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Chapter 20
Regulation of
Advertising
and
Promotion
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Education.
Advertising Controls
Self
Regulation
State
Regulation
Federal
Regulation
Regulation and Control of Advertising
 Regulatory concerns
 Nature and content of the ad
 Potential of the ad to offend, exploit, mislead, and/or
deceive consumers
 Self regulation: Voluntary internal regulation
practiced and promoted within an industry
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McGraw-Hill Education.
3
Self-Regulation by Trade
Associations
 Industries prone to controversy develop their own
advertising guidelines
 Many professions maintain guidelines through
local, state, and national organizations
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McGraw-Hill Education.
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Self-Regulation by Businesses
 Better Business Bureau (BBB): Promotes fair
advertising and selling practices across industries at
the local level
 Council of Better Business Bureaus: Provide
effective control over advertising practices at the
national level
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McGraw-Hill Education.
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Advertising Self-Regulatory Council
(ASRC)
 Earlier known as the National Advertising Review
Council (NARC)
 Mission - To sustain high standards of truth and
accuracy in national advertising
 Advertising Accountability Program - Regulates
online behavioral advertising (OBA) across the
Internet
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McGraw-Hill Education.
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National Advertising Division of the Council
of Better Business Bureaus (NAD)
 Examines product performance, superiority,
scientific and technical claims
 Has lawyers to scrutinize all types of media to find
misleading advertisements
 Helps various industries to develop effective selfregulatory programs
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McGraw-Hill Education.
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National Advertising Review Board
(NARB)
 Appealed for additional review by advertisers who
disagree with NAD’s findings
 Composed of advertising professionals and
prominent public interest members
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CARU Activities
• General activities
• Review and evaluate child-directed
advertising in all media
• Oversee online privacy issues that affect
children
• Advise advertisers and agencies
• Maintain self-regulatory guidelines
for children’s advertising
Mission of the ERSP
Enhance consumer confidence
in electronic retailing
Discourage advertising and marketing in
the electronic retailing industry that
contains unsubstantiated claims
Demonstrate a commitment to
meaningful and effective self-regulation
Self-Regulation by Advertising
Associations
Actively Monitoring
and Policing
Advertising Practices
American Association of
Advertising Agencies
American Advertising
Federation
Advertisers
Agencies
Media
Advertising Clubs
Advertising Associations
 American Association of Advertising Agencies
(AAAA) - Issues guidelines for specific types of
advertising
 American Advertising Federation (AAF)
 Has standards for truthful and responsible
advertising
 Involved in advertising legislation
 Influences agencies to abide by its code and
principles
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McGraw-Hill Education.
12
Self-Regulation by Media
Newspapers and magazines
• Have requirements and restrictions depending on the size and nature of
the publication
• Some test the products advertised and offer refunds if they are later found
to be defective
Television and radio
• Major TV networks have incorporated the NAB codes into their standards
• All commercials intended for airing on a network or an affiliate has to be
reviewed
• Network standards change constantly
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McGraw-Hill Education.
13
Federal Regulation of Advertising
Federal
Communications
Commission
(FCC)
Federal Trade
Commission
(FTC)
Bureau of Alcohol
Tobacco, and
Firearms
Food and Drug
Administration
(FDA)
U.S. Postal
Service
Major Divisions of the FTC
Bureau of Competition
• Seeks to prevent business practices that restrain competition
• Enforces antitrust laws
Bureau of Economics
• Provides economic analysis and support to antitrust and consumer
protection investigations
• Analyzes the impact of government regulation on competition and
consumers
Bureau of Consumer Protection
• Protects consumers against unfair, deceptive, or fraudulent
practices
• Investigates and litigates practices alleged to be unfair to
consumers
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McGraw-Hill Education.
15
Deceptive Advertising
Likelihood of
misleading consumer
Perspective of
reasonable consumer
Materiality –
misrepresentation or
practice is likely to
affect consumers’
purchase decision
Puffery
Bayer –
“The wonder
drug that works
wonders”
Nestlé –
“The very best
chocolate”
BMW –
“The ultimate
driving
machine”
Snapple –
“Made from
the best stuff
on earth”
Ways the FTC Handles Deceptive
Advertising
FTC programs to
prevent deceptive
advertising
FTC programs to
deal with deceptive
advertising
after it occurs
Affirmative
Disclosure
Cease-and-Desist
Orders
Advertising
Substantiation
Consent
Orders
Corrective
Advertising
Additional Federal Regulatory
Agencies
Federal
Communications
Commission
Food and Drug
Administration
Additional federal regulatory agencies
and departments that regulate
advertising and promotion
Bureau of Alcohol,
Tobacco, and
Firearms
U.S. Postal Service
The Lanham Act
 Prohibits any false description or representation
 To win a false advertising lawsuit containing a comparative
claim, one must prove that:
 False statements have been made about the advertiser’s or
one’s product
 Ads deceived or had the tendency to deceive a substantial
segment of the audience
 Deception was material or meaningful and can influence
purchase decisions
 Falsely advertised products or services are sold in interstate
commerce
 One will incur loss of sales or of goodwill as a result of the false
statements
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20
McGraw-Hill Education.
National Association of Attorneys
General (NAAG)
 Regulates:
 Airfare advertising
 Car-rental price advertising
 Advertising dealing with nutrition and health claims
in food ads
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McGraw-Hill Education.
21
Regulation of Sales Promotion
 Contests and sweepstakes - Marketers must ensure
that:
 Contest or sweepstake cannot be classified as lottery
 Full disclosure of the promotion is made
 Premium
 Marketers should list its value as the price at which the
merchandise is sold
 Trade allowances
 Should follow the stipulations of the Robinson-Patman Act
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McGraw-Hill Education.
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Regulation of Direct Marketing
Self-regulation occurs through
various industry groups
FTC & US Postal Service police
direct-response ads closely
Telemarketing faces
increased regulation
Telephone Consumer Protection Act
Pay-per-call Rule
FTC “Do-not-call” Registry
Marketing on the Internet
 Undisclosed profiling of consumers by web
marketers is a major concern
 Network Advertising Initiative (NAI)
 Created by companies that collect Internet usage
data
 Provides self-regulatory codes
 Children’s Online Privacy Protection Act
(COPPA): Restricts collecting information from
children via the Internet
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McGraw-Hill Education.
24
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 ecommerce sites
 Must identify themselves as such
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McGraw-Hill Education.
Anti-Spamming Legislation
 CAN-SPAM Act of 2003 email rules
 Conspicuous notice of the right to opt-out
 A functioning Internet-based mechanism that a
recipient may use to opt out of future commercial email messages
 Clear and conspicuous identification that the
message is an advertisement
 A valid physical postal address for the sender