2.1

Chapter 6:Chapter 6:

THE REGULATIONTHE REGULATIONENVIRONMENT FORENVIRONMENT FOR

PROMOTIONPROMOTIONandand

ETHICAL ISSUESETHICAL ISSUES

6.1

Regulation, Ethics and Regulation, Ethics and a Free Enterprise Economya Free Enterprise Economy

PROMOTION DID NOT COME FROM MADISON AVENUEPROMOTION DID NOT COME FROM MADISON AVENUE

MARKETING PROCESSES, INCLUDING PROMOTION:MARKETING PROCESSES, INCLUDING PROMOTION: Naturally Emerge in Highly Industrialized, High Consumption Naturally Emerge in Highly Industrialized, High Consumption

Societies from a Need to:Societies from a Need to: Efficiently, Effectively Distribute the Production Output of Efficiently, Effectively Distribute the Production Output of

SocietySociety

BASIS FOR EXISTENCE OF PROMOTIONAL PROCESSBASIS FOR EXISTENCE OF PROMOTIONAL PROCESS Economic: Free-Enterprise Economy FundamentalsEconomic: Free-Enterprise Economy Fundamentals Social: Mixed Economy that is Somewhat Free, Partially Socialistic Social: Mixed Economy that is Somewhat Free, Partially Socialistic

and Heavily Regulated.and Heavily Regulated.

6.26.2

Regulation of Promotion: Government, Regulation of Promotion: Government, Industry & ConsumersIndustry & Consumers

FEDERAL GOVERNMENT REGULATIONFEDERAL GOVERNMENT REGULATION FTC Legal Powers - Broadest & Most Direct Power Over FTC Legal Powers - Broadest & Most Direct Power Over

Promotional PracticesPromotional Practices Advertising Substantiation ProgramAdvertising Substantiation Program Consent OrderConsent Order Cease & Desist OrderCease & Desist Order Affirmative DisclosureAffirmative Disclosure Corrective AdvertisingCorrective Advertising Celebrity EndorsementsCelebrity Endorsements

6.36.3

Regulation of Promotion: Government, Regulation of Promotion: Government, Industry & Consumers (con’t)Industry & Consumers (con’t)

STATE GOVERNMENT REGULATIONSTATE GOVERNMENT REGULATION

States Do Not have Extensive Policing Power over States Do Not have Extensive Policing Power over Promotional Activities of FirmsPromotional Activities of Firms

Attorney General’s (AG) Office InvestigatesAttorney General’s (AG) Office Investigates National Association of Attorneys General (NAAG) are an National Association of Attorneys General (NAAG) are an

Active GroupActive Group 13 States have Prize Notification Laws Regarding 13 States have Prize Notification Laws Regarding

Sweepstakes and ContestsSweepstakes and Contests

6.46.4

Regulation of Promotion: Government, Regulation of Promotion: Government, Industry & Consumers (con’t)Industry & Consumers (con’t)

INDUSTRY SELF-REGULATION ORGANIZATIONSINDUSTRY SELF-REGULATION ORGANIZATIONS Promotion Industry’s Attempt to Police ItselfPromotion Industry’s Attempt to Police Itself

National Advertising Review BoardNational Advertising Review Board State and Local Better Business BureausState and Local Better Business Bureaus Better Business Bureau Code of Online Business PracticesBetter Business Bureau Code of Online Business Practices Advertising Agencies & Promotion Trade AssociationsAdvertising Agencies & Promotion Trade Associations The Direct Marketing Association (DMA)The Direct Marketing Association (DMA) Point-of-Purchase Advertising Institute (POPAI)Point-of-Purchase Advertising Institute (POPAI) Media OrganizationsMedia Organizations Internet Self-RegulationInternet Self-Regulation

6.56.5

Regulation of Promotion: Government, Regulation of Promotion: Government, Industry & Consumers (con’t)Industry & Consumers (con’t)

CONSUMERS ARE REGULATORY AGENTSCONSUMERS ARE REGULATORY AGENTS Consumerism - Actions of Individual Consumers or Groups Consumerism - Actions of Individual Consumers or Groups

of Consumers Designed to Exert Power in the Marketplaceof Consumers Designed to Exert Power in the Marketplace

Earliest Consumer Efforts - 17th Century EnglandEarliest Consumer Efforts - 17th Century England Consumers want More Voice in Process of Product Consumers want More Voice in Process of Product

Development, Distribution, & Information DisseminationDevelopment, Distribution, & Information Dissemination Consumers Try to Create Pressure on Firms Through Consumers Try to Create Pressure on Firms Through

BoycottsBoycotts

6.66.6

Regulation of Promotion: Government, Regulation of Promotion: Government, Industry & Consumers (con’t) Industry & Consumers (con’t)

CONSUMERS ARE REGULATORY AGENTS (con’t)CONSUMERS ARE REGULATORY AGENTS (con’t) Consumer OrganizationsConsumer Organizations

Consumer Federation of America (CFA)Consumer Federation of America (CFA) Consumers UnionConsumers Union Action for Children’s Television (ACT)Action for Children’s Television (ACT)

6.76.7

Issues in the Regulation of PromotionIssues in the Regulation of Promotion

ISSUES IN THE REGULATION OF ADVERTISINGISSUES IN THE REGULATION OF ADVERTISING Deception & UnfairnessDeception & Unfairness

False TestimonialsFalse Testimonials Bait-and-Switch AdvertisingBait-and-Switch Advertising Misleading DemonstrationsMisleading Demonstrations ““Free Offers”Free Offers” PufferyPuffery

6.86.8

““Puffery” is a Completely Puffery” is a Completely Legal Approach to Legal Approach to Touting a Brand’s ValueTouting a Brand’s Value

6.9

Issues in the Regulation of Promotion Issues in the Regulation of Promotion (con’t)(con’t)

ISSUES IN THE REGULATION OF ADVERTISING (con’t)ISSUES IN THE REGULATION OF ADVERTISING (con’t)

Competitive IssuesCompetitive Issues

Vertical Cooperative AdvertisingVertical Cooperative Advertising Comparison AdvertisingComparison Advertising Monopoly PowerMonopoly Power

6.106.10

Advertisements UsingAdvertisements UsingComparison are Subject to Comparison are Subject to Regulation by the FTCRegulation by the FTC

6.11

Issues in the Regulation of Promotion Issues in the Regulation of Promotion (con’t)(con’t)

ISSUES IN THE REGULATION OF ADVERTISING (con’t)ISSUES IN THE REGULATION OF ADVERTISING (con’t)

Advertising Aimed at ChildrenAdvertising Aimed at Children Critics say Continually Bombarding Children w/Persuasive Critics say Continually Bombarding Children w/Persuasive

Stimuli Can Alter Their Motivation and BehaviorStimuli Can Alter Their Motivation and Behavior Children’s Television Act (199) - Limits Amount of Children’s Television Act (199) - Limits Amount of

Commercial Airtime During Children’s ProgramsCommercial Airtime During Children’s Programs Children’s Review Unit Issues Set of GuidelinesChildren’s Review Unit Issues Set of Guidelines Major TV Networks Set Their Own GuidelinesMajor TV Networks Set Their Own Guidelines

6.126.12

Advertising Aimed atAdvertising Aimed atChildren is Scrutinized Children is Scrutinized

Both Legally and EthicallyBoth Legally and Ethically

6.136.13

Issues in the Regulation of Promotion Issues in the Regulation of Promotion (con’t)(con’t)

ISSUES IN REGULATION OF DIRECT MARKETING ISSUES IN REGULATION OF DIRECT MARKETING & e-COMMERCE & e-COMMERCE

PrivacyPrivacy Contests & SweepstakesContests & Sweepstakes

TelemarketingTelemarketing

6.146.14

Issues in the Regulation of Promotion Issues in the Regulation of Promotion (con’t)(con’t)

ISSUES IN THE REGUALTION OF SALES PROMOTIONISSUES IN THE REGUALTION OF SALES PROMOTION

Premium OffersPremium Offers

Trade AllowancesTrade Allowances

Contest & SweepstakesContest & Sweepstakes

6.156.15

Issues in the Regulation of Promotion Issues in the Regulation of Promotion (con’t)(con’t)

ISSUES IN THE REGULATION OF PUBLIC RELATIONSISSUES IN THE REGULATION OF PUBLIC RELATIONS Rights of PrivacyRights of Privacy

AppropriationAppropriation Copyright InfringementCopyright Infringement DefamationDefamation

SlanderSlander LibelLibel

6.166.16

Issues in the Regulation of Promotion Issues in the Regulation of Promotion (con’t)(con’t)

ISSUES IN THE REGULATION OF PERSONAL SELLINGISSUES IN THE REGULATION OF PERSONAL SELLING Price DiscriminationPrice Discrimination

Price FixingPrice Fixing Tying AgreementsTying Agreements

BriberyBribery

6.176.17

Ethical Issues in PromotionEthical Issues in Promotion

ETHICAL ISSUES IN ADVERTISINGETHICAL ISSUES IN ADVERTISING Advertising is SuperficialAdvertising is Superficial Advertising Wastes ResourcesAdvertising Wastes Resources Advertising Creates NeedsAdvertising Creates Needs Advertising Promotes MaterialismAdvertising Promotes Materialism Advertising Perpetuates StereotypesAdvertising Perpetuates Stereotypes Advertising is Often Offensive & In Poor TasteAdvertising is Often Offensive & In Poor Taste Advertisers Deceive with Subliminal StimulationAdvertisers Deceive with Subliminal Stimulation Advertising Affects Programming on Mass MediaAdvertising Affects Programming on Mass Media Advertising Causes People to Use Alcohol & TobaccoAdvertising Causes People to Use Alcohol & Tobacco

6.186.18

Critics Argue that Advertising Creates an Critics Argue that Advertising Creates an Emphasis on MaterialismEmphasis on Materialism

Ethical Issues in Promotion (con’t)Ethical Issues in Promotion (con’t)

ETHICAL ISSUES IN SALES PROMOTION, DIRECT MARKETING, ETHICAL ISSUES IN SALES PROMOTION, DIRECT MARKETING, and e-COMMERCEand e-COMMERCE Issue of PrivacyIssue of Privacy Trade Channels - Recently Acquired PowerTrade Channels - Recently Acquired Power

Slotting FeesSlotting Fees Question of Retailers Not Following Through the Promised Question of Retailers Not Following Through the Promised

Rewards of a PromotionRewards of a Promotion

6.206.20

Ethical Issues in PromotionEthical Issues in Promotion

ETHICAL ISSUES IN PUBLIC RELATIONSETHICAL ISSUES IN PUBLIC RELATIONS

ETHICAL ISSUES IN PERSONAL SELLINGETHICAL ISSUES IN PERSONAL SELLING

6.216.21