including the: Telephone Consumer Protection Act of 1991 Pay-per-call rule Development of “do-not-call” registry by FTC Use of this slide This slide can be used to discuss the regulation of the direct marketing industry. The Federal Trade Commission enforces laws related to direct marketing including mail-order offers, the use of 900 telephone numbers, and direct-response TV advertising. The U.S. Postal Service enforces laws dealing with the use of the mail to deliver advertising and promotional messages or receive payments and orders for items advertised in print or broadcast media. Recently in 2003 the FTC developed the “do-not-call” registry, which is discussed on the next slide.
  • Relation to text This slide relates to material on pp. 743-744 of the text. Summary Overview This slide summarizes the characteristics of the national “do-not-call” registry which was created by the FTC to deal with the problems of unwanted calls consumer receive from telemarketers. Some of the important aspects of this registry are: 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 relationships with Companies calling consumers on the registry are subject to a fine of up to $11,000 per incident Took effect in October 2003; over 50 million consumers registered Use of this slide This slide can be used to discuss the national “do-not-call” registry, which took effect in October 2003. The development of this registry has received opposition from the direct-marketing industry and others challenging the authority of the FTC in creating such a list. However, Congress has upheld the legality of the registry and it is now in effect.
  • Relation to text This slide relates to material on pp. 744-746 of the text. Summary Overview This slide shows some proposed restrictions in the way marketers use the Internet to get information from consumers, the types of information they can get, and what they do with this information. Some of the restrictions that have been proposed include: Banning unsolicited e-mails (SPAM) Privacy issues such as providing and collecting personal information Protecting children when they are online Use of this slide This slide can be used to discuss some of the proposed restrictions placed on Internet marketing. Currently marketing on the Internet is subject to only limited government regulation, and many consumer and industry groups are concerned that some marketers will use the new medium to get around regulations and restrictions in other promotional areas. The FTC’s legal authority is limited in this area and extending it would require congressional action.
  • Relation to text This slide relates to material on p. 746 of the text. Summary Overview This slide relates to the Children’s Online Privacy Protection Act and summarizes the characteristics of this piece of legislation which are: Enacted to protect the privacy of children when they are using the Internet Places restrictions on collecting information from children on the Internet Privacy policies must be posted on home page and areas where information is collected Use of this slide This slide can be used to discuss the Children’s Online Privacy Protection Act. Concerns over online marketing to children led to the passage of this act, which the FTC began enforcing in April 2000.

21 21 Presentation Transcript

  • Regulation of Advertising and Promotion © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  • Advertising is regulated through Federal Regulation Self Regulation © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Self Regulation Federal Regulation State Regulation
  • Many Marketers Have Their Ads Reviewed by Law Firms © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin +
  • Self-regulation of Advertising Media Industry Trade Associations Advertisers and Agencies © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Voluntary self regulation by the advertising industry, business, and media to maintain consumer trust and confidence and limit government interference Advertisers and Agencies Industry Trade Associations Media Business (BBB) NARB
  • The NAD is an important self-regulatory body © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  • Sources of NAD Cases (2001) © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Consumer Challenges Local BBB Challenges NAD Monitoring Competitor Challenges 66% 15% 5% 14% 0 20 40 60 80
  • Some TV Network Guidelines for Children’s Advertising No Shots Under One Second in Length Must Not Over Glamorize Product No Exhortative Language, Such As “Ask Mom to Buy Generally No Celebrity Endorsements Can’t Use “Only” or “Just” in Regard to Price No Costumes or Props Not Available With the Toy Influencing Influentials, Providing Information to Opinion Leaders Three-second Establishing Shot of Toy in Relation to Child Three-second Establishing Shot of Toy in Relation to Child Influencing Influentials, Providing Information to Opinion Leaders No Costumes or Props Not Available With the Toy Can’t Use “Only” or “Just” in Regard to Price Generally No Celebrity Endorsements No Exhortative Language, Such As “Ask Mom to Buy Must Not Over Glamorize Product © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
  • Appraising Self Regulation Often Results in More Stringent Standards Than Those Imposed by Legislation Lack of Power or Authority Problems With Budgeting and Staffing Takes Too Long to Resolve Complaints Preferable to Government Intervention Effective Regulatory Mechanism Encourages Truthful, Ethical and Responsible Advertising © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Perspective of Advertisers, Agencies and Media Perspective Of Critics Often Results in More Stringent Standards Than Those Imposed by Legislation Encourages Truthful, Ethical and Responsible Advertising Effective Regulatory Mechanism Preferable to Government Intervention Takes Too Long to Resolve Complaints Problems With Budgeting and Staffing Lack of Power or Authority Self-serving to Advertiser and Media
  • Questioning the effectiveness of media self-regulation of liquor advertising © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin +
  • Malt Beverages Are Advertised on Television © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin *Click outside of the video screen to advance to the next slide
  • Federal Government Agencies Involved in the Regulation of Advertising and Promotion U.S. Postal Service Food and Drug Administration (FDA) Federal Communications Commission (FCC) Federal Trade Commission (FTC) © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Federal Communications Commission (FCC) Food and Drug Administration (FDA) U.S. Postal Service Bureau of Alcohol Tobacco, and Firearms Federal Trade Commission (FTC)
  • Advertising and the First Amendment Speech promoting a commercial transaction is protected but must be truthful Freedom of speech or expression is the most basic federal law that governs advertising and promotion © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Speech promoting a commercial transaction is protected but must be truthful Freedom of speech or expression is the most basic federal law that governs advertising and promotion Freedom of speech must be balanced against competing interests such as advertising of harmful products
  • Federal Trade Commission © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 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
    Created By FTC Act (1914) Wheeler Lea Amendment (1938) Made Deceptive Practices Unlawful
  • Deceptive Advertising: Key Elements © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Perspective of Reasonable Consumer Likelihood of Misleading Consumer Perspective of Reasonable Consumer Likelihood of Misleading Consumer Materiality – Misrepresentation or Practice Is Likely to Affect Consumers’ Purchase Decision
  • Puffery: Some Examples © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 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”
  • Ways the FTC Deals With Deceptive Advertising Cease and Desist Orders Advertising Substantiation Affirmative Disclosure © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin FTC Programs to Prevent Deceptive Advertising FTC Programs to Deal With Deceptive Advertising After It Occurs Affirmative Disclosure Advertising Substantiation Cease and Desist Orders Corrective Advertising
  • Suing a competitor under the Lanham Act False statements have been made about advertiser’s product or your product The falsely advertised products or services are sold in interstate commerce The deception was “material” or meaningful and is likely to influence purchasing decisions The ads actually deceived or had the tendency to deceive a substantial segment of the audience © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 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
  • Regulation of Sales Promotion Cannot Misrepresent Their Value Rules and Details Must Be Disclosed To Consumers Cannot Require Purchase to Enter © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Contests and Sweepstakes Premiums Cannot Misrepresent Their Value Cannot Require Purchase to Enter Rules and Details Must Be Disclosed To Consumers Care Must Be Taken With Special Audiences Such As Children
  • Regulation of Direct Marketing Self-regulation Occurs Through Various Industry Groups Pay-per-call Rule Telephone Consumer Protection Act of 1991 FTC and US Postal Service Police Direct-response Advertising Closely Self-regulation Occurs Through Various Industry Groups © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Telephone Consumer Protection Act of 1991 Pay-per-call Rule Telemarketing Faces Increased Regulation Including the FTC and US Postal Service Police Direct-response Advertising Closely 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 From Telemarketers Does Not Cover Calls From Political Organizations, Charities, Telephone Surveyors, or Companies With Which the Consumer Has an Existing Relationship Companies Calling Consumers on the Registry Subject to a Fine of up to $11,000 Per Incident Took Effect in October 2003. Over 50 Million Consumers Registered © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Created by the Federal Trade Commission to Allow Consumers to Limit the Calls They Receive From 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 50 Million Consumers Registered
  • Issues Regarding Marketing on the Internet Privacy Issues Such As Profiling and Collecting Personal Information Banning Unsolicited Emails (SPAM) © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Banning Unsolicited Emails (SPAM) Privacy Issues Such As Profiling and Collecting Personal Information Protecting Children When They Are Online
  • Children’s Online Privacy Protection Act Places Restrictions on Collecting Information From Children Via The Internet Enacted to Protect the Privacy Of Children When They Are Using the Internet © 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Places Restrictions on Collecting Information From Children Via The Internet Enacted to Protect the Privacy Of Children When They Are Using the Internet Privacy Policies Must Be Posted on Home Pages And Area Where Information Is Collected