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Chapter 20 - Regulation of Advertising and Promotion

Chapter 20

Regulation of Advertising and Promotion

Multiple Choice Questions

1. Advertisers are often supportive of voluntary self-regulation because: A. self-regulation is viewed as a way of limiting government interference of advertising. B. all clients and agencies are affected by voluntary self-regulation. C. self-regulation does not require interaction between agency and client. D. self-regulation results in even more stringent regulations than state and federal agencies want. E. it is simple and less time consuming.

2. Self-regulation begins with the interaction of client and agency when: A. a consent order is signed. B. the company is charged with a lawsuit for deceptive advertising. C. there has been omission of advertising substantiation. D. creative ideas are generated and submitted for consideration. E. the ads are aired in foreign nations.

3. In 1977, the _____ ruled that restrictions on advertising by lawyers are unconstitutional and that they have a First Amendment right to advertise. A. Federal Trade Commission B. American Bar Association C. U.S. Supreme Court D. Better Business Bureau E. U.S. Department of Justice

4. Which of the following statements about advertising by attorneys, dentists and physicians is true? A. Attorneys are not allowed to advertise, but dentists and physicians are. B. Dentists and physicians are not allowed to advertise, but attorneys are. C. Most consumers are against the use of professional advertising. D. The Supreme Court has ruled that professionals such as attorneys, dentists and physicians have the right to advertise. E. Attorneys, dentists, and physicians do not advertise because they believe that advertising demeans their professions.

5. Which of the following statements concerning advertising by attorneys is true? A. Advertising by attorneys is legal in the entire United States. B. The U.S. Supreme Court does not permit lawyers to advertise if they earn more than $100,000 per year. C. Attorneys are in agreement that advertising is an important part of their marketing mix. D. The American Bar Association recently removed all restrictions on the type of advertising attorneys can use. E. By its very nature, advertising can only have a positive impact on the legal profession.

6. A number of self-regulatory mechanisms have been established by the business community in an effort to control advertising practices and among them the largest and best known is the ____. A. Federal Trade Commission B. Federal Communications Commission C. Better Business Bureau (BBB) D. World Trade Organization E. Chamber of Deputies

7. BBB is the largest and best known self-regulatory mechanism in United States, for controlling advertising practices, that has been established by the business community. BBB stands for: A. Board for Business Broadcasting. B. Board of the Best Businessmen. C. Board for Betterment of Broadcasting. D. Better Business Bureau. E. Best Business Bureau.

8. Better Business Bureaus provide control over advertising practices at a _____ level while the Council of Better Business Bureaus plays a major role in controlling advertising practices at a(n) _____ level. A. local; national B. national; local C. distributor; manufacturer D. industry-wide; individual company E. regional; local

9. The _____ was formed by three advertising associations and the Council of Better Business Bureaus to sustain high standards of truth, accuracy, morality and social responsibility in national advertising. A. National Advertising Board B. National Advertising Review Council C. American Association of Advertisers D. Ad Council E. Board of Advertising Ombudsmen

10. The _____ accepts cases dealing with product performance claims, superiority claims against competitive products, and all kinds of scientific and technical claims made in national advertising. A. National Advertising Division (NAD) B. U.S. Department of Justice C. National Association of Attorneys General D. American Association of Advertising Agencies E. Federal Trade Commission

11. Which of the following statements describes the NAD/NARB review process? A. If a case is not resolved to its satisfaction, the NARB has the power to order an advertiser to stop running its ads. B. If the NAD and an advertiser fail to resolve an advertising controversy, either party can appeal the case to the NARB. C. Advertisers who participate in the full process of an NAD investigation, and NARB appeal often do not abide by the panel's decision. D. Most advertising cases investigated by the NAD are resolved without being sent to the NARB. E. Advertisers who do not comply with the NAD/NARB review process will find themselves encumbered with a class action lawsuit.

12. The _____ examines advertising claims in direct-response advertising, including infomercials and home-shopping channels. A. Children's Advertising Review Unit (CARU) B. Vision Council of America C. National Association of Broadcasters D. Electronic Retailing Self-Regulation Program E. Independent Business Alliance

13. The advertising industry's most effective self-regulatory mechanism is the: A. Association of National Advertisers. B. Federal Trade Commission. C. NAD/NARB. D. Distilled Spirits Council. E. National Association of Broadcasters.

14. Policies and procedures for self-regulation of advertising industry are established by the ____. A. National Association of Broadcasters B. Vision Council of America C. National Advertising Review Council D. Independent Business Alliance E. Association of American Publishers

15. Which of the following is the appellate unit of the National Advertising Review Council? A. National Advertising Division B. Independent Business Alliance C. National Advertising Review Board D. Vision Council of America E. National Association of Broadcasters

16. If an advertiser refuses to comply with rulings made by the National Advertising Review Board (NARB), the NARB is most likely to: A. order the company to stop running the ad. B. refer the case to an industry trade association. C. refer the matter to an appropriate government agency. D. impose a fine. E. lodge a class action suit for customers who have been in some way negatively affected by the ad.

17. The NARC became involved in the self-regulation of electronic retailing when it initiated the: A. Information Technology Act (ITA). B. Centre for Electronic Technology. C. Electronic Retailing Agency. D. Electronic Retailing Self-Regulation Program (ERSP). E. Federal Trade Commission (FTC).

18. The _____ is sponsored by the Electronic Retailing Association (ERA), although it works independently of the ERA to create an unbiased self-regulatory system. A. National Advertising Review Board B. Federal Trade Commission C. Council of Better Business Bureaus D. Electronic Retailing Self-Regulation Program E. Information Technology Act

19. Which of the following statements is true about National Advertising Review Council (NARC)? A. Cases brought to NARC are subject to more publicity as compared to the cases brought to a court. B. It is very expensive to get a case solved through NARC. C. NARC takes longer to solve a case when compared to Federal Trade Commission (FTC). D. NARC can handle cases at lower cost as compared to a court. E. NARC is a government agency regulating advertising agency.

20. The _____ is a major trade association of the advertising business in the United States. It has its own standards of practice and creative code. A. Vision Council of America B. Independent Business Alliance C. American Association of Advertising Agencies D. Federal Trade Commission E. National Association of Broadcasters

21. Which of the following statements describes the media's role in the self-regulation of advertising? A. The media must accept all advertising they receive because of First Amendment that guarantees the freedom of speech. B. The media cannot refuse to accept advertising for an entire product class such as hard liquor. C. The media can refuse to accept individual ads they find offensive or objectionable. D. Most media accept any advertising they receive since advertising is their major source of revenue. E. Most media reject political ads.

22. The reason a magazine such as ‘Good Housekeeping' regularly tests products and offers a "seal of approval" is to: A. enhance the credibility of the publication. B. encourage advertisers to buy more media space. C. avoid self-regulation. D. discourage comparative advertising. E. avoid questionable advocacy advertising.

23. Advertising on television and radio was regulated for many years through codes developed by the _____ until the courts found some of its regulations served to restrain trade. A. National Advertising Review Board B. Federal Trade Commission C. Federal Communications Commission D. National Association of Broadcasters E. Standards and Practices Division

24. Which of the following media has the most stringent review and approval process for advertising? A. Local radio B. Magazines C. Newspapers D. Internet E. The four major television networks

25. Television advertising: A. is generally used for hard liquor advertising. B. is regulated through codes developed and enforced by the Federal Trade Commission. C. is regulated by affiliates. D. is more stringently self-regulated than any other medium. E. is experiencing a tightening of the rules concerning the rating system used for commercials.

26. A very frustrating, and often expensive, scenario for both an agency and its client occurs when: A. a commercial is rejected at the storyboard stage. B. a commercial that was rejected at the storyboard stage is accepted at the final stage. C. a commercial is rejected for reasons such as sex and politics. D. a commercial is approved at the storyboard stage but then is rejected after it is produced. E. a commercial is rejected at the idea generation stage.

27. Which of the following statements about self - regulation by media is true? A. Most commercials once rejected cannot be rerun. B. Network standards regarding acceptable advertising have remained constant over the past 30 to 40 years. C. Advertising for contraceptives is completely banned on all networks since 1995. D. Television is the most carefully scrutinized of all forms of advertising. E. Network standards have become more stringent in response to competition from independent and cable stations.

28. The three major participants in the advertising process that work individually and collectively to encourage truthful, ethical, and responsible advertising are: A. advertisers, creatives, and the cable operators. B. creative boutiques, copywriters, and consumers. C. children, advertisers, and agencies. D. advertisers, agencies, and the media. E. advertisers, government, and the television networks.

29. ____, as defined by the First Amendment to the U.S. Constitution, is the most basic federal law governing advertising in the United States. A. Freedom of using any media vehicle B. Freedom to advertise C. Freedom to stop the airing of any advertisement D. Freedom of speech E. Freedom of press

30. The courts have extended First Amendment protection to: A. commercial speech. B. advertisers so that they can sue media for not providing them with the promised reach and frequency. C. the findings of marketing research studies. D. advertisers who want to use misleading wording in their ads. E. advertisers who do not want to be self-regulated.

31. Commercial speech is most accurately defined as: A. both an encoding and a decoding tool for communications. B. speech that promotes a commercial transaction. C. any type of comparative advertising. D. any advertising on a broadcast media. E. speech governed by the First Amendment to the U.S. Constitution.

32. The U.S. Supreme Court established the ____, a four-part test, to determine restrictions on commercial speech. A. Virginia Consumer Council Test B. Free Speech Matrix C. First-Amendment Analysis D. California Test of Affirmation E. Central Hudson Test

33. Federal regulation of advertising originated in 1914 with the passage of the _____ Act. A. Information Technology B. Competition C. Consumer Protection D. Federal Trade Commission E. Central Hudson

34. Under the original Federal Trade Commission Act of 1914, the FTC: A. was given the power to issue cease-and-desist orders against firms engaging in deceptive practices. B. was given the power to pursue corrective advertising remedies to deceptive practices. C. could not prohibit false advertising unless there was evidence of injury to competition. D. was given the power to regulate all false and deceptive advertising practices that might injure competition or mislead consumers. E. was given the authority to establish a National Advertising Review Board.

35. The _____ empowered the Federal Trade Commission to regulate unfair or deceptive practices including those in advertising. A. Lanham Act B. Sherman Antitrust Act C. Wheeler Lea Amendment to the FTC Act D. FDA Act E. Consumer Protection Act

36. The _____ gave the FTC the power to issue cease-and-desist orders and levy fines on violators. A. Central Hudson Test B. National Advertising Review Board C. Lanham Act D. Wheeler-Lea Amendment E. Sherman Antitrust Act

37. Three major divisions of the Federal Trade Commission are the Bureaus of: A. employment, national security, and trade. B. governance, compliance, and cooperation. C. regulation, restriction, and reconstruction. D. economics, consumer protection, and competition. E. distribution, distillation, and diversity.

38. Which division of the Federal Trade Commission would deal with antitrust and consumer protection investigations? A. Bureau of Economics B. Bureau of Compliance C. National Advertising Review Board D. Bureau of Reconstruction E. Trade Regulation Bureau

39. The _____ is the division of the Federal Trade Commission that is responsible for investigating cases involving deceptive or misleading advertising. A. Bureau of Economics B. Bureau of Competition C. National Advertising Review Board D. Bureau of Consumer Protection E. Trade Regulation Bureau

40. Which of the following divisions of the Federal Trade Commission protects consumers from deceptive and unsubstantiated advertising and enforces the provisions of the FTC Act that forbid misrepresentation, unfairness, and deception in general advertising at the national and regional level? A. The division of Consumer Protection B. The division of Broadcasting C. The division of Marketing Practices D. The division of Advertising Practices E. The division of Economic Practices

41. The _____ gave the Federal Trade Commission the power to establish trade regulation rules. A. Magnuson-Moss Act of 1975 B. FTC Act C. Wheeler-Lea Amendment D. Sherman Antitrust Act E. Trade Regulation Act

42. The Magnuson-Moss Act of 1975: A. defined commercial speech. B. provides for the review and evaluation of all child-directed advertising. C. defined the requirements for advertising substantiation. D. is concerned with the misrepresentation of premiums when used in sales promotions. E. dealt with consumers' rights regarding product warranties.

43. _____ are industry-wide rules used by the Federal Trade Commission that define unfair or deceptive practices. A. Trade regulation rules B. Affirmative disclosures C. Corrective advertising D. Cease-and-desist orders E. Advertising guidelines

44. According to Federal Trade Commission policy, the criteria for determining _____ are (1) a trade practice causes substantial physical or economic injury to consumers, (2) could be reasonably avoided by consumers, and (3) it must not be outweighed by countervailing benefits to consumers or competition. A. unfairness B. deception C. puffery D. affirmative disclosure E. the impact of cease-and-desist orders

45. Controversy over the FTC's authority to regulate unfair advertising practices began in 1978, when the agency relied on this mandate to formulate its controversial _____ rule restricting advertising to children. A. cease-and-desist B. kid vid C. affirmative disclosures D. Wheeler-Lea E. Magnuson-Moss

46. _____ 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." A. Deceptive advertising B. Unfairness C. Comparative advertising D. Puffery E. Affirmative disclosure

47. Nestlé claims "Nestlé makes the very best chocolate," Snapple advertises that its beverages are "made from the best stuff on Earth," are all examples of: A. deceptive advertising. B. superiority advocacy. C. puffery. D. comparative advertising. E. noncompetitive advertising.

48. An advertiser who says that his product is the "best," "greatest," etc. is using ____, which is a(n) ______ form of advertising. A. deception; legal B. a superlative; illegal C. puffery; illegal D. puffery; legal E. puffery, unethical

49. Which of the following is the best example of the use of puffery in advertising? A. Central Bank advertises free checking with a minimum balance of $1,000. B. Michelin advertises a 50,000-mile guarantee for its tires. C. Godiva claims that it makes the finest chocolates in the world. D. Head & Shoulders shampoo advertises that it has been proven to be effective in preventing dandruff. E. Federal Express advertises guaranteed overnight delivery service.

50. A prepackaged milkshake sold in convenience stores advertises that it has more chocolate-taste than shakes purchased at restaurants. This is an example of: A. an unfair claim. B. puffery. C. an illegal deception. D. an affirmative disclosure. E. an illegal comparative advertisement.

51. The Federal Trade Commission takes the position that: A. consumers cannot distinguish between factual information and puffery. B. puffery has detrimental effect on consumers' purchase decisions. C. consumers recognize puffery and don't believe it. D. puffery is illegal. E. consumers believe in puffery.

52. Which of the following statements about the use of puffery in advertising is true? A. Puffery is illegal. B. Puffery is banned in a 1996 revision of the Uniform Commercial Code. C. According to the Federal Trade Commission consumers believe in puffery. D. Superlatives such as greatest, best, and finest are puffs that are often used in advertising. E. Puffery is only illegal if it eliminates a competitive advantage.

53. The Federal Trade Commission (FTC) defines _____ as an express or implied statement contrary to fact. A. selective exposure B. affirmative disclosure C. selective retention D. misrepresentation E. comparative disclosure

54. The key elements in the FTC's definition of deception are that the representation, omission, or practice must be likely to mislead the reasonable consumer and that it has: A. materiality. B. selective exposure. C. selective retention. D. multiple interpretations. E. peripheral importance.

55. According to the FTC's definition of deception, a representation, omission, or practice has materiality if it: A. uses puffery. B. can be decoded to have several different meanings. C. is important to consumer and would likely have an effect on the purchase decision. D. uses any superlatives. E. can be substantiated.

56. According to the Federal Trade Commission _____ exists if there is a misrepresentation, omission, or practice that is likely to mislead the consumer acting reasonably in the circumstances to the consumer's detriment. A. puffery B. affirmative disclosure C. selective retention D. deception E. selective disclosure

57. As per FTC, _____ occurs when qualifying information necessary to prevent a practice, claim, representation, or reasonable belief from being misleading is not disclosed. A. misinterpretation B. affirmative disclosure C. coercion D. misleading omission E. fraud

58. Which of the following is one of the two of the factors the FTC considers in evaluating an ad for deception? A. Presence of superlative words in the advertisement B. Significant omission of important information C. Lack of selective disclosure D. Presence of puffery in the advertisement E. Violation of trade regulation rules

59. The Federal Trade Commission may require affirmative disclosure if: A. previous advertising has led to the formation of false beliefs about a product. B. consumers need to know information about consequences, conditions, and limitations associated with the use of the product. C. there has been material injury to reasonable consumers. D. an advertisement has the potential to mislead an unsophisticated consumer. E. the advertising relies on the use of puffery to make its point.

60. In 1995, the Federal Trade Commission issued a complaint against the manufacturers of New Balance and Saucony athletic shoes based on their "Made in the USA" advertising claims. The FTC claimed the ads were misleading since imported soles and upper parts were used to make the shoes. These claims can be viewed as deceptive under the FTC's requirement of: A. cease-and-desist. B. puffery. C. affirmative disclosure. D. fairness. E. advertising substantiation.

61. Federal Trade Commission's (FTC's) _____ program required advertisers to have supporting documentation for their claims and to prove the claims are truthful. A. Central Hudson B. Lanham C. Cease-and-Desist D. advertising substantiation E. affirmative disclosure

62. Federal Trade Commission's advertising substantiation program requires advertisers to substantiate their claims: A. within one month of the appearance of the ad. B. if the ad does not provide sufficient information to the consumers so as to make an informed decision. C. if the ad uses puffery. D. before the ad appears. E. if the ad runs for more than six months.

63. The Federal Trade Commission requires advertising for any product that is sweetened with saccharin to contain a warning that saccharin may be hazardous to one's health. This requirement falls under the FTC's _____ requirement. A. misleading omission B. advertising substantiation C. affirmative disclosure D. cease-and-desist E. materiality

64. Under which of the following FTC programs might a firm be required to have product information verifying the veracity of its advertising claims before making any advertising claims about the product? A. Corrective advertising B. Implied uniqueness C. Comparative advertising D. Affirmative disclosure E. Advertising substantiation

65. Critics of the FTC's ad substantiation program argue that: A. ad substantiation has been proven unnecessary as long as the advertising industry is self-regulating. B. ad substantiation is not needed because most advertisements make very legitimate claims. C. ad substantiation will result in advertisers resorting to puffery to avoid the need for claim verification. D. the burden of proof for advertising claims lies with the consumer. E. the burden of proof for advertising claims lies with the Federal Trade Commission.

66. A(n) _____ is an agreement to stop engaging in a particular practice for settlement purposes only and does not constitute an admission of guilt by the advertiser. A. cease-and-desist order B. consent order C. ad substantiation agreement D. affirmative disclosure order E. injunction

67. Which of the following statements about a consent order is true? A. The signing of a consent order is an admission of guilt by the advertiser. B. If an advertiser refuses to sign a consent order, the inquiry is handed to the U.S. Department of Justice. C. Most FTC inquiries are settled by consent order. D. A consent order prohibits an advertiser from making a specified advertising claim for 30 days. E. Consent orders lead to excessive adverse publicity.

68. Under the Wheeler-Lea Amendment, the Federal Trade Commission is empowered to stop an advertiser from making a specified claim within 30 days and refrain from doing so until a hearing is held. This is known as: A. a consent order. B. injunctive power. C. a cease-and-desist order. D. corrective advertising. E. advertising substantiation.

69. Cease-and-desist orders: A. are used to regulate public service announcements. B. require an advertiser to run comparative advertisement. C. are issued by the Federal Trade Commission. D. were made legally binding by the Robinson-Patman Act. E. are issued by the National Association of Attorneys General.

70. The FTC program that requires an advertiser who is found guilty of false or misleading advertising claims to run ads to rectify the situation is known as: A. the fairness doctrine. B. ad substantiation. C. affirmative disclosure. D. corrective advertising. E. puffery.

71. The origin of the Federal Trade Commission's corrective advertising program came from a deceptive advertising case involving: A. Listerine. B. Ocean Spray Cranberry Juice. C. Campbell Soup. D. STP Corporation. E. McDonald's.

72. Which of the following programs is more likely to be the most controversial of all the Federal Trade Commission's programs? A. Ad substantiation B. Implied uniqueness C. Puffery legitimization D. Advertising deregulation E. Corrective advertising

73. Under the FTC's program of ____, Novartis Corporation was required to run advertising informing consumers that it could not substantiate its claim that Doan's pills were superior to other over-the-counter analgesics in treating back pain. The FTC wanted to make sure consumers were not under any false impression that Doan's was a superior medication. A. ad substantiation B. implied uniqueness C. puffery legitimization D. advertising deregulation E. corrective advertising

74. The _____ is a federal agency that was founded in 1934 to regulate broadcast communication 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

75. Under the Children's Television Act,: A. advertising aimed at children is prohibited. B. advertising on children's programs is limited to 12 minutes per hour on weekdays and 10.5 minutes per hour on weekends. C. broadcasters are required to provide time for opposing viewpoints on important issues. D. limits on the amount of television advertising per hour targeted to children are eliminated. E. the FCC is granted the right to fine advertisers who exceeded advertising limits as defined by the act.

76. Under the Reagan administration, the controversial _____ Doctrine, which required broadcasters to provide time for opposing viewpoints on important issues, was repealed on the grounds that it was counterproductive. A. Deception B. Misinterpretation C. Affirmative Disclosure D. Fairness E. Substantiation

77. Under the _____ Doctrine, the Federal Communications Commission (FCC) required stations to run commercials about the harmful effects of smoking. A. Substantial Omission B. Misinterpretation C. Affirmative Disclosure D. Fairness E. Substantiation

78. The _____ is the government agency that has authority over the labeling, packaging, branding, ingredient listing and advertising of packaged foods and drug products. A. Federal Trade Commission B. Federal Communications Commission C. U. S. Postal Service D. Bureau of Alcohol, Tobacco, and Firearms E. Food and Drug Administration

79. In 1996, President Clinton signed an executive order declaring that nicotine was an addictive drug and gave the _____ broad jurisdiction to regulate the advertising of cigarettes and smokeless tobacco. A. U.S. Postal Service B. Federal Trade Commission C. Bureau of Alcohol, Tobacco and Firearms D. Food and Drug Administration E. The Tobacco Institute

80. The ____ has been heavily involved in the regulation of advertising of prescription drugs. A. Better Business Bureau B. Food and Drug Administration C. U.S. Postal Service D. U.S. Department of Welfare E. Federal Communications Commission

81. Direct-response advertisers that use the U.S. mail to deceive consumers by marketing get-rich-quick schemes fall under the jurisdiction of the: A. U.S. Postal Service. B. Federal Communications Commission. C. Bureau of Alcohol, Tobacco and Firearms. D. Food and Drug Administration. E. U.S. Department of Welfare.

82. The _____ regulates and controls the advertising of alcoholic beverages. A. Federal Communications Commission B. Food and Drug Administration C. Bureau of Alcohol, Tobacco and Firearms D. Federal Trade Commission E. National Association of Attorneys General

83. The _____ is a government regulation that is increasingly being used by companies to sue competitors for false or misleading advertising claims. A. FTC Act B. Wheeler Lea Amendment C. Lanham Act D. Robinson Patman Act E. Clayton Antitrust Act

84. The Bureau of Alcohol, Tobacco, and Firearms (BATF) is an agency within the ____. A. Department of Foreign Affairs B. Department of Justice (DOJ) C. Department of Commerce (DOC) D. Department of the Interior (DOI) E. Treasury Department

85. Which of the following agencies is responsible for tax collection for the liquor industry? A. Federal Communications Commission B. Food and Drug Administration C. Bureau of Alcohol, Tobacco and Firearms D. Federal Trade Commission E. National Association of Attorneys General

86. Pizza Hut launched a civil suit against Papa John's pizza claiming false and misleading advertising made Pizza Hut's pizza look inferior to Papa John's. The federal law that made this suit possible was the _____ Act. A. Federal Trade Commission B. Wheeler Lea C. Lanham D. Robinson Patman E. Clayton Antitrust

87. Acme Tire is developing an advertising campaign that will claim cars with its new RX model stop 25 percent faster on wet pavement compared to other brands of tires. The company must conduct careful studies to provide support for the claim because: A. the Federal Trade Commission (FTC) may sue Acme for comparative advertising. B. Acme's competitors may sue the company under the Lanham Act if it cannot substantiate its claims. C. the Better Business Bureau may sue Acme if it cannot substantiate its claims. D. the FTC may charge Acme with using puffery, which is an illegal form of advertising. E. the consumers may sue the company for non substantiation of the ad.

88. Texaco claimed its ClearSystem gasoline cleaned car engines, boosted mileage, and reduced pollution emissions better than any other gas. Chevron contended its products were just as good as Texaco's. The _____ made it easier for Chevron to sue Texaco for this perceived misrepresentation. A. Wheeler-Lea Amendment B. FTC Improvements Act C. Clayton Antitrust Act D. Lanham Act E. Competitor Trademark Act

89. The _____ closed a loophole in the Lanham Act and facilitated the ease with which one company can sue a competitor for making false advertising claims about the first company's products. A. Wheeler-Lea Amendment B. FTC Improvements Act C. Robinson Patman Act D. Trademark Revision Act of 1988 E. Competitor Trademark Act

90. Which of the following is used by many states as a basis for their advertising regulations? A. The Printer's Ink Statutes B. The Better Business Bureau guidelines C. The Wheeler-Lea Amendment D. Regulations developed by a consortium of trade associations E. U.S. Supreme Court rulings

91. The _____ moved against a number of national advertisers as a result of inactivity by the Federal Trade Commission (FTC) during the Reagan administration. A. Better Business Bureau B. Food and Drug Administration C. Bureau of Alcohol, Tobacco and Firearms D. National Association of Attorneys General E. Federal Communications Commission

92. Many areas of consumer and trade promotions are regulated by the _____ through the Marketing Practices Division of the Bureau of Consumer Protection. A. Federal Communications Commission. B. Food and Drug Administration. C. Federal Trade Commission. D. U.S. Justice Department. E. Promotional Products Marketing Association.

93. Champion Sportswear has developed a "Super Bowl Sweepstakes" that it plans to promote. To avoid having this promotion classified as a lottery, Champion should: A. require that consumers make a purchase of one of their products as a condition for entering the sweepstakes. B. offer only merchandise and no cash as part of the sweepstakes prizes. C. not require that consumers make a purchase of one of their products as a condition for entering the sweepstakes. D. run the promotion only in the state where the Super Bowl is being held. E. avoid comparative advertising.

94. If a participant is required to give up something of value in order to participate in a game or sweepstakes, then _____ is present, and the promotion is considered a lottery. A. exchange B. consideration C. equity D. enticement E. remuneration

95. A promotion such as a contest or sweepstakes can avoid being considered a lottery or form of gambling by: A. conducting the contest or sweepstake only at the regional level and not national level. B. providing full disclosure. C. not requiring consumers to make a purchase as a condition for entering. D. publishing the odds of winning. E. requiring the consumer to pay a consideration.

96. A study by the National Advertising Division's Children's Advertising Review Unit found that the most prevalent violation of its voluntary advertising guidelines occurred with _____ aimed at children. A. rebates and refunds B. premiums C. trade allowances D. discounts E. contests and sweepstakes

97. Marketers' use of trade allowances is controlled by the ____, which prohibits price discrimination. A. FTC Act B. Lanham Act C. Robinson Patman Act D. FDA Act E. Wheeler-Lea Amendment

98. Under the _____ passed in 1991, telemarketers must follow a complex set of rules developed by the Federal Communications Commission. A. Federal Trade Commission Act B. Robinson Patman Act C. FCC Act D. Trademark Improvements Act E. Telephone Consumer Protection Act

99. The Federal Trade Commission and U.S. Postal Service have laws that govern the use of a(n) ____, whereby a company proposes to send merchandise to consumers and expects payment unless a rejection or cancellation notice is sent by the consumer. A. unsolicited order B. negative option C. contradictory option D. false substitution E. unsubstantiated order

100. Unsolicited junk fax ads and telemarketing calls to consumers who do not want to be called are banned under the: A. Direct Marketing Reform Act. B. Telephone Consumer Protection Act of 1991. C. Direct Selling Association Act. D. Lanham Act. E. Federal Communication Reform Act.

Chapter 20 Regulation of Advertising and Promotion Answer Key

Multiple Choice Questions

1. (p. 684) Advertisers are often supportive of voluntary self-regulation because: A. self-regulation is viewed as a way of limiting government interference of advertising. B. all clients and agencies are affected by voluntary self-regulation. C. self-regulation does not require interaction between agency and client. D. self-regulation results in even more stringent regulations than state and federal agencies want. E. it is simple and less time consuming.

Advertisers see self-regulation as a way to limit government interference, which, they believe, results in more stringent and troublesome regulations.

AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: Self - Regulation

2. (p. 684) Self-regulation begins with the interaction of client and agency when: A. a consent order is signed. B. the company is charged with a lawsuit for deceptive advertising. C. there has been omission of advertising substantiation. D. creative ideas are generated and submitted for consideration. E. the ads are aired in foreign nations.

Self-regulation begins with the interaction of client and agency when creative ideas are generated and submitted for consideration.

AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: Self-Regulation by Advertisers and Agencies

3. (p. 685) In 1977, the _____ ruled that restrictions on advertising by lawyers are unconstitutional and that they have a First Amendment right to advertise. A. Federal Trade Commission B. American Bar Association C. U.S. Supreme Court D. Better Business Bureau E. U.S. Department of Justice

In 1977, the Supreme Court held that state bar associations' restrictions on advertising are unconstitutional and that attorneys have First Amendment freedom of speech rights to advertise.

AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: Self - Regulation by Trade Associations

4. (p. 685) Which of the following statements about advertising by attorneys, dentists and physicians is true? A. Attorneys are not allowed to advertise, but dentists and physicians are. B. Dentists and physicians are not allowed to advertise, but attorneys are. C. Most consumers are against the use of professional advertising. D. The Supreme Court has ruled that professionals such as attorneys, dentists and physicians have the right to advertise. E. Attorneys, dentists, and physicians do not advertise because they believe that advertising demeans their professions.

In 1982, the Supreme Court upheld an FTC order permitting advertising by dentists and physicians.

AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: Self - Regulation by Trade Associations

5. (p. 685) Which of the following statements concerning advertising by attorneys is true? A. Advertising by attorneys is legal in the entire United States. B. The U.S. Supreme Court does not permit lawyers to advertise if they earn more than $100,000 per year. C. Attorneys are in agreement that advertising is an important part of their marketing mix. D. The American Bar Association recently removed all restrictions on the type of advertising attorneys can use. E. By its very nature, advertising can only have a positive impact on the legal profession.

In 1977, the Supreme Court held that state bar associations' restrictions on advertising are unconstitutional and that attorneys have First Amendment freedom of speech rights to advertise.

AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: Self - Regulation by Trade Associations

6. (p. 686) A number of self-regulatory mechanisms have been established by the business community in an effort to control advertising practices and among them the largest and best known is the ____. A. Federal Trade Commission B. Federal Communications Commission C. Better Business Bureau (BBB) D. World Trade Organization E. Chamber of Deputies

A number of self-regulatory mechanisms have been established by the business community in an effort to control advertising practices. The largest and best known is the Better Business Bureau (BBB).

AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: Self - Regulation by Business

7. (p. 686) BBB is the largest and best known self-regulatory mechanism in United States, for controlling advertising practices, that has been established by the business community. BBB stands for: A. Board for Business Broadcasting. B. Board of the Best Businessmen. C. Board for Betterment of Broadcasting. D. Better Business Bureau. E. Best Business Bureau.

A number of self-regulatory mechanisms have been established by the business community in an effort to control advertising practices. The largest and best known is the Better Business Bureau (BBB).

AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: Self - Regulation by Business

8. (p. 688) Better Business Bureaus provide control over advertising practices at a _____ level while the Council of Better Business Bureaus plays a major role in controlling advertising practices at a(n) _____ level. A. local; national B. national; local C. distributor; manufacturer D. industry-wide; individual company E. regional; local

While BBBs provide effective control over advertising practices at the local level, the parent organization, the Council of Better Business Bureaus, plays a major role at the national level.

AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: Self - Regulation by Business

9. (p. 688) The _____ was formed by three advertising associations and the Council of Better Business Bureaus to sustain high standards of truth, accuracy, morality and social responsibility in national advertising. A. National Advertising Board B. National Advertising Review Council C. American Association of Advertisers D. Ad Council E. Board of Advertising Ombudsmen

In 1971 four associations—the American Advertising Federation (AAF), the American Association of Advertising Agencies (AAAA), the Association of National Advertisers (ANA), and the Council of Better Business Bureaus—joined forces to establish the National Advertising Review Council (NARC).

AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: The National Advertising Review Council and the NAD/NARB

10. (p. 688) The _____ accepts cases dealing with product performance claims, superiority claims against competitive products, and all kinds of scientific and technical claims made in national advertising. A. National Advertising Division (NAD) B. U.S. Department of Justice C. National Association of Attorneys General D. American Association of Advertising Agencies E. Federal Trade Commission

NAD has examined advertising for truth and accuracy since 1971 and has published more than 5,000 decisions, focusing on areas that include product performance claims, superiority claims against competitive products, and all kinds of scientific and technical claims.

11. (p. 688) Which of the following statements describes the NAD/NARB review process? A. If a case is not resolved to its satisfaction, the NARB has the power to order an advertiser to stop running its ads. B. If the NAD and an advertiser fail to resolve an advertising controversy, either party can appeal the case to the NARB. C. Advertisers who participate in the full process of an NAD investigation, and NARB appeal often do not abide by the panel's decision. D. Most advertising cases investigated by the NAD are resolved without being sent to the NARB. E. Advertisers who do not comply with the NAD/NARB review process will find themselves encumbered with a class action lawsuit.

When an advertiser or a challenger disagrees with the NAD's findings, NAD's decision can be appealed to the NARB for additional review.

AACSB: Analytic Bloom's: Remember Difficulty: Medium Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: The National Advertising Review Council and the NAD/NARB

12. (p. 688) The _____ examines advertising claims in direct-response advertising, including infomercials and home-shopping channels. A. Children's Advertising Review Unit (CARU) B. Vision Council of America C. National Association of Broadcasters D. Electronic Retailing Self-Regulation Program E. Independent Business Alliance

The Electronic Retailing Self-Regulation Program (ERSP) examines advertising claims in direct-response advertising, including infomercials and home-shopping channels.

AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: Self - Regulation

13. (p. 690) The advertising industry's most effective self-regulatory mechanism is the: A. Association of National Advertisers. B. Federal Trade Commission. C. NAD/NARB. D. Distilled Spirits Council. E. National Association of Broadcasters.

The National Advertising Review Council, working through the NAD/CARU/ERSP and NARB is a valuable and effective self-regulatory body.

14. (p. 688) Policies and procedures for self-regulation of advertising industry are established by the ____. A. National Association of Broadcasters B. Vision Council of America C. National Advertising Review Council D. Independent Business Alliance E. Association of American Publishers

Policies and procedures for self-regulation of advertising industry are established by the National Advertising Review Council.

AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: Self - Regulation by Business

15. (p. 688) Which of the following is the appellate unit of the National Advertising Review Council? A. National Advertising Division B. Independent Business Alliance C. National Advertising Review Board D. Vision Council of America E. National Association of Broadcasters

National Advertising Review Board acts as the appellate unit of the National Advertising Review Council.

AACSB: Analytic Bloom's: Remember Difficulty: Medium Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: Self - Regulation

16. (p. 689) If an advertiser refuses to comply with rulings made by the National Advertising Review Board (NARB), the NARB is most likely to: A. order the company to stop running the ad. B. refer the case to an industry trade association. C. refer the matter to an appropriate government agency. D. impose a fine. E. lodge a class action suit for customers who have been in some way negatively affected by the ad.

When companies refuse to participate in a self-regulatory proceeding or do not comply with the terms of a decision, their disputed advertising may be referred to the most appropriate federal agency for further review.

17. (p. 690) The NARC became involved in the self-regulation of electronic retailing when it initiated the: A. Information Technology Act (ITA). B. Centre for Electronic Technology. C. Electronic Retailing Agency. D. Electronic Retailing Self-Regulation Program (ERSP). E. Federal Trade Commission (FTC).

The NARC became involved in the self-regulation of electronic retailing when it initiated the Electronic Retailing Self-Regulation Program (ERSP).

18. (p. 690) The _____ is sponsored by the Electronic Retailing Association (ERA), although it works independently of the ERA to create an unbiased self-regulatory system. A. National Advertising Review Board B. Federal Trade Commission C. Council of Better Business Bureaus D. Electronic Retailing Self-Regulation Program E. Information Technology Act

The Electronic Retailing Self-Regulation Program is sponsored by the Electronic Retailing Association (ERA), although it works independently of the ERA to create an unbiased self-regulatory system.

19. (p. 690) Which of the following statements is true about National Advertising Review Council (NARC)? A. Cases brought to NARC are subject to more publicity as compared to the cases brought to a court. B. It is very expensive to get a case solved through NARC. C. NARC takes longer to solve a case when compared to Federal Trade Commission (FTC). D. NARC can handle cases at lower cost as compared to a court. E. NARC is a government agency regulating advertising agency.

Cases brought to NARC are handled at a fraction of the cost (and with much less publicity) than those brought to court.

20. (p. 691) The _____ is a major trade association of the advertising business in the United States. It has its own standards of practice and creative code. A. Vision Council of America B. Independent Business Alliance C. American Association of Advertising Agencies D. Federal Trade Commission E. National Association of Broadcasters

The AAAA, which is the major trade association of the ad agency business in the United States, has established standards of practice and its own creative code.

21. (p. 691) Which of the following statements describes the media's role in the self-regulation of advertising? A. The media must accept all advertising they receive because of First Amendment that guarantees the freedom of speech. B. The media cannot refuse to accept advertising for an entire product class such as hard liquor. C. The media can refuse to accept individual ads they find offensive or objectionable. D. Most media accept any advertising they receive since advertising is their major source of revenue. E. Most media reject political ads.

Most media maintain some form of advertising review process and, except for political ads, may reject any they regard as objectionable. Some media exclude advertising for an entire product class; others ban individual ads they think offensive or objectionable.

AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: Self - Regulation by Media

22. (p. 691; 692) The reason a magazine such as ‘Good Housekeeping' regularly tests products and offers a "seal of approval" is to: A. enhance the credibility of the publication. B. encourage advertisers to buy more media space. C. avoid self-regulation. D. discourage comparative advertising. E. avoid questionable advocacy advertising.

Large, established publications, such as major newspapers or magazines, often have strict standards regarding the type of advertising they accept. Such policies are designed to enhance the credibility of the publication.

AACSB: Reflective Thinking Bloom's: Apply Difficulty: Hard Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: Self - Regulation by Media

23. (p. 692) Advertising on television and radio was regulated for many years through codes developed by the _____ until the courts found some of its regulations served to restrain trade. A. National Advertising Review Board B. Federal Trade Commission C. Federal Communications Commission D. National Association of Broadcasters E. Standards and Practices Division

Advertising on television and radio has been regulated for years through codes developed by the industry trade association, the National Association of Broadcasters (NAB).

AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: Self - Regulation by Media

24. (p. 692) Which of the following media has the most stringent review and approval process for advertising? A. Local radio B. Magazines C. Newspapers D. Internet E. The four major television networks

The four major television networks have the most stringent review process of any media.

AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: Self - Regulation by Media

25. (p. 692) Television advertising: A. is generally used for hard liquor advertising. B. is regulated through codes developed and enforced by the Federal Trade Commission. C. is regulated by affiliates. D. is more stringently self-regulated than any other medium. E. is experiencing a tightening of the rules concerning the rating system used for commercials.

The four major television networks have the most stringent review process of any media.

AACSB: Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: Self - Regulation by Media

26. (p. 692) A very frustrating, and often expensive, scenario for both an agency and its client occurs when: A. a commercial is rejected at the storyboard stage. B. a commercial that was rejected at the storyboard stage is accepted at the final stage. C. a commercial is rejected for reasons such as sex and politics. D. a commercial is approved at the storyboard stage but then is rejected after it is produced. E. a commercial is rejected at the idea generation stage.

A very frustrating, and often expensive, scenario for both an agency and its client occurs when a commercial is approved at the storyboard stage but then is rejected after it is produced.

AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: Self - Regulation by Media

27. (p. 692) Which of the following statements about self - regulation by media is true? A. Most commercials once rejected cannot be rerun. B. Network standards regarding acceptable advertising have remained constant over the past 30 to 40 years. C. Advertising for contraceptives is completely banned on all networks since 1995. D. Television is the most carefully scrutinized of all forms of advertising. E. Network standards have become more stringent in response to competition from independent and cable stations.

Since television is probably the most carefully scrutinized and frequently criticized of all forms of advertising, the networks must be careful not to offend their viewers and detract from advertising's credibility.

AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: Self - Regulation by Media

28. (p. 693) The three major participants in the advertising process that work individually and collectively to encourage truthful, ethical, and responsible advertising are: A. advertisers, creatives, and the cable operators. B. creative boutiques, copywriters, and consumers. C. children, advertisers, and agencies. D. advertisers, agencies, and the media. E. advertisers, government, and the television networks.

The three major participants in the advertising process—advertisers, agencies, and the media—work individually and collectively to encourage truthful, ethical, and responsible advertising.

AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 20-02 To examine self-regulation of advertising and evaluate its effectiveness. Topic: Appraising Self - Regulation

29. (p. 694) ____, as defined by the First Amendment to the U.S. Constitution, is the most basic federal law governing advertising in the United States. A. Freedom of using any media vehicle B. Freedom to advertise C. Freedom to stop the airing of any advertisement D. Freedom of speech E. Freedom of press

Freedom of speech or expression, as defined by the First Amendment to the U.S. Constitution, is the most basic federal law governing advertising in the United States.

AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 20-03 To consider how advertising is regulated by federal and state government agencies; including the Federal Trade Commission. Topic: Federal Regulation of Advertising

30. (p. 694) The courts have extended First Amendment protection to: A. commercial speech. B. advertisers so that they can sue media for not providing them with the promised reach and frequency. C. the findings of marketing research studies. D. advertisers who want to use misleading wording in their ads. E. advertisers who do not want to be self-regulated.

The courts have extended First Amendment protection to commercial speech, which is speech that promotes a commercial transaction.

31. (p. 694) Commercial speech is most accurately defined as: A. both an encoding and a decoding tool for communications. B. speech that promotes a commercial transaction. C. any type of comparative advertising. D. any advertising on a broadcast media. E. speech governed by the First Amendment to the U.S. Constitution.

The courts have extended First Amendment protection to commercial speech, which is speech that promotes a commercial transaction.

32. (p. 695) The U.S. Supreme Court established the ____, a four-part test, to determine restrictions on commercial speech. A. Virginia Consumer Council Test B. Free Speech Matrix C. First-Amendment Analysis D. California Test of Affirmation E. Central Hudson Test

The court has established a four part test known as the Central - Hudson test for determining restrictions on commercial speech.

33. (p. 695) Federal regulation of advertising originated in 1914 with the passage of the _____ Act. A. Information Technology B. Competition C. Consumer Protection D. Federal Trade Commission E. Central Hudson

Federal regulation of advertising originated in 1914 with the passage of the Federal Trade Commission Act (FTC Act).

34. (p. 696) Under the original Federal Trade Commission Act of 1914, the FTC: A. was given the power to issue cease-and-desist orders against firms engaging in deceptive practices. B. was given the power to pursue corrective advertising remedies to deceptive practices. C. could not prohibit false advertising unless there was evidence of injury to competition. D. was given the power to regulate all false and deceptive advertising practices that might injure competition or mislead consumers. E. was given the authority to establish a National Advertising Review Board.

In 1922, the Supreme Court upheld an FTC interpretation that false advertising was an unfair method of competition, but in the 1931 case FTC v. Raladam Co., the Court ruled the commission could not prohibit false advertising unless there was evidence of injury to a competitor.

AACSB: Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 20-03 To consider how advertising is regulated by federal and state government agencies; including the Federal Trade Commission. Topic: Background on Federal Regulation of Advertising

35. (p. 696) The _____ empowered the Federal Trade Commission to regulate unfair or deceptive practices including those in advertising. A. Lanham Act B. Sherman Antitrust Act C. Wheeler Lea Amendment to the FTC Act D. FDA Act E. Consumer Protection Act

In 1938, Congress passed the Wheeler-Lea Amendment. It amended section 5 of the FTC Act to read: "Unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce are hereby declared to be unlawful."

36. (p. 696) The _____ gave the FTC the power to issue cease-and-desist orders and levy fines on violators. A. Central Hudson Test B. National Advertising Review Board C. Lanham Act D. Wheeler-Lea Amendment E. Sherman Antitrust Act

The Wheeler-Lea Amendment gave the FTC the power to issue cease-and-desist orders and levy fines on violators.

37. (p. 696) Three major divisions of the Federal Trade Commission are the Bureaus of: A. employment, national security, and trade. B. governance, compliance, and cooperation. C. regulation, restriction, and reconstruction. D. economics, consumer protection, and competition. E. distribution, distillation, and diversity.

The major divisions of the FTC include the bureaus of competition, economics, and consumer protection.

38. (p. 696) Which division of the Federal Trade Commission would deal with antitrust and consumer protection investigations? A. Bureau of Economics B. Bureau of Compliance C. National Advertising Review Board D. Bureau of Reconstruction E. Trade Regulation Bureau

The 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.

39. (p. 696) The _____ is the division of the Federal Trade Commission that is responsible for investigating cases involving deceptive or misleading advertising. A. Bureau of Economics B. Bureau of Competition C. National Advertising Review Board D. Bureau of Consumer Protection E. Trade Regulation Bureau

The Bureau of Consumer Protection's mandate is to protect consumers against unfair, deceptive, or fraudulent practices. This bureau also investigates and litigates cases involving acts or practices alleged to be deceptive or unfair to consumers.

40. (p. 696) Which of the following divisions of the Federal Trade Commission protects consumers from deceptive and unsubstantiated advertising and enforces the provisions of the FTC Act that forbid misrepresentation, unfairness, and deception in general advertising at the national and regional level? A. The division of Consumer Protection B. The division of Broadcasting C. The division of Marketing Practices D. The division of Advertising Practices E. The division of Economic Practices

The Division of Advertising Practices protects consumers from deceptive and unsubstantiated advertising and enforces the provisions of the FTC Act that forbid misrepresentation, unfairness, and deception in general advertising at the national and regional level.

41. (p. 697) The _____ gave the Federal Trade Commission the power to establish trade regulation rules. A. Magnuson-Moss Act of 1975 B. FTC Act C. Wheeler-Lea Amendment D. Sherman Antitrust Act E. Trade Regulation Act

The second section of the Magnuson-Moss Act of 1975, the FTC Improvements Act, empowered the FTC to establish trade regulation rules (TRRs), industry wide rules that define unfair practices before they occur.

42. (p. 697) The Magnuson-Moss Act of 1975: A. defined commercial speech. B. provides for the review and evaluation of all child-directed advertising. C. defined the requirements for advertising substantiation. D. is concerned with the misrepresentation of premiums when used in sales promotions. E. dealt with consumers' rights regarding product warranties.

The first section of the Magnuson-Moss Act dealt with consumers' rights regarding product warranties.

43. (p. 697) _____ are industry-wide rules used by the Federal Trade Commission that define unfair or deceptive practices. A. Trade regulation rules B. Affirmative disclosures C. Corrective advertising D. Cease-and-desist orders E. Advertising guidelines

The second section of the Magnuson-Moss Act of 1975, the FTC Improvements Act, empowered the FTC to establish trade regulation rules (TRRs), industrywide rules that define unfair practices before they occur.

44. (p. 697) According to Federal Trade Commission policy, the criteria for determining _____ are (1) a trade practice causes substantial physical or economic injury to consumers, (2) could be reasonably avoided by consumers, and (3) it must not be outweighed by countervailing benefits to consumers or competition. A. unfairness B. deception C. puffery D. affirmative disclosure E. the impact of cease-and-desist orders

According to Federal Trade Commission policy, the criteria for determining unfairness are (1) a trade practice causes substantial physical or economic injury to consumers, (2) could be reasonably avoided by consumers, and (3) it must not be outweighed by countervailing benefits to consumers or competition.

45. (p. 697) Controversy over the FTC's authority to regulate unfair advertising practices began in 1978, when the agency relied on this mandate to formulate its controversial _____ rule restricting advertising to children. A. cease-and-desist B. kid vid C. affirmative disclosures D. Wheeler-Lea E. Magnuson-Moss

Controversy over the FTC's authority to regulate unfair advertising practices began in 1978, when the agency relied on this mandate to formulate its controversial "kid vid" rule restricting advertising to children.

AACSB: Analytic Bloom's: Remember Difficulty: Medium Learning Objective: 20-03 To consider how advertising is regulated by federal and state government agencies; including the Federal Trade Commission. Topic: The Concept of Unfairness

46. (p. 698) _____ 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." A. Deceptive advertising B. Unfairness C. Comparative advertising D. Puffery E. Affirmative disclosure

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."

47. (p. 698) Nestlé claims "Nestlé makes the very best chocolate," Snapple advertises that its beverages are "made from the best stuff on Earth," are all examples of: A. deceptive advertising. B. superiority advocacy. C. puffery. D. comparative advertising. E. noncompetitive advertising.

AACSB: Reflective Thinking Bloom's: Apply Difficulty: Hard Learning Objective: 20-03 To consider how advertising is regulated by federal and state government agencies; including the Federal Trade Commission. Topic: Deceptive Advertising

48. (p. 698) An advertiser who says that his product is the "best," "greatest," etc. is using ____, which is a(n) ______ form of advertising. A. deception; legal B. a superlative; illegal C. puffery; illegal D. puffery; legal E. puffery, unethical

49. (p. 698) Which of the following is the best example of the use of puffery in advertising? A. Central Bank advertises free checking with a minimum balance of $1,000. B. Michelin advertises a 50,000-mile guarantee for its tires. C. Godiva claims that it makes the finest chocolates in the world. D. Head & Shoulders shampoo advertises that it has been proven to be effective in preventing dandruff. E. Federal Express advertises guaranteed overnight delivery service.

50. (p. 698) A prepackaged milkshake sold in convenience stores advertises that it has more chocolate-taste than shakes purchased at restaurants. This is an example of: A. an unfair claim. B. puffery. C. an illegal deception. D. an affirmative disclosure. E. an illegal comparative advertisement.

51. (p. 698) The Federal Trade Commission takes the position that: A. consumers cannot distinguish between factual information and puffery. B. puffery has detrimental effect on consumers' purchase decisions. C. consumers recognize puffery and don't believe it. D. puffery is illegal. E. consumers believe in puffery.

The FTC takes the position that because consumers expect exaggeration or inflated claims in advertising, they recognize puffery and don't believe it.

52. (p. 698) Which of the following statements about the use of puffery in advertising is true? A. Puffery is illegal. B. Puffery is banned in a 1996 revision of the Uniform Commercial Code. C. According to the Federal Trade Commission consumers believe in puffery. D. Superlatives such as greatest, best, and finest are puffs that are often used in advertising. E. Puffery is only illegal if it eliminates a competitive advantage.

Advertisers' battle to retain the right to use puffery was supported in the latest revision of the Uniform Commercial Code in 1996.

53. (p. 699) The Federal Trade Commission (FTC) defines _____ as an express or implied statement contrary to fact. A. selective exposure B. affirmative disclosure C. selective retention D. misrepresentation E. comparative disclosure

The FTC defines misrepresentation as an express or implied statement contrary to fact.

54. (p. 699) The key elements in the FTC's definition of deception are that the representation, omission, or practice must be likely to mislead the reasonable consumer and that it has: A. materiality. B. selective exposure. C. selective retention. D. multiple interpretations. E. peripheral importance.

The third key element to the FTC's definition of deception is materiality. According to the FTC a "material" misrepresentation or practice is one that is likely to affect a consumer's choice or conduct with regard to a product or service.

55. (p. 699) According to the FTC's definition of deception, a representation, omission, or practice has materiality if it: A. uses puffery. B. can be decoded to have several different meanings. C. is important to consumer and would likely have an effect on the purchase decision. D. uses any superlatives. E. can be substantiated.

56. (p. 699) According to the Federal Trade Commission _____ exists if there is a misrepresentation, omission, or practice that is likely to mislead the consumer acting reasonably in the circumstances to the consumer's detriment. A. puffery B. affirmative disclosure C. selective retention D. deception E. selective disclosure

In 1983, the FTC, under Chair James Miller III, put forth a new working definition of deception: "The commission will find deception if there is a misrepresentation, omission, or practice that is likely to mislead the consumer acting reasonably in the circumstances to the consumer's detriment."

57. (p. 699) As per FTC, _____ occurs when qualifying information necessary to prevent a practice, claim, representation, or reasonable belief from being misleading is not disclosed. A. misinterpretation B. affirmative disclosure C. coercion D. misleading omission E. fraud

The FTC defines misrepresentation as an express or implied statement contrary to fact, whereas a misleading omission occurs when qualifying information necessary to prevent a practice, claim,representation, or reasonable belief from being misleading is not disclosed.

58. (p. 699; 700) Which of the following is one of the two of the factors the FTC considers in evaluating an ad for deception? A. Presence of superlative words in the advertisement B. Significant omission of important information C. Lack of selective disclosure D. Presence of puffery in the advertisement E. Violation of trade regulation rules

Two of the factors the FTC considers in evaluating an ad for deception are (1) whether there are significant omissions of important information and (2) whether advertisers can substantiate the claims made for the product or service.

AACSB: Reflective Thinking Bloom's: Analyze Difficulty: Hard Learning Objective: 20-03 To consider how advertising is regulated by federal and state government agencies; including the Federal Trade Commission. Topic: Deceptive Advertising

59. (p. 700) The Federal Trade Commission may require affirmative disclosure if: A. previous advertising has led to the formation of false beliefs about a product. B. consumers need to know information about consequences, conditions, and limitations associated with the use of the product. C. there has been material injury to reasonable consumers. D. an advertisement has the potential to mislead an unsophisticated consumer. E. the advertising relies on the use of puffery to make its point.

Under its affirmative disclosure requirement, the FTC may require advertisers to include certain types of information in their ads so that consumers will be aware of all the consequences, conditions, and limitations associated with the use of a product or service. The goal of affirmative disclosure is to give consumers sufficient information to make an informed decision.

60. (p. 701) In 1995, the Federal Trade Commission issued a complaint against the manufacturers of New Balance and Saucony athletic shoes based on their "Made in the USA" advertising claims. The FTC claimed the ads were misleading since imported soles and upper parts were used to make the shoes. These claims can be viewed as deceptive under the FTC's requirement of: A. cease-and-desist. B. puffery. C. affirmative disclosure. D. fairness. E. advertising substantiation.

One area where the Federal Trade Commission through its affirmative disclosures is seeking more specificity from advertisers is in regard to country of origin claims.

61. (p. 702) Federal Trade Commission's (FTC's) _____ program required advertisers to have supporting documentation for their claims and to prove the claims are truthful. A. Central Hudson B. Lanham C. Cease-and-Desist D. advertising substantiation E. affirmative disclosure

In 1971, the FTC's advertising substantiation program required advertisers to have supporting documentation for their claims and to prove the claims are truthful.

62. (p. 702) Federal Trade Commission's advertising substantiation program requires advertisers to substantiate their claims: A. within one month of the appearance of the ad. B. if the ad does not provide sufficient information to the consumers so as to make an informed decision. C. if the ad uses puffery. D. before the ad appears. E. if the ad runs for more than six months.

Broadened in 1972, the advertising substantiation program now requires advertisers to substantiate their claims before an ad appears.

63. (p. 702) The Federal Trade Commission requires advertising for any product that is sweetened with saccharin to contain a warning that saccharin may be hazardous to one's health. This requirement falls under the FTC's _____ requirement. A. misleading omission B. advertising substantiation C. affirmative disclosure D. cease-and-desist E. materiality

FTC's advertising substantiation program required advertisers to have supporting documentation for their claims and to prove the claims are truthful. Broadened in 1972, this program now requires advertisers to substantiate their claims before an ad appears.

64. (p. 702) Under which of the following FTC programs might a firm be required to have product information verifying the veracity of its advertising claims before making any advertising claims about the product? A. Corrective advertising B. Implied uniqueness C. Comparative advertising D. Affirmative disclosure E. Advertising substantiation

65. (p. 703) Critics of the FTC's ad substantiation program argue that: A. ad substantiation has been proven unnecessary as long as the advertising industry is self-regulating. B. ad substantiation is not needed because most advertisements make very legitimate claims. C. ad substantiation will result in advertisers resorting to puffery to avoid the need for claim verification. D. the burden of proof for advertising claims lies with the consumer. E. the burden of proof for advertising claims lies with the Federal Trade Commission.

Some advertisers threaten to avoid the substantiation issue by using puffery claims, which do not require substantiation.

66. (p. 704) A(n) _____ is an agreement to stop engaging in a particular practice for settlement purposes only and does not constitute an admission of guilt by the advertiser. A. cease-and-desist order B. consent order C. ad substantiation agreement D. affirmative disclosure order E. injunction

Consent order is an agreement to stop the practice or advertising in question. This agreement is for settlement purposes only and does not constitute an admission of guilt by the advertiser.

67. (p. 704) Which of the following statements about a consent order is true? A. The signing of a consent order is an admission of guilt by the advertiser. B. If an advertiser refuses to sign a consent order, the inquiry is handed to the U.S. Department of Justice. C. Most FTC inquiries are settled by consent order. D. A consent order prohibits an advertiser from making a specified advertising claim for 30 days. E. Consent orders lead to excessive adverse publicity.

Most FTC inquiries are settled by consent orders because they save the advertiser the cost and possible adverse publicity that might result if the case went further.

68. (p. 705) Under the Wheeler-Lea Amendment, the Federal Trade Commission is empowered to stop an advertiser from making a specified claim within 30 days and refrain from doing so until a hearing is held. This is known as: A. a consent order. B. injunctive power. C. a cease-and-desist order. D. corrective advertising. E. advertising substantiation.

The Wheeler-Lea Amendment empowers the FTC to issue a cease-and-desist order, which requires that the advertiser stop the specified advertising claim within 30 days and prohibits the advertiser from engaging in the objectionable practice until after the hearing is held.

69. (p. 705) Cease-and-desist orders: A. are used to regulate public service announcements. B. require an advertiser to run comparative advertisement. C. are issued by the Federal Trade Commission. D. were made legally binding by the Robinson-Patman Act. E. are issued by the National Association of Attorneys General.

70. (p. 705) The FTC program that requires an advertiser who is found guilty of false or misleading advertising claims to run ads to rectify the situation is known as: A. the fairness doctrine. B. ad substantiation. C. affirmative disclosure. D. corrective advertising. E. puffery.

To address the problem of residual effects, in the 1970s, the FTC developed a program known as corrective advertising. An advertiser found guilty of deceptive advertising can be required to run additional advertising designed to remedy the deception or misinformation contained in previous ads.

71. (p. 705) The origin of the Federal Trade Commission's corrective advertising program came from a deceptive advertising case involving: A. Listerine. B. Ocean Spray Cranberry Juice. C. Campbell Soup. D. STP Corporation. E. McDonald's.

The impetus for corrective advertising was a case involving Campbell Soup, which when making a photo for an ad, placed marbles in the bottom of a bowl of vegetable soup to force the solid ingredients to the surface, creating a false impression that the soup contained more vegetables than it really did.

72. (p. 705) Which of the following programs is more likely to be the most controversial of all the Federal Trade Commission's programs? A. Ad substantiation B. Implied uniqueness C. Puffery legitimization D. Advertising deregulation E. Corrective advertising

Corrective advertising is probably the most controversial of all the FTC programs.

73. (p. 706) Under the FTC's program of ____, Novartis Corporation was required to run advertising informing consumers that it could not substantiate its claim that Doan's pills were superior to other over-the-counter analgesics in treating back pain. The FTC wanted to make sure consumers were not under any false impression that Doan's was a superior medication. A. ad substantiation B. implied uniqueness C. puffery legitimization D. advertising deregulation E. corrective advertising

In a recent case involving Novartis Consumer Health Corp.'s Doan's Pills, the FTC sent a strong message to advertisers and agencies that it will require marketers to run corrective ads to remedy any misleading impressions that were created through unsubstantiated advertising claims.

74. (p. 709) The _____ is a federal agency that was founded in 1934 to regulate broadcast communication 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

The Federal Communications Commission (FCC), founded in 1934 to regulate broadcast communication, has jurisdiction over the radio, television, telephone, and telegraph industries.

75. (p. 709) Under the Children's Television Act,: A. advertising aimed at children is prohibited. B. advertising on children's programs is limited to 12 minutes per hour on weekdays and 10.5 minutes per hour on weekends. C. broadcasters are required to provide time for opposing viewpoints on important issues. D. limits on the amount of television advertising per hour targeted to children are eliminated. E. the FCC is granted the right to fine advertisers who exceeded advertising limits as defined by the act.

In 1991, the Children's Television Act went into effect. The act limits advertising during children's programming to 10.5 minutes an hour on weekends and 12 minutes an hour on weekdays.

76. (p. 709) Under the Reagan administration, the controversial _____ Doctrine, which required broadcasters to provide time for opposing viewpoints on important issues, was repealed on the grounds that it was counterproductive. A. Deception B. Misinterpretation C. Affirmative Disclosure D. Fairness E. Substantiation

Under the Reagan administration, the controversial Fairness Doctrine, which required broadcasters to provide time for opposing viewpoints on important issues, was repealed on the grounds that it was counterproductive.

77. (p. 709) Under the _____ Doctrine, the Federal Communications Commission (FCC) required stations to run commercials about the harmful effects of smoking. A. Substantial Omission B. Misinterpretation C. Affirmative Disclosure D. Fairness E. Substantiation

Under the Fairness Doctrine the FCC required stations to run commercials about the harmful effects of smoking before passage of the Public Health Cigarette Smoking Act of 1970, which banned broadcast advertising of cigarettes.

78. (p. 710) The _____ is the government agency that has authority over the labeling, packaging, branding, ingredient listing and advertising of packaged foods and drug products. A. Federal Trade Commission B. Federal Communications Commission C. U. S. Postal Service D. Bureau of Alcohol, Tobacco, and Firearms E. Food and Drug Administration

The Food and Drugs Administration (FDA) has authority over the labeling, packaging, branding, ingredient listing, and advertising of packaged foods and drug products, as well as cosmetics.

79. (p. 710-711) In 1996, President Clinton signed an executive order declaring that nicotine was an addictive drug and gave the _____ broad jurisdiction to regulate the advertising of cigarettes and smokeless tobacco. A. U.S. Postal Service B. Federal Trade Commission C. Bureau of Alcohol, Tobacco and Firearms D. Food and Drug Administration E. The Tobacco Institute

In 1996, President Bill Clinton signed an executive order declaring that nicotine is an addictive drug and giving the FDA board jurisdiction to regulate cigarettes and smokeless tobacco.

80. (p. 712) The ____ has been heavily involved in the regulation of advertising of prescription drugs. A. Better Business Bureau B. Food and Drug Administration C. U.S. Postal Service D. U.S. Department of Welfare E. Federal Communications Commission

One area where the Food and Drug Administration has become more involved is the advertising of prescription drugs.

81. (p. 712) Direct-response advertisers that use the U.S. mail to deceive consumers by marketing get-rich-quick schemes fall under the jurisdiction of the: A. U.S. Postal Service. B. Federal Communications Commission. C. Bureau of Alcohol, Tobacco and Firearms. D. Food and Drug Administration. E. U.S. Department of Welfare.

The U.S. Postal Service has control over advertising involving the use of the mail and ads that involve lotteries, obscenity, or fraud.

82. (p. 712) The _____ regulates and controls the advertising of alcoholic beverages. A. Federal Communications Commission B. Food and Drug Administration C. Bureau of Alcohol, Tobacco and Firearms D. Federal Trade Commission E. National Association of Attorneys General

The Bureau of Alcohol, Tobacco, and Firearms (BATF) regulates and controls the advertising of alcoholic beverages.

83. (p. 712) The _____ is a government regulation that is increasingly being used by companies to sue competitors for false or misleading advertising claims. A. FTC Act B. Wheeler Lea Amendment C. Lanham Act D. Robinson Patman Act E. Clayton Antitrust Act

While most advertisers rely on self-regulatory mechanisms and the FTC to deal with deceptive or misleading advertising by their competitors, many companies are filing lawsuits against competitors they believe are making false claims. One piece of federal legislation that has become increasingly important in this regard is the Lanham Act.

84. (p. 712) The Bureau of Alcohol, Tobacco, and Firearms (BATF) is an agency within the ____. A. Department of Foreign Affairs B. Department of Justice (DOJ) C. Department of Commerce (DOC) D. Department of the Interior (DOI) E. Treasury Department

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.

85. (p. 712) Which of the following agencies is responsible for tax collection for the liquor industry? A. Federal Communications Commission B. Food and Drug Administration C. Bureau of Alcohol, Tobacco and Firearms D. Federal Trade Commission E. National Association of Attorneys General

86. (p. 713) Pizza Hut launched a civil suit against Papa John's pizza claiming false and misleading advertising made Pizza Hut's pizza look inferior to Papa John's. The federal law that made this suit possible was the _____ Act. A. Federal Trade Commission B. Wheeler Lea C. Lanham D. Robinson Patman E. Clayton Antitrust

More and more companies are using the Lanham Act to sue competitors for their advertising claims, particularly since comparative advertising has become so common.

87. (p. 713) Acme Tire is developing an advertising campaign that will claim cars with its new RX model stop 25 percent faster on wet pavement compared to other brands of tires. The company must conduct careful studies to provide support for the claim because: A. the Federal Trade Commission (FTC) may sue Acme for comparative advertising. B. Acme's competitors may sue the company under the Lanham Act if it cannot substantiate its claims. C. the Better Business Bureau may sue Acme if it cannot substantiate its claims. D. the FTC may charge Acme with using puffery, which is an illegal form of advertising. E. the consumers may sue the company for non substantiation of the ad.

Over the years there has been a significant increase in the use of comparative advertising, and it has resulted in more and more companies suing one another under the Lanham Act.

88. (p. 713) Texaco claimed its ClearSystem gasoline cleaned car engines, boosted mileage, and reduced pollution emissions better than any other gas. Chevron contended its products were just as good as Texaco's. The _____ made it easier for Chevron to sue Texaco for this perceived misrepresentation. A. Wheeler-Lea Amendment B. FTC Improvements Act C. Clayton Antitrust Act D. Lanham Act E. Competitor Trademark Act

While the FTC Act did not give individual advertisers the opportunity to sue a competitor for deceptive advertising, civil suits are permitted under the Lanham Act.

89. (p. 713) The _____ closed a loophole in the Lanham Act and facilitated the ease with which one company can sue a competitor for making false advertising claims about the first company's products. A. Wheeler-Lea Amendment B. FTC Improvements Act C. Robinson Patman Act D. Trademark Revision Act of 1988 E. Competitor Trademark Act

Suing competitors for false claims was made even easier with passage of the TradeMark Law Revision Act of 1988.

90. (p. 716) Which of the following is used by many states as a basis for their advertising regulations? A. The Printer's Ink Statutes B. The Better Business Bureau guidelines C. The Wheeler-Lea Amendment D. Regulations developed by a consortium of trade associations E. U.S. Supreme Court rulings

An important early development in state regulation of advertising was the adoption in 44 states of the Printers Ink model statutes as a basis for advertising regulation.

91. (p. 716) The _____ moved against a number of national advertisers as a result of inactivity by the Federal Trade Commission (FTC) during the Reagan administration. A. Better Business Bureau B. Food and Drug Administration C. Bureau of Alcohol, Tobacco and Firearms D. National Association of Attorneys General E. Federal Communications Commission

The National Association of Attorneys General (NAAG) moved against a number of national advertisers as a result of inactivity by the FTC during the Reagan administration.

92. (p. 717) Many areas of consumer and trade promotions are regulated by the _____ through the Marketing Practices Division of the Bureau of Consumer Protection. A. Federal Communications Commission. B. Food and Drug Administration. C. Federal Trade Commission. D. U.S. Justice Department. E. Promotional Products Marketing Association.

The Federal Trade Commission regulates many areas of sales promotion through the Marketing Practices Division of the Bureau of Consumer Protection.

AACSB: Analytic Bloom's: Remember Difficulty: Easy Learning Objective: 20-04 To examine rules and regulations that affect sales promotion; direct marketing; and marketing on the Internet. Topic: Sales Promotion

93. (p. 717) Champion Sportswear has developed a "Super Bowl Sweepstakes" that it plans to promote. To avoid having this promotion classified as a lottery, Champion should: A. require that consumers make a purchase of one of their products as a condition for entering the sweepstakes. B. offer only merchandise and no cash as part of the sweepstakes prizes. C. not require that consumers make a purchase of one of their products as a condition for entering the sweepstakes. D. run the promotion only in the state where the Super Bowl is being held. E. avoid comparative advertising.

AACSB: Reflective Thinking Bloom's: Apply Difficulty: Hard Learning Objective: 20-04 To examine rules and regulations that affect sales promotion; direct marketing; and marketing on the Internet. Topic: Sales Promotion

94. (p. 717) If a participant is required to give up something of value in order to participate in a game or sweepstakes, then _____ is present, and the promotion is considered a lottery. A. exchange B. consideration C. equity D. enticement E. remuneration

A promotion is considered a lottery if a prize is offered, if winning a prize depends on chance and not skill, and if the participant is required to give up something of value in order to participate. The latter requirement is referred to as consideration and is the basis on which most contests, games, and sweepstakes avoid being considered lotteries.

AACSB: Analytic Bloom's: Understand Difficulty: Medium Learning Objective: 20-04 To examine rules and regulations that affect sales promotion; direct marketing; and marketing on the Internet. Topic: Sales Promotion

95. (p. 717) A promotion such as a contest or sweepstakes can avoid being considered a lottery or form of gambling by: A. conducting the contest or sweepstake only at the regional level and not national level. B. providing full disclosure. C. not requiring consumers to make a purchase as a condition for entering. D. publishing the odds of winning. E. requiring the consumer to pay a consideration.

96. (p. 718) A study by the National Advertising Division's Children's Advertising Review Unit found that the most prevalent violation of its voluntary advertising guidelines occurred with _____ aimed at children. A. rebates and refunds B. premiums C. trade allowances D. discounts E. contests and sweepstakes

A recent study of children's advertising commissioned by CARU found the single most prevalent violation involved devoting virtually an entire commercial message to information about a premium.

97. (p. 718) Marketers' use of trade allowances is controlled by the ____, which prohibits price discrimination. A. FTC Act B. Lanham Act C. Robinson Patman Act D. FDA Act E. Wheeler-Lea Amendment

Marketers using various types of trade allowances must be careful not to violate any stipulations of the Robinson-Patman Act, which prohibits price discrimination.

98. (p. 719) Under the _____ passed in 1991, telemarketers must follow a complex set of rules developed by the Federal Communications Commission. A. Federal Trade Commission Act B. Robinson Patman Act C. FCC Act D. Trademark Improvements Act E. Telephone Consumer Protection Act

With the passage of the Telephone Consumer Protection Act of 1991, marketers who use telephones to contact consumers must follow a complex set of rules developed by the Federal Communications Commission.

99. (p. 719) The Federal Trade Commission and U.S. Postal Service have laws that govern the use of a(n) ____, whereby a company proposes to send merchandise to consumers and expects payment unless a rejection or cancellation notice is sent by the consumer. A. unsolicited order B. negative option C. contradictory option D. false substitution E. unsubstantiated order

The FTC and the Postal Service Laws forbid mailing unordered merchandise to consumers, and rules govern the use of "negative option" plans whereby a company proposes to send merchandise to consumers and expects payment unless the consumer sends a notice of rejection or cancellation.

100. (p. 719) Unsolicited junk fax ads and telemarketing calls to consumers who do not want to be called are banned under the: A. Direct Marketing Reform Act. B. Telephone Consumer Protection Act of 1991. C. Direct Selling Association Act. D. Lanham Act. E. Federal Communication Reform Act.

With the passage of the Telephone Consumer Protection Act of 1991, marketers who use telephones to contact consumers must follow a complex set of rules that require telemarketers to maintain an in-house list of residential telephone subscribers who do not want to be called.

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