The document discusses several topics related to advertising including its effects on the economy and society, attempts to regulate it, and debates around whether it provides market power or market information. It raises questions about how advertising affects pricing and consumer spending. Ethical issues around the content and accuracy of ads and their potential to make people more materialistic are also examined. The document outlines government regulatory bodies and their concerns with deceptive or misleading ads. It closes by posing questions about the biggest benefits and problems with advertising.

1. Advertising Society Economics The effects of advertising on our economy Ethics The effects of advertising on our society Regulation Our attempts to manage those effects &

2. Power or Information? Market Power Advertising Persuades consumer to purchase one brand over another more often Excess brand profits Higher barriers to entry and more market power More advertising leads to greater brand loyalty Reduce quality/raise price Reduced consumer sovereignty Monopoly Market Information Advertising Increased consumer knowledge More substitute products consumers can consider Lower barriers to entry by new brands Reduced market power for any individual brand Better pricing/distribution more product innovation Optimal brand profits, consumer choice, and price benefits

3. What do you think? Advertising = Market Power Advertising = Market Information Or both?

4. Some Economic Questions: How does advertising affect the price of a new car? How does advertising affect the price of a latté from Starbucks? How does advertising affect the way that you spend your money?

5. Some Economic Questions: Can ads make people buy things they don’t want or need? Can ads make people more materialistic? Are the benefits of advertising worth the annoyance?

6. Ads destroy freedom of choice Ads give consumers more choices An Ethical Debate Ads simply reflect the “real world” Ads = freedom of speech Ads destroy democracy/media Advertising warps social values

7. 3 Ethical Issues: 1) Advocacy What does the advertising advocate? 2) Accuracy How accurate is the advertising? Some of this depends on susceptibility of the audience (i.e., kids). 3) Acquisitiveness What is the overall effect? Does it make us more materialistic?

8. 5 Controversial Issues: 1) Puffery "Nothing beats a Bud” 2) Decency Sexual innuendo, violence 3) Stereotyping Portrayals of housewives, seniors, racial groups 4) Children Violence, dangerous acts, unhealthy habits 5) Controversy Condoms, alcohol, fashion

9. Regulation - 2 Main Purposes Regulation - 3 Main Areas Purpose for advertising regulation To protect competition To protect consumers from economic or physical harm Regulations are concerned with Deceptive or unfair content How advertising is delivered Protection of susceptible groups (kids, etc.)

10. 5 FTC Concerns: 1) Deception Must lead to material injury. 2) Comparisons Must substantiate with statistically significant data. 3) Endorsements Must be qualified; must use product. 4) Demonstrations Must be accurately depicted. 5) “Bait & Switch” Product must be available.

11. 4 Possible Remedies for Deceptive Ads: 1) Consent Decree 2) Cease & Desist 4) Consumer Redress FTC mandates reimbursement. FTC asks advertiser to stop. FTC mandates new ads to correct false perceptions. 3) Corrective Ads FTC gets court order to force advertiser to stop.

12. 6 Government Regulatory Groups: 1) FDA Packaging and labeling 2) FCC Broadcast advertising 3) Postal Service Magazines, direct mail 4) ATF Liquor labeling, advertising 5) Patent Office Trademarks 6) Library of Congress Copyrights

13. 2 Industry Watchdogs 1) NAD (National Advertising Division) - Part of Better Business Bureau 2) National Advertising Review Board - Represents advertisers and agencies - A division of the NAD Compliance is strictly voluntary

14. Big Questions What do you think is the biggest benefit of advertising? What do you think is the biggest problem with advertising? What do you think is the best example of bad advertising? What do you think is the best example of good advertising?