Copyright © 2012 McGraw-Hill Companies, Inc., All right reversedMcGraw-Hill/Irwin

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Regulation of Advertisingand Promotion

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)

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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

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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TV Network Guidelines for Children’s Ads

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Advertising and the First Amendment

Speech promoting acommercial transactionis protected but must

be truthful

Freedom of speech orexpression is the most basic

federal law that governsadvertising and promotion

Speech must bebalanced against competinginterests such as advertising

of harmful products

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The Concept of Unfairness

Could not reasonably be avoided by consumers

Could not reasonably be avoided by consumers

Causes substantial physical or economic injury to consumers

Causes substantial physical or economic injury to consumers

Must not be outweighed by countervailing

benefits to consumersor competition

Must not be outweighed by countervailing

benefits to consumersor competition

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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

Deceptive Advertising

Perspective of reasonable consumer

Likelihood of misleading consumer

Materiality – misrepresentation orpractice is likely to affect consumers’purchase decision

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Ways the FTC Handles Deceptive Ads

FTC programs to prevent deceptive

advertising

AffirmativeDisclosure

Advertising Substantiation

FTC programs to deal with deceptive

advertisingafter it occurs

Cease-and-Desist Orders

ConsentOrders

CorrectiveAdvertising

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Suing Competitors Under the Lanham Act

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)

False statements have been made about the advertiser’s product or your product

Must be proven to win a false advertising suit

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Regulation of Sales Promotion

Cannot misrepresent their value

Cannot be a lotteryRules & details must

be fully disclosed

Care must be taken with special audiences

Contests/SweepstakesContests/Sweepstakes

PremiumsPremiums

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Regulation of Trade Allowances

Must not violate any stipulations of the

Robinson-Patman Act

Co-op funds must be equal and non-discriminatory

Trade AllowancesTrade Allowances

20-13

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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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

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