Public Policy and Consumer Public Policy and Consumer ProtectionProtection

What is public policy?What is public policy?

Government intervention in the process Government intervention in the process or outcome of marketing exchanges or outcome of marketing exchanges which policymakers believe will benefit which policymakers believe will benefit society as a whole.society as a whole.

New policies usually result from:New policies usually result from: Marketplace abusesMarketplace abuses Need for economic or social welfareNeed for economic or social welfare

The Public Trusts Who?The Public Trusts Who?Percentage of Public Who Respond That

Issue “Businesswill do”

vs “Government must watch”

Invest in newproducts/services

65% 31%

Advertise honestly 29% 65%

Make safeproducts/services

25% 71%

Not engage inprice fixing

15% 79%

Clean up air andwater pollution

11% 85%

Types of Government Types of Government InterventionsInterventions RegulationRegulation

Consumer educationConsumer education

IncentivesIncentives

RegulationRegulation

Effectiveness of government regulation is Effectiveness of government regulation is inconsistentinconsistent Consumers end up bearing costs of Consumers end up bearing costs of

regulationregulation Requires cost vs. benefit analysisRequires cost vs. benefit analysis

Regulation does not always help the original Regulation does not always help the original intentintent Because not based on consumer Because not based on consumer

researchresearch

Regulatory AgenciesRegulatory Agencies

FTCFTC FDAFDA EPAEPA SECSEC Local governmentsLocal governments

Framework for Determining Framework for Determining RegulationRegulation

Is government intervention appropriate?

Select the form of remedy from the “remedies continuum”

Apply 3 key principles:Incentive compatibility

First Amendment protectionCommunication effectiveness

Removerestraints

Enhanceinformation flow

Restrictinformation flow

Yes

No DROP!Stage 1

Stage 2

Stage 3

Least Restrictive Most Restrictive

Deceptive AdvertisingDeceptive Advertising Unfair adUnfair ad

The advertiser witholds information which The advertiser witholds information which could result in injuries to consumerscould result in injuries to consumers

Deceptive adDeceptive ad Contains explicit or implied claims or Contains explicit or implied claims or

omissions which are likely to “mislead a omissions which are likely to “mislead a consumer acting reasonably under the consumer acting reasonably under the circumstances”circumstances”

Three Categories of DeceptionThree Categories of Deception

Unconscionable liesUnconscionable lies Completely false claims made Completely false claims made

intentionallyintentionally

Claim/fact discrepanciesClaim/fact discrepancies Some relevant qualifications of a Some relevant qualifications of a

claim are omitted, resulting in claim are omitted, resulting in misrepresentationmisrepresentation

Claim/belief discrepanciesClaim/belief discrepancies No deceptive claim is made, but a No deceptive claim is made, but a

deceptive belief is createddeceptive belief is created

What’s done about deceptive What’s done about deceptive advertising?advertising? Corrective adsCorrective ads

Consumer EducationConsumer Education

Provide better product information to Provide better product information to protect against market abuseprotect against market abuse labelinglabeling

IncentivesIncentives

Encourage certain types of consumer Encourage certain types of consumer behaviors by offering them incentivesbehaviors by offering them incentives RebatesRebates Tax deductionsTax deductions

Socially Responsible Socially Responsible MarketingMarketing Marketplace works best when it’s free Marketplace works best when it’s free

and is being socially responsible.and is being socially responsible.