Regulation of Advertising and Promotion

1. 20 Regulation of Advertisingand Promotion

2. 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) 20-2

3. 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) 20-3

4. Self-Regulation by Advertising Associations American Association of Advertising Agencies Actively Monitoring and Policing Advertising Practices American AdvertisingFederation Advertisers Agencies Media Advertising Clubs 20-4

5. TV Network Guidelines for Children’s Ads 20-5

6. 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 20-6

7. 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 consumersor competition 20-7

8. 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” 20-8

9. Deceptive Advertising Likelihood of misleading consumer Perspective of reasonable consumer Materiality – misrepresentation or practice is likely to affect consumers’ purchase decision 20-9

10. Ways the FTC Handles Deceptive Ads FTC programs to prevent deceptive advertising FTC programs to deal with deceptive advertisingafter it occurs AffirmativeDisclosure Cease-and-Desist Orders ConsentOrders Advertising Substantiation CorrectiveAdvertising 20-10

11. 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 andis likely to influence purchasing decisions Falsely advertised products or servicesare 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 20-11

12. 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 20-12

13. Regulation of Trade Allowances Trade Allowances Must not violate any stipulations of the Robinson-Patman Act Co-op funds must be equal and non-discriminatory 20-13

14. Regulation of Direct Marketing Self-regulation occurs through various industry groups FTC & US Postal Service police direct-response ads closely Telemarketing facesincreased regulation Telephone Consumer Protection Act Pay-per-call Rule FTC “Do-not-call” Registry 20-14

15. 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 20-15