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Regulation of Advertising and Promotion 21 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Advertising is Regulated Through… Direct Mail Under Attack Many Ads Are Review by Law Firms Self-Regulation of Advertising Advertisers and Agencies Industry Trade
Associations Media Business (BBB)
NARB Voluntary self regulation by the advertising industry, business, and media to maintain consumer trust and confidence and limit government interference Malt Beverages Advertised on Television *Click outside of the video screen to advance to the next slide Liquor Advertising on TV The National Advertising Review Council Sources of NAD Cases Mission of the ERSP To discourage advertising and marketing in the electronic retailing industry that contains unsubstantiated claims To demonstrate a commitment to meaningful and effective self-regulation To enhance consumer confidence in electronic retailing TV Network Guidelines for Children’s Ads 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 Generally no comparative or superiority claims No costumes or props not available with the toy Three-second establishing shot of toy in relation to child Advertising Self-Regulation Test Your Knowledge Which of the following is a common complaint often lodged about the self-regulation of advertising?
A) The NAD/NARB has a limited budget and staff.
B) It takes the National Advertising Division a long time to resolve a complaint.
C) Self-regulation is viewed as being self- serving to the advertising industry.
D) Self-regulation lacks the power and authority to be a viable alternative to government regulation.
E) All of the above. Federal Regulation of Advertising Advertising and the First Amendment Freedom of speech or
expression is the most basic
federal law that governs
advertising and promotion Speech must be
balanced against competing
interests such as advertising
of harmful products Federal Trade Commission Three Major Divisions Consumer Protection
Competition Wheeler Lea Amendment (1938) Made Deceptive Practices Unlawful Created By FTC Act (1914) The Concept of Unfairness Deceptive Advertising: Key Elements Puffery: Some Examples Presentations that praise the item to be sold with subjective opinions, superlatives, or exaggerations, vaguely and generally, stating no specific facts Ways the FTC Handles Deceptive Ads Affirmative
Substantiation FTC Programs to Prevent
Deceptive Advertising Cease and
Desist Orders Corrective
Advertising FTC Programs to Deal With
Deceptive Advertising After It Occurs Federal Regulation by the FTC 1970’s FTC is powerful, active regulator Improvements Act passed 1980 FTC becomes less active 1980’s and 1990’s Focused on enforcing existing regs 2000 to present Additional Federal Regulatory Agencies The Federal Communications Commission The Food and Drug Administration The U.S. Postal Service Bureau of Alcohol, Tobacco, and Firearms Additional Federal Regulatory Agencies and Departments That Also Regulate Advertising and Promotion 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 The Nutrition Labeling and Education Act The U.S. Postal Service The U.S. Postal Service has control over ads that involve… Lotteries Obscenity Fraud Bureau of Alcohol, Tobacco, and Firearms The BATF… Enforces liquor laws Develops regulations Collects taxes on liquor sales Regulates liquor advertising Imposes sanctions Suing Competitors Under the Lanham Act 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 False statements have been made about advertiser’s product or your product Elements Required
To Win a False
Lanham Act Suing Competitors State Regulation In addition to recognizing decisions by the federal courts regarding false or deceptive practices, many states have special controls and regulations governing the advertising of specific industries or practices. Regulation of Sales Promotion Cannot misrepresent their value Cannot require purchase to enter Rules and details must be disclosed to consumers Care must be taken with special audiences, like children Contests and Sweepstakes Premiums Regulation of Trade Allowances Must not violate any stipulations of the Robinson-Patman Act Co-op funds must be equal and non-discriminatory Trade Allowances Regulation of Direct Allowances Telephone Consumer Protection Act of 1991 Pay-per-call Rule Development of “Do-not-call” Registry by FTC Telemarketing faces increased regulation including… FTC and US Postal Service police direct-response advertising closely Self-regulation occurs through various industry groups Protecting Consumers from Unwanted Calls Created by the FTC 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 relationship Companies calling consumers on the registry subject to fine of up to $11,000 per incident Over 145 million consumers registered since October 2003. Internet Marketing Issues 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 Privacy policies must
be posted on home pages
and area where information