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Social, Ethical and Regulatory Issues in Advertising

Social, Ethical and Regulatory Issues in Advertising. Pro: Advertising is Informative Benefits & features Comparison data Product use info Market knowledge. Con: Advertising is Superficial Biased information Manipulated emotions Deceptive practices Little/no product

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Social, Ethical and Regulatory Issues in Advertising

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  1. Social, Ethical and Regulatory Issues in Advertising

  2. Pro: Advertising is Informative Benefits & features Comparison data Product use info Market knowledge Con: Advertising is Superficial Biased information Manipulated emotions Deceptive practices Little/no product info Advertising Educates Consumers?

  3. Critics of advertising feel that advertising is superficial because many ads carry little actual product information. Do you think advertising is superficial?

  4. Pro:Ads Lower Product Costs Economies of scale Less overhead per unit Improves choice variety Promotes competition Con:Ads Waste Resources Inefficient process Shuffles fixed demand Lowers living standard Advertising Improves the Standard of Living

  5. Pro:Advertising Meets Needs E.g., food/health care Reflects society’s priorities Con:Advertising Creates Needs Consumers are seduced “Wants” become “needs” Advertising promotes materialism Ads define what’s hip; it shapes society Advertising Affects General Well-Being?

  6. Critics feel advertising promotes materialism

  7. Pro: (Liberating): Increased social sensitivity Women in management/ leadership roles Advertising is an art form Superbowl? Con: (Demeaning):Perpetuated stereotypes Women as homemakers/sex symbols Offensive, or in poor taste Anything to grab attention... Subliminal deception A common urban myth Is Advertising Demeaning or Liberating?

  8. Do you think this ad perpetuates stereotypes?

  9. Pro:Diversity & Affordability Primary source of revenue Sponsored programming Variety of media sources Competition is enhanced Con:Affected Programming Conflicts-of-interest Controversy is shunned Education is secondary Advertising Affects the Mass Media Positively/Negatively?

  10. The Ethical Aspects of Advertising Ethics are the moral standards against which behavior is judged. Key areas of debate regarding ethics and advertising are:

  11. The Ethical Aspects of Advertising • Truth in advertising • Advertising to children • Advertising controversial products

  12. Areas of Advertising Regulation • Deception and unfairness • Competitive issues • Advertising to children

  13. Key Regulatory Agencies • Government Regulation • Federal Trade Commission (FTC) • Wide range of regulatory programs and remedies • Federal Communications Commission (FCC) • Food and Drug Administration (FDA) • U.S. Postal Service • Securities and Exchange Commission • Bureau of Alcohol, Tobacco, and Firearms

  14. The FTC • The government’s most powerful agency • Established in 1914 by the FTC Act • The Wheeler-Lea Amendment in 1938 gave the agency more power in regulating advertising deception

  15. The FTC’s Statement on Deception • There must be a representation, omission or practice that is likely to mislead the consumer • This representation, omission or practice must be judged from the perspective of a consumer acting reasonably in the circumstance • The representation, omission or practice must be a “material” one. Is the act/practice likely to affect the consumer’s conduct/decision w/regard to the product/service. If so, the practice is material and consumer injury is likely because consumers are likely have chosen differently

  16. Deceptive Practices • False Promises • Incomplete Description • Bait and Switch • Visual Distortions • False Testimonials • False Comparisons

  17. Competitive Issues • Vertical Cooperative Advertising • Comparative Advertising • Monopoly Power

  18. Advertising to Children • Children’s Television Act (1990) (Congress) • Children’s Advertising Review Unit (Council of Better Business Bureaus) • Major Television Networks

  19. The FTC’s Powers and Remedies • Advertising Substantiation Program • Consent Order • Cease and Desist Order • Affirmative Disclosure • Corrective Advertising

  20. Advertising Industry Self-Regulation Industry’s attempt to police itself

  21. Self-Regulation by the Advertising Industry • Motivated by: 1. fear of more stringent government regulations. 2. an interest in enhancing advertising effectiveness by discouraging misleading and deceptive practices 3. A general concern for public welfare

  22. Example • Distilled Spirits Council of the U.S.

  23. Advertising Industry Self-Regulation • The National Advertising Division/National Advertising Review Board (NAD/NARB) • Panel reviews complaints, hands off to the FTC • State and Local Better Business Bureaus • Counsels business, sends complaints to NAD/NARB • Advertising Agencies and Associations • Industry standards upheld by internal pressures • Media Organizations • Broadcasters monitor truth, fairness & taste

  24. Consumerism: Individuals or groups exerting regulatory power through boycotts and word of mouth Consumer Organizations: Consumer Federation of America (CFA) Consumers Union (Consumer Reports) Action for Children’s Television (ACT) Consumers as Regulatory Agents

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