Business
Regulation of Advertising and Promotion
21
McGraw-Hill/Irwin
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
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Chapter Twenty-One
Regulation of Advertising
and Promotion
© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Advertising is Regulated Through…
Self
Regulation
Federal Regulation
State Regulation
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Relation to text
This slide relates to material on p. 693-694 of the text.
Summary Overview
Numerous guidelines, rules, regulations and laws constrain and restrict advertising. This slide shows the various sources through which advertising and promotion are regulated. These include:
Self-regulation
Federal regulation
State regulation
Use of this slide
This slide can be used to introduce the regulation of advertising and promotion. More detailed discussion on how advertising and other forms of promotion are regulated will follow.
Direct Mail Under Attack
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Relation to text
This slide relates to the opening vignette on page 691 of the text.
Summary Overview
The typical American household receives about 40 lbs of direct mail each year, otherwise known as “junk mail,” and it is the latest traditional marketing tactic being challenged by consumers, as they continue to take control over the marketing message they receive.
Tired of seeing their mailboxes bulging with catalogs and other unsolicited pieces of mail, they want to take action. At the beginning of 2008, 11 states were considering legislation to create state-run “Do Not Mail” list registries.
Use of this slide
Use this slide when discussing the backlash against unsolicited junk mail.
Many Ads Are Review by Law Firms
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Relation to text
This slide relates to the material on p. 694 of the text.
Summary Overview
This slide shows an ad run by the law firm of Kinney & Lange, which specializes in advertising law. Many companies, as well as advertising agencies, use the law firms to review their ads for potential legal problems and to represent them if they have an advertising related problem.
Law firms can be a valuable resource for marketers, as well as advertising agencies, because they can review ads to ensure that they meet regulatory guidelines.
Use of slide
This slide can be used as part of a discussion of legal and regulatory issues impacting advertising.
Self-Regulation of Advertising
Voluntary self regulation by the advertising industry, business, and media to maintain consumer trust and confidence and limit government interference
Advertisers and Agencies
Industry Trade
Associations
Media
Business (BBB)
NARB
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Relation to text
This slide relates to material on pp. 694-704 of the text.
Summary Overview
This slide shows the various segments of the advertising industry that are involved in self- regulation. These include:
Advertisers and agencies – ads are usually examined to make sure messages are consistent with the corporate image and do not mislead or deceive consumers
Industry trade associations – many trade and industry associations develop their own advertising guidelines and codes that member companies are expected to abide by
Media – most media maintain some form of advertising review process and may reject any ads they regard as objectionable
Business (BBB) NARB – efforts of the business community to sustain high standards of truth, accuracy, and social responsibility by advertisers
Most advertisers, agencies, and the media recognize the importance of maintaining consumer trust and confidence. Advertisers also view self-regulation as a way to limit government interference, which they believe results in more stringent and troublesome regulations.
Use of slide
This slide can be used to discuss the various groups who are involved in self-regulation of advertising and promotion.
Malt Beverages Advertised on Television
*Click outside of the video screen to advance to the next slide
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Relation to text
This slide relates to IMC Perspective 21-1 as well as the material on pp. 696-697.
Summary Overview
This slide contains a commercial for Smirnoff Ice, an alternative malt beverage brand owned by Diageo PLC. Malt beverages, like Smirnoff Ice, Skyy Blue, and Bacardi Silver, are considered beers rather than hard liquor, from a self-regulatory perspective. Thus, major television networks and local stations allow advertising for these brands to be aired. The spot shown here was developed specifically for the Hispanic market.
Various public interest groups, such as MADD and the Center for Science in the Public Interest, have expressed concern over the introduction of malt beverages, which carry the names of liquor brands but follow industry guidelines for the advertising of beer. These guidelines are far less restrictive than those for distilled spirits.
Use of slide
Use this slide and video to explain how subtle the differences between products can be, and how such differences determine the regulations under which your product may fall. You might also discuss whether limitations should be placed on the advertising of malt beverages by the television networks.
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Liquor Advertising on TV
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Relation to text
This slide relates to IMC Perspective 21-1 (pp. 696-697) regarding the advertising of hard liquor on television.
Summary Overview
This slide shows an ad that was run in the New York Times in the form of an open letter sent to Seagram CEO Edgar Bronfman, Jr. criticizing the company’s decision to break the 48 year voluntary ban against hard liquor advertising on television. In the full-page ad, 58 health-advocacy and consumer organizations and individuals urged the Seagram Company to stop running television commercials for its hard-liquor products. The ad was run on August 2, 1996 a few months after Seagram’s issued a statement that it was ending its self-imposed ban on television advertising. The open letter was signed by numerous health, anti-drug, and religious groups assembled by the Center for the Science in the public interest, including the American Public Health Association, American Academy of Pediatrics, Students Against Drunk Driving, Community Anti-Drug Coalitions of America, Consumer Federation of America, Texans’ War on Drugs and Texas PTA. Individuals who signed the letter included Senator Robert Byrd, Representative Joseph P. Kennedy II and 10 other members of Congress.
Use of this slide
IMC Perspective 21-1 discusses the controversy surrounding the decision by the Distilled Spirits Council of the United States (DISCUS) to overturn the self-imposed ban on broadcast advertising by hard liquor companies. This slide can be used as part of a discussion regarding whether the broadcast networks should accept advertising for hard liquor.
The National Advertising Review Council
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Relation to text
This slide relates to the material on pp. 697-700 and Exhibit 21-3 of the text.
Summary Overview
This slide shows a page from the web site of the National Advertising Review Council. NARC's mission is sustain high standards of truth, accuracy, and social responsibility in national advertising. The self-regulatory system developed by NARC supports advertiser compliance by focusing on three goals:
- Minimize governmental involvement in the advertising business.
- Maintain a level playing field for settling disputes among competing advertisers.
- Foster brand loyalty by increasing public trust in the credibility of advertising.
This council plays an important role in the self-regulation of advertising and has become the advertising industry’s primary self-regulatory mechanism. The NAD acts as the investigative arm of the NARC.
Use of slide
This slide can be used as part of a discussion of the NAD/NARB which together form the National Advertising Review Council.
Sources of NAD Cases
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Relation to text
This slide relates to material on p. 698 and Figure 21-1 of the text.
Summary Overview
This slide shows the sources of the cases brought before the National Advertising Division (NAD) of the Council of Better Business Bureaus for 2007. The NAD is the first level that investigates the truthfulness and accuracy of an ad. NAD’s advertising monitoring program is the source of many of the cases it reviews. It also reviews complaints from consumers and consumer groups, local BBBs, and competitors.
As this slide shows, competitor challenges account for one-half of the NAD cases.
Product performance claims, superiority claims against competitive products, and all kinds of scientific and technical claims made in national advertising are often the source of cases investigated by the NAD.
Use of this slide
This slide can be used to discuss the NAD and the types of cases it reviews.
Chart1
| Consumer challenges |
| Local BBB challenges |
| NAD monitoring |
| Competitor challenges |
Sheet1
| Consumer challenges | 1.1 | |||
| Local BBB challenges | 3 | |||
| NAD monitoring | 46 | |||
| Competitor challenges | 51 | |||
| Competitor challenges | 61 | |||
| NAD monitoring | 32 | |||
| Local BBB challenges | 1 | |||
| Consumer challenges | 6 |
Sheet1
| 0 |
| 0 |
| 0 |
| 0 |
Sheet2
Sheet3
Mission of the ERSP
To discourage advertising and marketing in
the electronic retailing industry that
contains unsubstantiated claims
To demonstrate a commitment to meaningful and effective self-regulation
To enhance consumer confidence
in electronic retailing
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Relation to text
This slide relates to material on p. 699 of the text.
Summary Overview
In 2004, the NARC became involved in the self-regulation of electronic retailing when it initiated the Electronic Retailing Self-Regulation Program (ERSP). The mission of the ERSP is to enhance consumer confidence in electronic retailing, to discourage advertising and marketing in the electronic retailing industry that contains unsubstantiated claims, and to demonstrate a commitment to meaningful and effective self-regulation. SPAM e-mails along with website pop-up ads that lead to further e-commerce are in the ERSP’s purview, as well as advertising on TV shopping channels.
Use of this slide
This slide can be used to discuss the role and the activities of ERSP, including reviews that apply to all aspects of a marketing campaign including radio and Internet marketing.
TV Network Guidelines for Children’s Ads
No shots under one second in length
Must not over glamorize product
No exhortative language, such as “Ask mom to buy…”
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
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Relation to text
This slide relates to material on pp. 702-704 and Figure 21-3 of the text.
Summary Overview
This slide shows a sampling of the TV networks’ guidelines for children’s advertising. Guidelines that advertisers targeting children must follow include:
Must not over glamorize product
No exhortative language, such as “Ask mom to buy”
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
Many of the rules apply to toys, but the networks also have special guidelines for food commercials targeting children as well as commercials that offer premiums to kids.
Use of this slide
This slide can be used to discuss the media’s self-regulation for children’s advertising.
Advertising Self-Regulation
Can result in more stringent standards
than those imposed by legislation
Encourages truthful, ethical and
responsible advertising
Effective regulatory mechanism
Preferable to government intervention
Perspective of Advertisers, Agencies, Media
Takes too long to resolve complaints
Problems with budgeting and staffing
Lack of power or authority
Self-serving to advertiser and media
Perspective
Of Critics
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Relation to text
This slide relates to material on p. 704 of the text.
Summary Overview
This slide reviews two perspectives on self-regulation of advertising including the advertisers and media perspective and the critics’ perspective.
Perspective of advertisers, agencies, and media:
Encourages truthful, ethical, and responsible advertising
Effective regulatory mechanism
Preferable to government intervention
Can result in more stringent standards than those imposed by legislation
Perspective of critics of self regulation:
Takes too long to resolve complaints
Problems with budgeting and staffing
Lack of power and authority
Self-serving to advertiser and media
Those in favor of self-regulation believe it’s an effective mechanism for controlling advertising abuses and for avoiding the use of offensive, misleading, or deceptive practices. Those opposed do not believe advertising can, nor should, be controlled solely by self-regulation.
Use of this slide
This slide can be used to discuss the two perspectives relative to self-regulation of advertising.
Test Your Knowledge
Which of the following is a common complaint often lodged about the self-regulation of advertising?
A) The NAD/NARB has a limited budget
and staff.
B) It takes the National Advertising Division a long time to resolve a complaint.
C) Self-regulation is viewed as being self- serving to the advertising industry.
D) Self-regulation lacks the power and authority to be a viable alternative to government regulation.
E) All of the above.
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Answer: E
Federal Regulation of Advertising
Federal Communications Commission (FCC)
Food and Drug Administration (FDA)
U.S. Postal Service
Bureau of Alcohol Tobacco, and Firearms
Federal Trade Commission (FTC)
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Relation to text
This slide relates to material on pp. 704 of the text.
Summary Overview
This slide shows the various federal agencies involved in the regulation of advertising and promotion, which are:
Federal Trade Commission (FTC)
Federal Communications Commission (FCC)
Food and Drug Administration (FDA)
Bureau of Alcohol, Tobacco, and Firearms
U.S. Postal Service
Many of the regulations come under the jurisdiction of the Federal Trade Commission. In addition, depending on the advertiser’s industry and product or service, the other agencies listed may have regulations that affect advertising.
Use of slide
This slide can be used to introduce the various federal agencies involved in the regulation of advertising and promotion.
Advertising and the First Amendment
Speech promoting a
commercial transaction
is protected but must
be truthful
Freedom of speech or
expression is the most basic
federal law that governs
advertising and promotion
Speech must be
balanced against competing
interests such as advertising
of harmful products
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Relation to text
This slide relates to material on pp. 705 of the text.
Summary Overview
For years, freedom of speech protection did not include advertising and other forms of speech that promoted a commercial transaction. However, the courts have extended the First Amendment protection to include commercial speech, which is speech that promotes a commercial transaction. There have been a number of landmark cases over the past three decades where the federal courts have issued rulings supporting the protection of commercial speech by the First Amendment.
This slide shows that marketers have basic rights to advertise their products and services under the First Amendment to the U.S. Constitution. Some of the basic issues regarding advertising and the First Amendment are shown here and include:
Freedom of speech or expression is the most basic federal law that governs advertising and promotion
Freedom of 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
Use of this slide
This slide can be used to discuss how advertising is protected by the First Amendment.
Federal Trade Commission
Three Major Divisions
- Consumer Protection
- Economics
- Competition
Wheeler Lea Amendment (1938) Made Deceptive Practices Unlawful
Created By FTC Act (1914)
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Relation to text
This slide relates to material on pp. 705-708 and Exhibit 21-7 of the text.
Summary Overview
This slide provides an overview of the Federal Trade Commission. Some important facts related to the Federal Trade Commission are shown in this slide. These include:
Created by FTC Act (1914)
Wheeler Lea Amendment (1938) made deceptive practices unlawful
Three major divisions of the FTC are:
Bureau of Economics – helps the FTC evaluate the impact of its actions and provides economic analysis and support to antitrust and consumer protection investigations and rule makings
Bureau of Consumer Protection – protects consumers from deceptive and unsubstantiated advertising
Bureau of Competition –seeks to prevent business practices that restrain competition and is responsible for enforcing antitrust laws
The basic responsibility of the FTC is to protect both consumers and businesses from anticompetitive behavior and unfair and deceptive practices. These practices will be discussed in more detail in subsequent slides.
Use of this slide
This slide can be used to discuss the various aspects of the FTC.
The Concept of Unfairness
Could not reasonably be avoided by consumers
Causes substantial physical or economic injury to consumers
Must not be outweighed by countervailing benefits to consumers or competition
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Relation to text
This slide relates to material on p. 708 of the text.
Summary Overview
This slide shows the basis for determining unfairness. According to FTC policy, the basis for determining unfairness is that a trade practice:
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
Use of this slide
This slide can be used to discuss the controversy over the FTC’s authority to regulate unfair advertising practices, and the steps that have been taken to clarify the meaning of the term unfair.
Deceptive Advertising: Key Elements
Perspective of reasonable consumer
Likelihood of misleading consumer
Materiality – misrepresentation or
practice is likely to affect consumers’
purchase decision
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Relation to text
This slide relates to material on pp. 708-711 of the text.
Summary Overview
For years the term deception was criticized for being vague and all encompassing. These elements were established in 1983 and have helped the commission determine which ads warrant a FTC challenge.
This slide shows the key essential elements of deceptive advertising, which are:
Likelihood of misleading consumer – the representation, omission, or practice must be likely to mislead the consumer
Perspective of reasonable consumer – the act or practice must be considered from the perspective of the reasonable consumer
Materiality – misrepresentation or practice is likely to affect consumers’ purchase decision
Use of this slide
This slide can be used to discuss the key essential elements of deceptive advertising.
Presentations that 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”
BMW –
“The ultimate driving machine”
Nestle –
“The very best chocolate”
Snapple – “Made from the best stuff on earth”
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Relation to text
This slide relates to material on p. 709 of the text.
Summary Overview
This slide defines and shows some examples of what is known as puffery. Puffery has been legally defined as “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.” Advertisers commonly use puffery and it has generally been viewed as a form of poetic license or allowable exaggeration. The FTC takes the position that because consumers expect exaggerations or inflated claims in advertising they recognize puffery and don’t believe it.
Some examples of puffery are shown here, including:
Bayer - “The wonder drug that works wonder”
BMW – “The ultimate driving machine”
Nestle – “The very best chocolate”
Snapple – “Made from the best stuff on earth”
Use of this slide
This slide can be used to discuss the concept of puffery and show some examples of companies using puffery to advertise their products.
Ways the FTC Handles Deceptive Ads
Affirmative
Disclosure
Advertising
Substantiation
FTC Programs to Prevent
Deceptive Advertising
Cease and
Desist Orders
Corrective
Advertising
FTC Programs to Deal With
Deceptive Advertising After It Occurs
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Relation to text
This slide relates to material on pp. 711-716 of the text.
Summary Overview
This slide shows the ways in which the FTC deals with deceptive advertising. These include both prevention and dealing with deception after it occurs.
FTC programs to prevent deceptive advertising
Affirmative disclosure – require advertisers to include certain types of information in their ads so the consumer can be aware of all the consequences, conditions, and limitations associated with the use of the product or service
Advertising substantiation – requires advertisers to have supporting documentation for their claims and to prove the claims are truthful
FTC programs to deal with deception after it occurs
Cease and desist orders – requires that advertisers stop the specified advertising claim within 30 days and prohibits the advertiser from engaging in the objectionable practice until after a hearing
Corrective advertising – requires the advertiser to run additional advertising designed to remedy the deception or misinformation resulting from the use of deceptive advertising
Use of this slide
This slide can be used to discuss the ways the FTC deals with deception by taking steps to prevent it before it occurs as well as by programs that are designed to stop deceptive acts or practices and remedy them.
Federal Regulation by the FTC
1970’s
FTC is powerful,
active regulator
Improvements Act
passed
1980
FTC becomes
less active
1980’s and 1990’s
Focused on
enforcing existing regs
2000 to present
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Relation to text
This slide relates to material on pp. 716-717 of the text.
Summary Overview
This slide shows a brief timeline of federal regulation by the FTC. By the end of the 1970s, the FTC had become a very powerful and active regulator of advertising. However, Congress was concerned about the FTC’s broad interpretation of unfairness, which led to the restrictive legislation of the 1980 FTC Improvements Act. During the 1980s, the FTC became less active and cut back its regulatory efforts. After more than a decade of relative inactivity, the Federal Trade Commission has once again become active in the regulation of advertising. Under the Bush administration the FTC has focused its attention on the enforcement of existing regulations, particularly in areas such as telemarketing and Internet privacy.
Use of this slide
This slide can be used to discuss the history and current status of federal regulation by the FTC.
Additional Federal Regulatory Agencies
Additional Federal Regulatory Agencies and Departments That Also Regulate Advertising and Promotion
The Federal Communications Commission
The Food and Drug Administration
The U.S. Postal Service
Bureau of Alcohol, Tobacco, and Firearms
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Relation to text
This slide relates to material on pp. 717-720 of the text.
Summary Overview
While the FTC is the major regulator of advertising for products sold in interstate commerce, several other federal agencies and departments also regulate advertising and promotion, listed on this slide. These include:
The Federal Communications Commission – regulates broadcast communication and has jurisdiction over the radio, television, telephone, and telegraph industries
The Food and Drug Administration – now under the jurisdiction of the Department of Health and Human Services, the FDA has authority over the labeling, packaging, branding, ingredient listing, and advertising of packaged foods and drug products, as well as cosmetics.
The U.S. Postal Service – has control over advertising involving the use of the mail and ads that involve lotteries, obscenity, or fraud
Bureau of Alcohol, Tobacco, and Firearms – an agency within the Treasury Department that enforces laws, develops regulations, and is responsible for tax collection for the liquor industry.
Use of slide
This slide can be used to discuss the various groups who are involved in regulating advertising and promotion.
Test Your Knowledge
The _____ is a federal agency that was founded in 1934 to regulate broadcast communications that include the radio, television, telephone, and telegraph industries.
A) Federal Trade Commission
B) Federal Communications Commission
C) Fairness Doctrine
D) U.S. Postal Service
E) National Association of Broadcasters
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Answer: B
The Nutrition Labeling and Education Act
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Relation to text
This slide relates to the material on pp. 719 and Exhibit 21-11 of the text.
Summary Overview
Many changes in food labeling are a result of the Nutritional Labeling and Education Act, which Congress passed in 1990. Under this law, the FDA established legal definitions for a wide range of terms (such as low fat, light, and reduced calories) and required straightforward labels for all foods beginning in early 1994. In its current form, the act applies only to food labels, but it may soon affect food advertising as well. The FTC would be asked to ensure that food ads comply with the new FDA standards.
This slide shows the nutrition facts on the label of a jar of peanut butter.
Use of slide
This slide can be used to discuss regulatory areas where the FDA has been heavily involved, such as food labeling and in the advertising and promotion of tobacco products.
The U.S. Postal Service
The U.S. Postal Service has control over ads that involve…
Lotteries
Obscenity
Fraud
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Relation to text
This slide relates to page 720 of the text.
Summary Overview
The U.S. Postal Service has control over advertising involving the use of the mail and ads that involve lotteries, obscenity, or fraud. The regulation against fraudulent use of the mail has been used to control deceptive advertising by numerous direct-response advertisers.
Use of this slide
Use this slide to explain the types of advertising message over which the U.S. Post Service has regulatory jurisdiction.
Bureau of Alcohol, Tobacco, and Firearms
The BATF…
Enforces liquor laws
Develops regulations
Collects taxes on liquor sales
Regulates liquor advertising
Imposes sanctions
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Relation to text
This slide relates to page 720 of the text.
Summary Overview
The Bureau of Alcohol, Tobacco, and Firearms (BATF) is an agency within the Treasury Department that enforces laws, develops regulations, and is responsible for tax collection for the liquor industry. The BATF regulates and controls the advertising of alcoholic beverages. The agency determines what information can be provided in ads, as well as what is false and misleading advertising. It is also responsible for including warning labels on alcohol advertising and banning the use of active athletes in beer commercials. The BATF can impose strong sanctions for violators.
Advertising of alcoholic beverages has become a very controversial issue, with many consumer and public-interest groups calling for a total ban.
Use of this slide
Use this slide to explain the types of advertising message over which the U.S. Post Service has regulatory jurisdiction.
Suing Competitors Under the Lanham Act
Elements Required
To Win a False
Advertising Suit
Under the
Lanham Act
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
False statements have been made about advertiser’s product or your product
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Relation to text
This slide relates to material on pp. 722-723 of the text.
Summary Overview
The Lanham Act gives companies the ability to sue a competitor for deceptive advertising. More and more companies are using the Lanham Act to sue competitors for false advertising claims, particularly since comparative advertising has become so common. This slide shows the elements that are required to win a false advertising suit under the Lanham Act, which are:
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
Use of this slide
This slide can be used to discuss the Lanham Act and its significance to advertising.
Suing Competitors
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Relation to text
This slide relates to page 723 and Exhibit 21-13 of the text.
Summary Overview
In the mid-90s, the Campbell Soup Company advertised that its Prego brand of spaghetti sauce was thicker than Van Den Bergh Food’s Ragu brand. Van Den Bergh sued to have Campbell’s comparative ads halted, but lost the case. Campbell capitalized on its victory by creating an ad based on it. The tagline was “Ragu took us to court. We made our case stand. Just like our breadstick.”
Marketers using comparative ads must carefully consider whether their messages can mislead consumers or overstate their brand’s performance.
Use of this slide
Use this slide when discussing the use of comparative ads.
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.
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Relation to text
This slide relates to material on p. 723-724 of the text.
Summary Overview
This slide summarizes the areas where state and local entities involve themselves in advertising regulation. Advertisers are concerned about the trend toward increased regulation of advertising at the state and local levels because it could mean the national advertising campaigns would have to be modified for every state or municipality.
Use of this slide
This slide can be used to discuss the role state regulation plays in controlling advertising.
Regulation of Sales Promotion
Cannot misrepresent their value
Cannot require purchase to enter
Rules and details must be disclosed to consumers
Care must be taken with special audiences, like children
Contests and Sweepstakes
Premiums
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Relation to text
This slide relates to material on pp. 724-725 of the text.
Summary Overview
This slide deals with the regulation of the sales promotion. The Federal Trade Commission regulates many areas of sales promotion through the Marketing Practices Division of the Bureau of Consumer Protection. Many promotional practices are also policed by state attorneys general and local regulatory agencies.
Specific areas of sales promotion that are regulated include:
Contests and sweepstakes
Cannot require a purchase to enter
Rules and details must be disclosed to consumers
Premiums
Cannot misrepresent their value
Care must be taken with special audiences such as children
Use of this slide
This slide can be used to discuss the regulation of sales promotion.
Regulation of Trade Allowances
Must not violate any stipulations of the Robinson-Patman Act
Co-op funds must be equal and non-discriminatory
Trade Allowances
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Relation to text
This slide relates to material on pp. 725-726 of the text.
Summary Overview
This slide deals with the regulation of trade allowances.
The Federal Trade Commission regulates many areas of trade allowances through the Robison-Patman Act, which prohibits price discrimination. This act dictates that:
A manufacturer is prohibited from granting wholesalers and retailers various types of promotional allowances and/or payments unless they are made available to all consumers on proportionally equal terms.
Cooperative advertising programs must ensure that co-op funds are made available to retailers on a proportionally equal basis and that the payments are not used as a disguised form of price discrimination.
Use of this slide
This slide can be used to discuss the regulation of trade allowances.
Regulation of Direct Allowances
Telephone Consumer Protection Act of 1991
Pay-per-call Rule
Development of “Do-not-call” Registry by FTC
Telemarketing faces increased regulation including…
FTC and US Postal Service police direct-response advertising closely
Self-regulation occurs through various industry groups
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Relation to text
This slide relates to material on pp. 726-728 of the text.
Summary Overview
This slide summarizes the regulation of direct marketing. Some of the characteristics of the regulation of direct marketing are:
Self-regulation occurs through various industry groups
FTC and US Postal Service police direct marketing offers very closely
Telemarketing faces increased regulation including the:
Telephone Consumer Protection Act of 1991
Pay-per-call rule
Development of “do-not-call” registry by FTC
The Federal Trade Commission enforces laws related to direct marketing including mail-order offers, the use of 900 telephone numbers, and direct-response TV advertising. The U.S. Postal Service enforces laws dealing with the use of the mail to deliver advertising and promotional messages or receive payments and orders for items advertised in print or broadcast media. Recently in 2003 the FTC developed the “do-not-call” registry, which is discussed on the next slide.
Use of this slide
This slide can be used to discuss the regulation of the direct marketing industry.
Protecting Consumers from Unwanted Calls
Created by the FTC to allow consumers to limit the calls they receive from telemarketers
Does not cover calls from political organizations, charities, telephone surveyors, or companies with which the consumer has an existing relationship
Companies calling consumers on the registry subject to fine of up to $11,000 per incident
Over 145 million consumers registered since October 2003.
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Relation to text
This slide relates to material on pp. 727-728 of the text.
Summary Overview
This slide summarizes the characteristics of the national “do-not-call” registry which was created by the FTC to deal with the problems of unwanted calls consumer receive from telemarketers. Some of the important aspects of this registry are:
Created by the Federal Trade Commission to allow consumers to limit the calls they receive from telemarketers
Does not cover calls from political organizations, charities, telephone surveyors, or companies with which the consumer has an existing relationships with
Companies calling consumers on the registry are subject to a fine of up to $11,000 per incident
Took effect in October 2003; over 145 million consumers registered as of 2007
The development of this registry has received opposition from the direct-marketing industry and others challenging the authority of the FTC in creating such a list. However, Congress has upheld the legality of the registry and it is now in effect.
Use of this slide
This slide can be used to discuss the national “do-not-call” registry, which took effect in October 2003.
Internet Marketing Issues
Banning
unsolicited emails (SPAM)
Privacy issues
such as
profiling and collecting personal
information
Protecting children when
they are online
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Relation to text
This slide relates to material on pp. 728-730 of the text.
Summary Overview
This slide shows some proposed restrictions in the way marketers use the Internet to get information from consumers, the types of information they can get, and what they do with this information. Some of the restrictions that have been proposed include:
Banning unsolicited e-mails (SPAM)
Privacy issues such as providing and collecting personal information
Protecting children when they are online
Currently marketing on the Internet is subject to only limited government regulation, and many consumer and industry groups are concerned that some marketers will use the new medium to get around regulations and restrictions in other promotional areas. The FTC’s legal authority is limited in this area and extending it would require congressional action.
Use of this slide
This slide can be used to discuss some of the proposed restrictions placed on Internet marketing.
Children’s Online Privacy Protection Act
Places restrictions on collecting
information from children via
the Internet
Enacted to protect the privacy
of children when they are
using the Internet
Privacy policies must
be posted on home pages
and area where information
is collected
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Relation to text
This slide relates to material on p. 729 of the text.
Summary Overview
This slide relates to the Children’s Online Privacy Protection Act and summarizes the characteristics of this piece of legislation which are:
Enacted to protect the privacy of children when they are using the Internet
Places restrictions on collecting information from children on the Internet
Privacy policies must be posted on home page and areas where information is collected
Concerns over online marketing to children led to the passage of this act, which the FTC began enforcing in April 2000.
Use of this slide
This slide can be used to discuss the Children’s Online Privacy Protection Act.
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Consumer
challenges
Local BBB
challenges
NAD monitoring
Competitor
challenges