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Chapter 20Regulation
of Advertising
and Promotion
Advertising Controls
SelfRegulation
StateRegulation
Federal Regulation
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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
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Self-Regulation by Trade Associations
Industries prone to controversy develop their own advertising guidelines
Many professions maintain guidelines through local, state, and national organizations
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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
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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
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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
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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
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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
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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
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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
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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)
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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
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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
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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
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National Association of Attorneys General (NAAG)
Regulates: Airfare advertising
Car-rental price advertising
Advertising dealing with nutrition and health claims in food ads
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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
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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
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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
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