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Ethical and Legal Issues in Advertising and Promotion

Irene Powell and Paul Gaskin

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Ethical and Legal Issues

People’s attitudes to the institution of advertising

Frameworks for thinking about ethics Legal issues and ethical issues Voluntary Codes in Advertising• several Industry associations• agreements

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Attitudes to Advertising

Advertising is… % who agree95 96 97

Boring & repetitious 67 71 74

Out of touch with everyday life 61 63 63

Out of touch with econ. reality 61 64 65

In tune with my needs 35 32 31

Insults my intelligence 66 67 66

Provides useless info na 78 77

Sexist 56 51 51

Entertaining na 46 48

Source: Eye on Australia Grey/Sweeney, 1997

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Information Sources Most reliable source, from 1-10, 10=most reliable:

Personal previous experience 8.5

Advice from people you know 7.5

Endorsements from reputable sources 7.0

TV programs (Money,Better Homes & Gnds) 6.6

Testimonials from experts 6.4

Articles in newspapers & magazines 5.6

Advice from staff in stores 5.5

TV, press and magazine ads 4.7

Internet 4.6

Direct mail 4.0

Source: Eye on Australia Grey/Sweeney, 1996

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Only after the event?

“Most of us have a child’s notion of ethics and a graduate school notion of finance, marketing & management.”

Paul Thayer, former CEO of LTV after being sentenced to 4 years in prison for stock fraud.

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Anita Roddick, Body and Soul, London, Ebury Press, 1991founder of the Body Shop

“I am still looking for the modern day equivalent of those Quakers who ran successful businesses, made money because they offered honest products and treated their people decently, worked hard, spent honestly, saved honestly, gave honest value for money, put back more that they took out and told no lies. This business creed, sadly seems long forgotten.

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Why we study ethics

To help decision-making

Some decisions are easy because they are correct ie compliance with the law

Some decisions are problematic because there is no correct answer. Conflicts may arise as we balance the demands of doing business in a competitive environment and an ethical position personally, professionally and organisationally

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Ethical Issues in Advertising

Not what to think BUT what to think about (utilising agenda setting theory)

LAW sets minimum standards, beyond thatETHICS (organisation/individual & professional)

+

CODES OF CONDUCT

(organisation/industry)

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The relationship between legal and ethical issues in Advertising

Overview

Ethics Legislation

CultureMinimum standards

Advertising controls eg TPA, AANA, AFA,

organisationalprofessionalindividual

influence each other& often result in

Codes ofConduct

arise fromforms

can be

inform the decisions on

eg

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Action to encourage ethical behaviour

Examine values - corporate conscience, professional and individual values

Philosophical analysis - principles such as:• Teleology - the study of ends. A utilitarian

approach maximises benefits and/or minimises harm.

• Deontology - the study of duty. A humanist approach epitomised by ‘do as you would be done by’ …..role of socially acceptable behaviour

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Ethical Decision-makingModels

Frank Navran & Associates model

1 Define the problem

2 Identify available alternative solutions

3 Evaluate the alternatives

4 Make the decision

5 Implement the decision

6 Evaluate the decision

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Ethical Decision-makingModels

PLUS = Set of filtersP = Policies Is it consistent with my

organisation’s policies, procedures, and guidelines?

L = Legal Is is acceptable under applicable laws & regulations?

U = Universal Does it conform to the universal principles/values my organisation has adopted?

S = Self Does it satisfy my personal definition of right, good and fair?

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Ethical behaviour

Three Rules of Thumb

1. The Golden Rule

Act in the way you would expect others to act towards you.

2. The Professional Ethic

Take actions that would be viewed as proper by a disinterested group of colleagues.

3. The TV Test

Ask yourself ‘Would I feel comfortable explaining to a national TV audience why I took this action?’!

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Control of Advertising

Legal Controls

Advantages

•Pervasive•Wider scope•Level playing field

Disadvantages

•Slow to act•Over restrictive•Time consuming

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Legal controls

“….black letter law frequently acts as a road map for the unscrupulous. It encourages the attitude that what is not explicitly forbidden is permissable. This in turn leads to a search for loopholes in legislation.”

Henry Bosch, Business Council of Australia, 1992

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Legal controls

“Legislation is not an appropriate means of achieving ‘morality’. Legislation is results oriented, is often assessed in terms of increased costs, and tends to encourage a minimal response.”

Company Directors’ Duties, Australian Senate Standing Committee, 1989

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Main legal issue concerning advertising and promotion

Is it “misleading and/or deceptive”?• Trade Practices Act requires that sellers do not

act so as to mislead or deceive See subject Marketing Law Where advertising is involved in cases• mostly product, price or availability are the

problem, but advertising them brought it to notice!• tiny proportion involve only the “creative

expression” being the major legal problem

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Control of Advertising

Ethics in business = sound economics

BUT

Voluntary Controls

Advantages

•Preventative•Flexible•Self-governing

Disadvantages

•Adherence•Interpretation

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Voluntary Codes

Basis of SELF REGULATION system Advertiser Code of Ethics Therapeutic Goods Advertising Code Slimming Advertising Code Alcoholic Beverages Advertising Code

See AANA handout for detail

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Regulatory Framework for Advertising

Australian Association of National Advertisers• Self regulation system with support of

major industry players (agencies, media buyers & clients)

• Funded by media levy of 0.035% on all media invoices

• Advertiser Code of Ethics

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AANA Code of Ethics

Advertising should be legal, decent, honest & truthful

Obligations to consumer, society & competitors

11 Clauses• comply with law• not (likely to be) misleading & deceptive• no damaging misrepresentations to

competitors

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Clauses of the Code of Conduct(con’t)

• no portrays which discriminates or vilifies race, ethnicity, nationality, sex, age, sexual preference, religion, disability, political belief

• no unjustifiable violence• sensitive sex, sexuality & nudity• no alarm or distress to children• appropriate language (no strong/obscene)• health & safety according to prevailing

community standards• no misleading environmental benefits• no misleading Australian origin or content

claims

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Regulatory Framework for Advertising

Advertising Federation of Australia• Business Code of Ethics

(Telstra/Mojopartners issue)• Pitching Ethics– relationship between pitching agencies

• ideas not paid for not to be stolen, even if client wants to do it!

• issues of intellectual property and mechanisms to gain rights to that property

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Advertising Industry Players Australian Association of National

Advertisers (AANA) 1928• clients’ body - 150 members mainly large

consumer goods & services• Considerable clout• To represent advertisers’ views (took

leadership role on behalf of members in post accreditation agenda development)

• To educate via management training

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AANA created two Boards

Advertising Standards Board 1997 AANA driven with Register of Public Persons To maintain standards of taste & decency in

national advertising having regard to prevailing community values

To handle complaints from any source

Advertising Claims Board 1997 To resolve claims, especially with competitors

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Regulation funding

Media Levy of 0.035 percent on all media invoices from 1 Sep 1997

remitted (by media receiving) to Australian Advertising Standards Council, which runs the two boards on previous slide

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Advertising Industry Players

Advertising Federation of Australia (AFA) 1975• advertising agencies’ body• 160 members with top 20 accounting

for 60% of billings• To represent agency views• To provide training via AFA Training

Program

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Advertising Industry Players

Media Planning and Buying Association (name????) 1999

perhaps aims to be a countervailing power (in policy development terms) to large TV, newspaper and magazine groups

identifies separate interests from advertising agencies

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The Grand Council

Australian Advertising Industry Council (AAIC) 1978

AANA, AFA, media owners (and maybe soon media buyers?)

To create positive attitudes to advertising only acts if advertising threatened