Transcript Chap020.ppt

20
Regulation of Advertising
and Promotion
McGraw-Hill/Irwin
Copyright © 2012 McGraw-Hill Companies, Inc., All right reversed
Advertising Controls
Self
Regulation
State
Regulation
Federal
Regulation
20-2
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
20-3
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)
20-4
Self-Regulation by Advertisers & Agencies
• Protective measures
• Company guidelines,
standards, policies
• Corporate attorneys
• Substantiating ad claims
• Agency-client contracts
• Creative review boards
• Specialized lawyers
20-5
Self-Regulation by Trade Associations
• Affected products
and services
• Liquor & alcoholic
beverages
• Pharmaceuticals
• Products for
children
• Legal & medical
services
Attorneys at Law
20-6
Liquor Advertising on TV
60 million
underage
viewers
20-7
Liquor Advertising on TV
20-8
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)
20-9
The National Advertising Review Council
20-10
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
20-11
Mission of the ERSP
Enhance consumer confidence
in electronic retailing
Discourage advertising and marketing in
the electronic retailing industry that
contains unsubstantiated claims
Demonstrate a commitment to
meaningful and effective self-regulation
20-12
Self-Regulation by Advertising Associations
Actively Monitoring
and Policing
Advertising Practices
American Association of
Advertising Agencies
American Advertising
Federation
Advertisers
Agencies
Media
Advertising Clubs
20-13
Self-Regulation by Media
Many magazines refused this ad
20-14
TV Network Guidelines for Children’s Ads
20-15
Appraising Self-Regulation
Encourages truthful, ethical,
responsible advertising
Advertisers,
Agencies,
Media
Effective regulatory mechanism
Preferable to government intervention
Can be more stringent standards
than those imposed by legislation
Takes too long to resolve complaints
Critics
Problems with budgeting and staffing
Lack of power or authority
Self-serving to advertiser and media
20-16
Federal Regulation of Advertising
Federal
Communications
Commission
(FCC)
Federal Trade
Commission
(FTC)
Bureau of Alcohol
Tobacco, and
Firearms
Food and Drug
Administration
(FDA)
U.S. Postal
Service
20-17
Advertising and the First Amendment
Freedom of speech or
expression is the most basic
federal law that governs
advertising and promotion
Speech promoting a
commercial transaction
is protected but must
be truthful
Speech must be
balanced against competing
interests such as advertising
of harmful products
20-18
Federal Trade Commission
Created By FTC Act
(1914)
Wheeler Lea
Amendment (1938)
Made Deceptive
Practices Unlawful
Three Major Divisions
• Consumer
Protection
• Economics
• Competition
20-19
The Concept of Unfairness
Causes substantial
physical or economic
injury to consumers
Could not reasonably be
avoided by consumers
Must not be outweighed
by countervailing
benefits to consumers
or competition
20-20
Puffery
Bayer –
“The wonder
drug that works
wonders”
Nestlé –
“The very best
chocolate”
BMW –
“The ultimate
driving
machine”
Snapple –
“Made from
the best stuff
on earth”
20-21
Deceptive Advertising
Likelihood of
misleading consumer
Perspective of
reasonable consumer
Materiality –
misrepresentation or
practice is likely to
affect consumers’
purchase decision
20-22
Ways the FTC Handles Deceptive Ads
FTC programs to
prevent deceptive
advertising
FTC programs to
deal with deceptive
advertising
after it occurs
Affirmative
Disclosure
Cease-and-Desist
Orders
Advertising
Substantiation
Consent
Orders
Corrective
Advertising
20-23
Advertising Substantiation
Weight-loss
marketers
must
substantiate
their claims
20-24
Federal Regulation by the FTC
1970’s
1980’s and 1990’s
FTC is powerful,
active regulator
FTC becomes
less active
2000 to 2009
2010 to present
Focus on telemarketing
and Internet privacy
Asks for increased
powers to protect
consumers against
financial fraud
20-25
Additional Federal Regulatory Agencies
Federal
Communications
Commission
Food and Drug
Administration
Additional federal regulatory agencies
and departments that regulate
advertising and promotion
Bureau of Alcohol,
Tobacco, and
Firearms
U.S. Postal Service
20-26
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
20-27
The Nutrition Labeling and Education Act
Labels must
be easy for
consumers to
understand
20-28
The U.S. Postal Service
The U.S. Postal Service has control over
ads that involve…
Lotteries
Obscenity
Fraud
20-29
Bureau of Alcohol, Tobacco, and Firearms
The BATF…
Enforces liquor laws
Develops regulations
Collects taxes on liquor sales
Regulates liquor advertising
Imposes sanctions
20-30
Suing Competitors Under the Lanham Act
False statements have been made about the
advertiser’s product or your product
Ad deceived a substantial segment of the audience
Deception was “material” or meaningful and
is likely to influence purchasing decisions
Falsely advertised products or services
are 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)
Must be proven to win a false advertising suit
20-31
Suing Competitors
20-32
State Regulations
20-33
Regulation of Sales Promotion
Contests/Sweepstakes
Cannot be a lottery
Rules & details must
be fully disclosed
Premiums
Cannot misrepresent
their value
Care must be taken
with special audiences
20-34
Regulation of Trade Allowances
Trade Allowances
Must not violate any
stipulations of the
Robinson-Patman Act
Co-op funds must be
equal and nondiscriminatory
20-35
Regulation of Direct Marketing
Self-regulation occurs through
various industry groups
FTC & US Postal Service police
direct-response ads closely
Telemarketing faces
increased regulation
Telephone Consumer Protection Act
Pay-per-call Rule
FTC “Do-not-call” Registry
20-36
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 registry
subject to fine of up to $11,000 per incident
20-37
Internet Marketing Issues
Privacy
Issues
Marketing to
Children
Unsolicited
Emails (SPAM)
20-38
Children’s Online Privacy Protection Act
Enacted to protect the
privacy of children when
they are using the Internet
Places restrictions on
collecting information from
children via the Internet
Privacy policies must
be on home page and area
where data is collected
20-39
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
20-40
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
20-41