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Public Policy and Consumer Protection What is public policy? Government intervention in the process or outcome of marketing exchanges which policymakers believe will benefit society as a whole. New policies usually result from: Marketplace abuses Need for economic or social welfare The Public Trusts Who? Percentage of Public Who Respond That Issue Invest in new products/services ТBusiness will doУ 65% vs ТGovernment must watchУ 31% Advertise honestly 29% 65% Make safe products/services 25% 71% Not engage in price fixing 15% 79% Clean up air and water pollution 11% 85% Types of Government Interventions Regulation Consumer education Incentives Regulation Effectiveness of government regulation is inconsistent Consumers end up bearing costs of regulation Requires cost vs. benefit analysis Regulation does not always help the original intent Because not based on consumer research Regulatory Agencies FTC FDA EPA SEC Local governments Framework for Determining Regulation Stage 1 Is government intervention appropriate? No Yes Stage 2 Apply 3 key principles: Incentive compatibility First Amendment protection Communication effectiveness Stage 3 Select the form of remedy from the “remedies continuum” Remove restraints Least Restrictive Enhance information flow Restrict information flow Most Restrictive DROP! Deceptive Advertising Unfair ad The advertiser witholds information which could result in injuries to consumers Deceptive ad Contains explicit or implied claims or omissions which are likely to “mislead a consumer acting reasonably under the circumstances” Three Categories of Deception Unconscionable lies Completely false claims made intentionally Claim/fact discrepancies Some relevant qualifications of a claim are omitted, resulting in misrepresentation Claim/belief discrepancies No deceptive claim is made, but a deceptive belief is created What’s done about deceptive advertising? Corrective ads Consumer Education Provide better product information to protect against market abuse labeling Incentives Encourage certain types of consumer behaviors by offering them incentives Rebates Tax deductions Socially Responsible Marketing Marketplace works best when it’s free and is being socially responsible.
