Regulatory Factors Affecting Advertising Social Social

Regulatory Factors Affecting Advertising Social Social Responsibility/ Responsibility/ Self-Regulation Self-Regulation Government Government Agencies Agencies Legislation Legislation Organized Organized Groups Groups Advertisement Advertisement Audience Audience Protection Protection Media Media Groups Groups

Federal Case Law Affecting Advertising First First Amendment Amendment Case Case Law Law This ThisProtection ProtectionApplies Appliesto to Commercial CommercialSpeech, Speech,Which Which is isSpeech SpeechThat ThatPromotes PromotesCommercial CommercialActivity. Activity. That ThatProtection Protection is isNot Not Absolute. Absolute. Privacy Privacy Case Case Law Law Developments: Developments: Online Online Advertising Advertising Legal LegalIssues Issuesof of Data DataCollection Collection Are AreTroubling Troubling Consumers, Consumers,Online OnlineAdvertisers, Advertisers,and and the the Government. Government. Online OnlinePrivacy PrivacyAlliance AllianceHas HasPublished Published Guidelines. Guidelines.

Advertising and the Federal Trade Commission The Federal Trade Commission’s (FTC) Main Focus, Regarding Advertising, is to Identify and Eliminate Ads that are Deceptive or Mislead the Consumer. Key Areas that Concern the FTC: Deception Deception Reasonable Reasonable Basis Basis for for Making Making aa Claim Claim Comparative Comparative Advertising Advertising Endorsements Endorsements Demonstrations Demonstrations

Deception The current FTC policy on deception contains three basic elements: Where there is representation, omission, or practice, there must be a high probability that it will mislead the consumer.

Deception The current FTC policy on deception contains three basic elements: –The perspective of the “reasonable consumer” is used to judge deception.

Deception The current FTC policy on deception contains three basic elements: –The deception must lead to material injury.

Reasonable Basis for Making a Claim FTC considers the following factors: Type and specificity of claim made Type of product Possible consequences of the false claim Degree of reliance by consumers on the claims The type and accessibility of evidence available for making the claim.

Comparative Advertising The FTC considers comparative advertising deceptive unless: 1. 2. 3. 4. The comparisons are based on fact. The differences advertised are statistically significant. The comparisons involve meaningful issues. The comparisons are to meaningful competitors.

Endorsements An endorsement or testimonial is any advertising message that consumers believe reflects the opinions, beliefs, or experiences of an individual, group, or institution.

Endorsements Endorsers must: Be qualified by experience or training to make judgments They must actually use the product.

Advertising and Other Regulatory Agencies In Addition to the FTC, Several Other Federal Agencies Regulate Advertisers and Their Agencies. Food Food and and Drug Drug Administration Administration Federal Federal Communication Communication Commission Commission Additional Additional Federal Federal Regulatory Regulatory Agencies Agencies

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The Council of Better Business Bureaus The primary responsibility for truthful and non-deceptive advertising rests with the advertiser

BBB Advertisements which are untrue, misleading, deceptive, fraudulent, falsely disparaging of competitors, or insincere offers to sell, shall not be used

BBB An advertisement as a whole may be misleading although every sentence separately considered is literally true

The Federal Trade Commission Methods of FTC Enforcement Consumers, competitors, or the FTC staff file a claim of deceptive practices with the FTC The FTC begins its investigation A complaint is issued if the FTC finds the practice to be deceptive The advertiser is asked to sign a Consent Decree

The Federal Trade Commission The FTC issues a cease and desist order if an advertiser refuses to sign a consent decree The FTC may require a firm to run Corrective Advertisements If a company cannot reach agreement with the FTC, its next recourse is the Federal Courts