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Regulation of Advertising
and Promotion
Advertising is regulated through
Self
Regulation
Federal
Regulation
State
Regulation
Self-regulation of Advertising
Advertisers,
Advertisers and
Agencies, Media
Agencies
and their Lawyers
Industry Trade
Associations
Voluntary self regulation by the advertising
industry, business, and media to maintain
consumer trust and confidence and limit
government interference
BBB
NARC
The
Media
Public
The Pharmaceutical Industry Has Developed
Advertising Guidelines To Self-Regulate
The National Advertising Review Council
is an Important Self-Regulatory Body
Sources of NAD Cases (2008)
Competitor
challenges
61%
NAD monitoring
32%
Local BBB
challenges
1%
Consumer
challenges
6%
0
10
20
30
40
50
60
70
Some TV Network Guidelines for
Children’s Advertising
Must
Don’t
not
over-glamorize
over glamorizeproduct
product
Mom to buy…”
No exhortative language, such as “Ask mom
Generally no celebrity endorsements
Can’t use “only” or “just” in regard to price
Generally no comparative or superiority claims
No costumes or props not available with the toy
Three-second establishing shot of toy in relation to child
No shots under one second in length
Appraising Self-Regulation
Encourages truthful, ethical and
responsible advertising
Perspective of
Advertisers,
Agencies and
Media
Effective regulatory mechanism
Preferable to government intervention
Often results in more stringent standards
than those imposed by legislation
Takes too long to resolve complaints
Problems with budgeting and staffing
Lack
Lack
of of
real
power
power
or or
authority
authority
Self-serving to advertiser and media
Perspective
Of Critics
Hard Liquor Advertising on TV: Legal?
CSPI’s Response to Seagram’s Moratorium Violation
Mike’s Hard Lemonade: On TV, Web and in Print
How About Tobacco advertising?
No tobacco ads on tv or radio, but…
… magazines and outdoor posters near
retailers ok, unless targeted to minors
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
Freedom of speech must
be balanced against competing
interests such as advertising
of harmful products
Federal Government Agencies Involved in
the Regulation of Advertising and Promotion
Federal
Communications
Commission
(FCC)
Federal Trade
Commission
(FTC)
(FTC)*
Bureau of
Alcohol Tobacco,
and Firearms
Food and Drug
Administration
(FDA)
U.S. Postal
Service
Federal Trade Commission
Created By FTC Act
(1914)
Wheeler Lea
Amendment (1938)
Made Deceptive
Practices Unlawful
Three Major Divisions
• Bureau of Consumer
Protection
• Bureau of Economics
• Bureau of
Competition
Federal Regulation by the FTC
1970’s
FTC very powerful and active regulator
1980
1980
FTCImprovements
Improvements Act
FTC
Actpassed
passed
1980’s and 1990’s
FTC becomes less active
2000 to present
FTC focused on enforcement of existing regs
The Concept of “Unfairness”:
Legal Requirements
Causes substantial physical
or economic injury to
consumers
Could not reasonably be
avoided by consumers
Must not be outweighed by
countervailing benefits to
consumers or competition
“Deceptive Advertising”: Key Elements
Likelihood of misleading
consumer
Perspective of reasonable
consumer
Materiality –
misrepresentation or
practice is likely to affect
consumers’
purchase decision
Puffery: Some Examples
Advertising or other sales presentations which praise
the item to be sold with subjective opinions,
superlatives, or exaggerations, vaguely and generally,
stating no specific facts
Bayer –
“The wonder
drug that works
wonders”
Nestle –
“The very best
chocolate”
BMW –
“The ultimate
driving
machine”
Snapple –
“Made from
the best stuff
on earth”
Ways the FTC Deals With Deceptive Advertising
FTC Programs to Prevent
Deceptive Advertising
Affirmative
Affirmative
Disclosure
Disclosure
(i.e.
disclaimers)
Advertising
Substantiation
FTC Programs to Deal With
Deceptive Advertising After It Occurs
Cease and
Desist Orders
Corrective
Advertising
Corrective Advertising & Cease/Desist
Doan's Pills Must Run Corrective Advertising:
Ads Claiming Doan's Is Superior in Treating Back Pain Were Unsubstantiated
FTC News Release
May 27, 1999
The Federal Trade Commission has ordered the makers of Doan's Pills to run ads to
correct misbeliefs resulting from their unsubstantiated claim that Doan's Pills are superior to
other over-the-counter analgesics for treating back pain. The Order, contained in a
Commission opinion announced today, would require advertising and packaging to carry the
message, "Although Doan's is an effective pain reliever, there is no evidence that Doan's is
more effective than other pain relievers for back pain." The order also would prohibit Novartis
Corporation and Novartis Consumer Health, Inc., the marketers of Doan's, from representing
that the product is more effective than other over-the-counter products unless they possess
and rely upon competent and reliable scientific evidence -- including at least two clinical
studies — to substantiate their claims. In addition, the order would require Novartis to have
scientific substantiation for any claims made regarding the efficacy, safety, benefits or
performance of any over-the counter analgesic they market. Doan's has been marketed and
sold for over 90 years and always has been advertised as a backache product.
False Advertising: The Lanham Act
Elements
Required
To Win a False
Advertising
Suit
Under the
Lanham Act
False statements have been made about
advertiser’s product or your product
The ads actually deceived or had the
tendency to deceive a substantial segment
of the audience
The deception was “material” or
meaningful and is likely to influence
purchasing decisions
The falsely advertised products or services
are sold in interstate commerce
You have been or likely will be injured as a
result of the false statements, either by
loss of sales or loss of goodwill
Common Areas of FTC Inquiry
Environmental
Claims
“Free” Claims
Made in the USA
Claims
Advertising as a
Contract
Testimonials
Fact vs Puffery
FDA’s Nutrition Labeling and Education Act
(1990)
State Regulation
In addition to recognizing decisions
by the federal courts regarding false
or deceptive practices, many states
have special controls and regulations
governing the advertising of specific
industries or practices.
Legal Marketing/Advertising on the Internet
Banning
unsolicited emails
(CAN-SPAM)
(SPAM)
Privacy issues
issues
Privacy
suchsuch
as cookiesas
based tracking,
profiling
and
profiling and
collecting
collecting personal
personal
information
information
Protecting children
when
they are online
Major Provisions of the CAN-SPAM Act
• It bans false or misleading header
information.
• It prohibits deceptive subject lines.
• It requires that your e-mail give recipients an
opt-out method.
• It requires that commercial e-mail be
identified as an advertisement and include the
sender’s valid physical postal address.
Children’s Online Privacy Protection Act (COPPA)
Enacted to protect the privacy
of children when they are
using the Internet
Places restrictions on collecting
information from children via
the Internet
Privacy policies must
be posted on home pages
and areas where information
is collected; parents must affirm
registration through reply e-mail