Belch 10e ch20_ppt

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Chapter 20Regulation

of Advertising

and Promotion

Advertising Controls

SelfRegulation

StateRegulation

Federal Regulation


Regulation and Control of Advertising

Regulatory concerns Nature and content of the ad

Potential of the ad to offend, exploit, mislead, and/or deceive consumers

Self regulation: Voluntary internal regulation practiced and promoted within an industry

3


Self-Regulation by Trade Associations

Industries prone to controversy develop their own advertising guidelines

Many professions maintain guidelines through local, state, and national organizations

4


Self-Regulation by Businesses

Better Business Bureau (BBB): Promotes fair advertising and selling practices across industries at the local level

Council of Better Business Bureaus: Provide effective control over advertising practices at the national level

5


Advertising Self-Regulatory Council (ASRC)

Earlier known as the National Advertising Review Council (NARC)

Mission - To sustain high standards of truth and accuracy in national advertising

Advertising Accountability Program - Regulates online behavioral advertising (OBA) across the Internet

6


National Advertising Division of the Council of Better Business Bureaus (NAD)

Examines product performance, superiority, scientific and technical claims

Has lawyers to scrutinize all types of media to find misleading advertisements

Helps various industries to develop effective self-regulatory programs

7


National Advertising Review Board (NARB)

Appealed for additional review by advertisers who disagree with NAD’s findings

Composed of advertising professionals and prominent public interest members

8

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

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

Self-Regulation by Advertising Associations

Actively Monitoring and Policing Advertising Practices

American Association of Advertising Agencies

American AdvertisingFederation

Advertisers

Agencies

Media

Advertising Clubs


Advertising Associations

American Association of Advertising Agencies (AAAA) - Issues guidelines for specific types of advertising

American Advertising Federation (AAF) Has standards for truthful and responsible

advertising

Involved in advertising legislation

Influences agencies to abide by its code and principles

12


Self-Regulation by Media

• Have requirements and restrictions depending on the size and nature of the publication

• Some test the products advertised and offer refunds if they are later found to be defective

Newspapers and magazines

• Major TV networks have incorporated the NAB codes into their standards

• All commercials intended for airing on a network or an affiliate has to be reviewed

• Network standards change constantly

Television and radio

13

Federal Regulation of AdvertisingFederal Communications Commission (FCC)

Food and Drug Administration (FDA)

U.S. Postal Service

Bureau of Alcohol Tobacco, and Firearms

Federal Trade Commission (FTC)


Major Divisions of the FTC

• Seeks to prevent business practices that restrain competition• Enforces antitrust laws

Bureau of Competition

• Provides economic analysis and support to antitrust and consumer protection investigations

• Analyzes the impact of government regulation on competition and consumers

Bureau of Economics

• Protects consumers against unfair, deceptive, or fraudulent practices

• Investigates and litigates practices alleged to be unfair to consumers

Bureau of Consumer Protection

15

Deceptive Advertising

Perspective of reasonable consumer

Likelihood of misleading consumer

Materiality – misrepresentation orpractice is likely to affect consumers’purchase decision

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”

Ways the FTC Handles Deceptive Advertising

FTC programs to prevent deceptive advertising

AffirmativeDisclosure

Advertising Substantiation

FTC programs to deal with deceptive advertisingafter it occurs

Cease-and-Desist Orders

ConsentOrders

CorrectiveAdvertising

Additional Federal Regulatory Agencies

Federal Communications Commission

Federal Communications Commission

Food 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 regulateadvertising and promotion

Additional federal regulatory agenciesand departments that regulateadvertising and promotion


The Lanham Act Prohibits any false description or representation

To win a false advertising lawsuit containing a comparative claim, one must prove that:

False statements have been made about the advertiser’s or one’s product

Ads deceived or had the tendency to deceive a substantial segment of the audience

Deception was material or meaningful and can influence purchase decisions

Falsely advertised products or services are sold in interstate commerce

One will incur loss of sales or of goodwill as a result of the false statements

20


National Association of Attorneys General (NAAG)

Regulates: Airfare advertising

Car-rental price advertising

Advertising dealing with nutrition and health claims in food ads

21


Regulation of Sales Promotion

Contests and sweepstakes - Marketers must ensure that: Contest or sweepstake cannot be classified as lottery

Full disclosure of the promotion is made

Premium Marketers should list its value as the price at which the

merchandise is sold

Trade allowances Should follow the stipulations of the Robinson-Patman Act

22

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


Marketing on the Internet

Undisclosed profiling of consumers by web marketers is a major concern

Network Advertising Initiative (NAI) Created by companies that collect Internet usage

data

Provides self-regulatory codes

Children’s Online Privacy Protection Act (COPPA): Restricts collecting information from children via the Internet

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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

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