environmental, regulatory, and ethical issues

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Environmental, Regulatory, and Ethical Issues

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Chapter ObjectivesAfter reading this chapter you should be able to:1. Appreciate the role of marketing communications

in environmental (green) marketing and sustainability.

2. Recognize the principles that apply to all green marcom efforts.

3. Explain the role and importance of government efforts to regulate marketing communications.

4. Be familiar with deceptive advertising and the elements that guide the determination of whether a particular advertisement is deceptive.

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Chapter Objectives (cont’d)5. Be acquainted with regulation of unfair business

practices and the major areas where the unfairness doctrine is applied.

6. Know the process of advertising self-regulation.7. Appreciate the ethical issues associated with

advertising, sales promotion, and other marcom practices.

8. Understand why the targeting of marketing communications toward vulnerable groups is a heatedly debated practice.

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FDA’s Proposed Graphic Visual Health Warnings on Cigarette Packages

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“Green” Product: Nissan Leaf

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Industry Responses to Environmental Problems

Green Advertising

Packaging Responses

Seal-of-Approval Programs

Cause-Oriented Programs

Point-of-Purchase6


Figure 4.1: Green Advertising Addressing the Biophysical Environment

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Figure 4.2: Green Advertising Promoting a Green Lifestyle

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Figure 4.3: Green Advertising Presenting an Image of Environmental Responsibility

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Green Advertising

Packaging Responses



Point-of-Purchase Programs

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Packaging Responses

•Recyclable bottles•Polystyrene to paperboard•Plastic to cardboard•Smaller packages

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Green Advertising

Packaging Responses




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•Designed to assist consumers in identifying environmentally-friendly products and brands

•Green Seal of Approval and Germany’s Blue Angel

•100% Recycled Paperboard

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Green Advertising

Packaging Responses



Point-of-Purchase Prorgams

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Green Advertising

Packaging Responses




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•Closer consultations with retailers about POP needs:• Fewer unused and discarded displays• More permanent displays • Less trash in landfills and billions of dollars

saved

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Industry Response: Manufacturer Waste Options

1. Recycling2. Incineration3. Source Reduction4. Landfills

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Appropriate Environmental Claims

Make specific claims

Reflect current disposal options

Make substantive claims

Make supportable claims

Green Report: National Association of Attorneys General www.naag.org

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http://www.naag.org/


Guidelines for Green Marketing

Federal Trade Commission (FTC)

The U.S. government agency that has primary responsibility for regulating matters such as

deceptive and unfair business practices.

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FTC Green Guides (7/28/92): General Principles

•Qualifications and disclosures should be clear and prominent.

•Qualification/ application of claim issues•Not overstate benefit•Comparative claims and basis

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FTC Green Guides (7/28/92): Specific Example Areas

•General environmental benefits•Degradable/ biodegradable/ photodegradable•Compostable•Recyclable•Recycled content•Source Reduction•Refillable•Ozone safe and ozone friendly•What has not been addressed?? Updates to

Guides?21


Why Regulate Business??• Regulation of Competition (e.g., FTC, DOJ)• Regulation of Marketing Communications

• Federal Regulation (e.g., primarily FTC, FDA)• Lanham Act (companies suing one another in federal court over false claims)• State Regulation (e.g., NAAG, state attorney generals)• Self-Regulation (e.g., ASRC: NAD, NARB, CARU)

Advertising Self Regulatory Council: National Advertising Division,The National Advertising Review Board, Children’s Advertising Review Unit

• Primary FTC Marketing Communications Coverage: all promotion/advertising claims; all environmental claims/packaging; online marketing claims

• Primary FDA Marketing Communications Coverage: all package claims and labeling; all prescription drug claims/ packaging

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Benefits of Regulation

•Consumer choice improved through information

•Product quality tends to improve•Reduced prices

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Costs of Regulation

•Cost of complying•Enforcement costs•Unintended side effects

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FTC Organizational Chart

5 FTC Commissioners

Bureau of Economics

Bureau of Consumer ProtectionAd Practices

Marketing Practices

Financial Practices

Enforcement

Planning and Information

Bureau of Competition

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FTC Regulatory Authority on Marketing Communications

Deceptive Advertising

Unfair Practices

Information Regulation

Federal Trade Commission (FTC)

Regulatory Authority

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1983 FTC Deception Policy Statement•Misleading. There must be a representation,

omission, or practice likely to mislead the consumer. A misrepresentation is defined by the FTC as an express or implied statement contrary to fact.

•Reasonable consumer. The act or practice must be considered from the perspective of the “reasonable consumer.”

•Material. The representation, omission, or practice must be “material,” involving a central characteristic of the product important to consumers and likely to influence their choice or conduct regarding a product.

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Kraft Case History: FTC Deception CaseExample

• 1983: Campaign developed by JWT and Kraft due to market share losses

• 1985-1987: Campaign• Oct. 1985: CSPI complained• 1987: FTC issued complaint• 1989: ALJ initial decision• 1991: Commission decision• 1992: 7th Circuit denied appeal

(affirmed)• 1993: Supreme Court (cert. denied)

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Kraft’s Appeal of ALJ’s Initial Decision and Order

1. Commission must rely on extrinsic evidence for implied claims

2. ALJ erred in finding consumers took misleading claims

3. Calcium immaterial4. Order would be a restraint on free

speech (Ist Amendment)

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Kraft Materiality Question• “How important are the following in your purchase decision

for Kraft individual cheese slices?”• Results: “extremely important” or “very important”• One through eight below above 50% agreement:

1. Good tasting2. Made by a company you can trust3. Real cheese flavor4. Individually wrapped for freshness5. Consistent quality6. Convenient to use7. Reasonably priced8. A source of calcium9. A source of Vitamin C 30


Materiality is presumed when ...(see 1983 FTC Deception Policy Statement, footnotes 47-58)•Express claims•Seller knowledge of false/omitted claim•Health, safety, or other areas of concern (e.g.,

central characteristics of product)•Purpose, safety, efficacy, or cost of product•Durability, performance, warranties, or quality•Finding of materiality by another agency (e.g.,

EPA)

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FTC Unfairness Definition (1994) “... The act or practice (1) causes or is likely to cause substantial

injury (e.g., monetary, health/safety) to consumers, (2) which is not reasonably avoidable by consumers themselves and (3) not outweighed by countervailing benefits to consumers or competition.”

• Not whether the ad practice is immoral, unethical, offends public policy...

Applications of Unfairness:1. Basis for Advertising Substantiation2. Children (and other vulnerable populations)3. Trade Regulation Rules (as opposed to case by case actions)

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For Major Regulations/Unfairness:•Central Hudson 4-part test to determine the validity of

the regulation of commercial speech(All four must be met to regulate)

1. The speech must concern lawful activity and must not be misleading (rules out deception) (Note: Does 1st Amendment protect deceptive commercial speech??)

2. The government’s interest is substantial3. The regulation directly advances the government’s interest.4. The regulation is not more extensive than necessary to serve

its stated purpose

Central Hudson Gas and Electric Corporation v. Public Service Commission of New York, 447 US 557, 566 (1980)44 Liquormart v. Rhode Island, 116 S.Ct. 1495, 1500 (1996)

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FTC Regulatory Process (deceptive advertising and information regulation)• IF company agrees to complaint and initial order: no

admission of guilt/order negotiation• IF company does not agree: goes to trial and no order

negotiation if they lose•Order Provision Options (remedies):

• cease and desist• affirmative disclosure (triggered disclosure, corrective

advertising)• consumer redress• asset seizure (federal court)

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Information Regulation

Corrective Advertising

A firm that misleads consumers shouldhave to use future advertisements to

rectify any deceptive impressions it hascreated in consumers’ minds

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Regulation of Product Labeling

•Food and Drug Administration (FDA)• Responsible for regulating information on

the packages of food, drug, and tobacco products

• Responsible for regulating ads for prescription drugs

• Requires advertisers to present a balanced perspective when advertising drugs

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Lanham Act and State Agencies’ Regulation of Marketing Communications•Lanham Act (companies suing one another in

federal court over false claims – must have extrinsic evidence in the case of implied claims)

•Most, if not all, states have departments of consumer affairs or consumer protection.

•The National Association of Attorneys General (NAAG) – includes attorneys general from all 50 states (Note: major case – 1998 master settlement agreement and restrictions with tobacco industry)

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Advertising Clearance Process

•Advertising Clearance Process1. Advertising agency clearance 2. Approval from the advertiser’s legal

department and perhaps also from an independent law firm

3. Media approval

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Advertising Self-Regulation

•Advertising Self-Regulatory Council (ASRC) consists of three units:• Council of Better Business Bureau’s National Advertising

Division (NAD)• National Advertising Review Board (NARB)• The Children’s Advertising Review Unit (CARU)

• Note: resolution process with company is voluntary.

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NAD/NARB Complaint Resolution Process

Complaint Screening and Case Selection

Initial NAD Evaluation

Advertiser’s Initial Response

NAD’s Final Evaluation

Advertiser’s Final Response

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Ethical Issues in Marketing Communications

•Ethics in our context involves matters of right and wrong, or moral, conduct pertaining to any aspect of marketing communications

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Ethics of Targeting to Children/ Teens and Vulnerable Populations•“Old Joe the Camel”/ RJR tobacco marketing•Marketing violent entertainment to kids •Food marketing practices and childhood obesity

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Sources of Ethical Issues

Ethical Issues in Marketing Activities and

Communications

Advertising

Targeting Marcom

Public Relations

Internet Marketing

Sales PromotionsPackaging Communications

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The Ethics of Targeting

•Ethical Debate• Is it ethical to target products and communications

efforts to segments that vulnerable or put at risk by these actions?

•Is Targeting Unethical or Just Good Marketing?• When does a good targeting strategy become a

method of unfair (unethical) advantage?

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Fostering Ethical Marketing Communications

The Golden Rule

The Professional Ethics

The TV Test

Take only actions that would be viewed as proper by an objective panel of your professional colleagues

“Would l feel comfortable explaining this action on television to the general public?”

Act in a way that you would want others to act toward you

(see also utilitarian rule; categorical imperative)

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environmental, regulatory, and ethical issues

Documents

accessible website

green advertising

environmental green

deceptive advertising

green marcom efforts

objectives environmental

green product

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