regulation of advertising and promotion
DESCRIPTION
22. Regulation of Advertising and Promotion. Advertising Controls. Self Regulation. State Regulation. Federal Regulation. 22- 2. Self-Regulation of Advertising. Gatekeepers Advertising industry Businesses Media Trade associations Goals Maintain consumer trust and confidence - PowerPoint PPT PresentationTRANSCRIPT
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Copyright © 2012 McGraw-Hill Companies, Inc., All right reversedMcGraw-Hill/Irwin
22
Regulation of Advertisingand Promotion
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Advertising Controls
SelfRegulation
StateRegulation
Federal Regulation
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Self-Regulation of Advertising
• Gatekeepers• Advertising industry• Businesses• Media• Trade associations
• Goals• Maintain consumer trust and confidence• Limit government interference• Protect all parties from litigation
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Local, State, and Federal Regulation
• Local and Industry Groups• Better Business Bureau (BBB)• National Advertising Review Council (NARC)• Distilled Spirits Council (DISCUS)• American Medical Association (AMA)
• State and Federal Agencies• Federal Trade Commission (FTC)• Federal Communications Commission (FCC)• Food and Drug Administration (FDA)• U.S. Postal Service (USPS)
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Self-Regulation by Advertisers & Agencies
• Protective measures• Company guidelines,
standards, policies• Corporate attorneys• Substantiating ad claims• Agency-client contracts• Creative review boards• Specialized lawyers
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Self-Regulation by Trade Associations
• Affected products and services• Liquor & alcoholic
beverages• Pharmaceuticals• Products for
children• Legal & medical
services
Attorneys at Law
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Liquor Advertising on TV
60 million underage viewers
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Liquor Advertising on TV
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Self-Regulation by Businesses
• Better Business Bureau (BBB)• Promotes fair advertising and selling
practices across all industries• Handles consumer complaints• Supported by dues of the member firms• Uses negative publicity to curb abuses
• BBB national investigative arms• National Advertising Division (NAD)• Children’s Advertising Review Unit (CARU)• Electronic Retailing Self-Regulation
Program (ERSP)22-9
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The National Advertising Review Council
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CARU Activities
• General activities• Review and evaluate child-directed
advertising in all media• Oversee online privacy issues that affect
children• Advise advertisers and agencies• Maintain self-regulatory guidelines
for children’s advertising
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Mission of the ERSP
Discourage advertising and marketing in the electronic retailing industry that
contains unsubstantiated claims
Enhance consumer confidence in electronic retailing
Demonstrate a commitment to meaningful and effective self-regulation
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Self-Regulation by Advertising Associations
Actively Monitoring and Policing
Advertising Practices
American Association of Advertising Agencies
American AdvertisingFederation
Advertisers
Agencies
Media
Advertising Clubs
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Self-Regulation by Media
Many magazines refused this ad
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TV Network Guidelines for Children’s Ads
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Appraising Self-Regulation
Can be more stringent standardsthan those imposed by legislation
Encourages truthful, ethical, responsible advertising
Effective regulatory mechanism
Preferable to government intervention
Advertisers, Agencies,
Media
Takes too long to resolve complaints
Problems with budgeting and staffing
Lack of power or authority
Self-serving to advertiser and media
Critics
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Federal Regulation of Advertising
Federal Communications
Commission (FCC)
Food and Drug Administration
(FDA)
U.S. Postal Service
Bureau of Alcohol Tobacco, and
Firearms
Federal Trade Commission
(FTC)
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Advertising and the First Amendment
Speech promoting acommercial transactionis protected but must
be truthful
Freedom of speech orexpression is the most basic
federal law that governsadvertising and promotion
Speech must bebalanced against competinginterests such as advertising
of harmful products
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Federal Trade Commission
Three Major Divisions
•Consumer Protection
•Economics•Competition
Wheeler Lea Amendment (1938)
Made Deceptive Practices Unlawful
Created By FTC Act (1914)
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The Concept of Unfairness
Could not reasonably be avoided by consumers
Could not reasonably be avoided by consumers
Causes substantial physical or economic injury to consumers
Causes substantial physical or economic injury to consumers
Must not be outweighed by countervailing
benefits to consumersor competition
Must not be outweighed by countervailing
benefits to consumersor competition
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Puffery
Bayer – “The wonder drug that works wonders”
BMW – “The ultimate driving machine”
Nestlé – “The very best chocolate”
Snapple – “Made from the best stuff on earth”
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Deceptive Advertising
Perspective of reasonable consumer
Likelihood of misleading consumer
Materiality – misrepresentation orpractice is likely to affect consumers’purchase decision
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Ways the FTC Handles Deceptive Ads
FTC programs to prevent deceptive
advertising
AffirmativeDisclosure
Advertising Substantiation
FTC programs to deal with deceptive
advertisingafter it occurs
Cease-and-Desist Orders
ConsentOrders
CorrectiveAdvertising
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Advertising Substantiation
Weight-loss marketers
must substantiate their claims
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Federal Regulation by the FTC
1970’s
FTC is powerful, active regulator
FTC becomes less active
1980’s and 1990’s
Focus on telemarketingand Internet privacy
2000 to 2009Asks for increasedpowers to protectconsumers against
financial fraud
2010 to present
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Additional Federal Regulatory Agencies
Federal Communications
Commission
Federal Communications
CommissionFood and Drug AdministrationFood and Drug Administration
U.S. Postal ServiceU.S. Postal ServiceBureau of Alcohol,
Tobacco, and Firearms
Bureau of Alcohol, Tobacco, and
Firearms
Additional federal regulatory agenciesand departments that regulate
advertising and promotion
Additional federal regulatory agenciesand departments that regulate
advertising and promotion
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Test Your Knowledge
The _____ is a federal agency that was founded in 1934 to regulate broadcast communications 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
Labels must be easy for
consumers to understand
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The U.S. Postal Service
The U.S. Postal Service has control over ads that involve…
The U.S. Postal Service has control over ads that involve…
LotteriesLotteries
ObscenityObscenity
FraudFraud
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Bureau of Alcohol, Tobacco, and Firearms
The BATF…
Enforces liquor laws
Develops regulations
Collects taxes on liquor sales
Regulates liquor advertising
Imposes sanctions
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Suing Competitors Under the Lanham Act
Ad deceived a substantial segment of the audience
Deception was “material” or meaningful andis likely to influence purchasing decisions
Falsely advertised products or servicesare sold in interstate commerce
You were, or likely will be, injured as a result of the false statements (loss of sales or loss of goodwill)
False statements have been made about the advertiser’s product or your product
Must be proven to win a false advertising suit
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Suing Competitors
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State Regulations
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Regulation of Sales Promotion
Cannot misrepresent their value
Cannot be a lotteryRules & details must
be fully disclosed
Care must be taken with special audiences
Contests/SweepstakesContests/Sweepstakes
PremiumsPremiums
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Regulation of Trade Allowances
Must not violate any stipulations of the
Robinson-Patman Act
Co-op funds must be equal and non-discriminatory
Trade AllowancesTrade Allowances
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Regulation of Direct Marketing
Telephone Consumer Protection Act
Pay-per-call Rule
FTC “Do-not-call” Registry
Telemarketing facesincreased regulation
FTC & US Postal Service police direct-response ads closely
Self-regulation occurs through various industry groups
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Protecting Consumers from Unwanted Calls
Created by the FTC to allow consumers to limit the calls they receive from telemarketers
Excludes calls from political organizations, charities, telephone surveyors, or companies with which the
consumer has an existing relationship
Companies calling consumers on the registrysubject to fine of up to $11,000 per incident
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Internet Marketing Issues
PrivacyIssues
Marketing to Children
Unsolicited Emails (SPAM)
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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
Privacy policies must be on home page and area
where data is collected
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Regulation of Social Media
• Safeguarding of personal information• Guidelines for online endorsements
• Online endorsers and bloggers must disclose any material connection to company or brand
• Paid endorsers posting on social media and e-commerce sites• Must identify themselves as such
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Anti-Spamming Legislation
• CAN-SPAM Act of 2003 email rules
• Conspicuous notice of the right to opt-out
• A functioning Internet-based mechanism that a recipient may use to opt out of future commercial e-mail messages
• Clear and conspicuous identification that the message is an advertisement
• A valid physical postal address for the sender
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