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4.01 Foundational knowledge of promotion

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1 4.01 Foundational knowledge of promotion
Part F: Explain the need for truthfulness in promotional messages and claims

2 Definition & Need Truthfulness refers to the ACT of giving TRUE information or facts about something Is useful to customers because it helps them buy or use products satisfactorily Will improve the customer’s purchase or use experience Can enhance patronage of goods , enhance resale, repeat business Can make a dynamic contribution to the economy, creating jobs

3 How misleading promo is regulated
Federal Trade Commission (FTC) – regulatory power to step in and end any potentially misleading or deceptive claims Advertising must be truthful and non-deceptive Advertisers must have evidence to back up their claims Advertisements cannot be unfair

4 What makes an ad Deceptive Unfair
If it contains a statement or omits information that is likely to mislead consumers acting reasonable under circumstances Is material – important to a consumer’s decision to buy or use the product Consumers are also protected by state laws If it causes or is likely to cause substantial consumer injury which a consumer could not reasonable avoid It is not outweighed by the benefit to consumers

5 Laws that protect Consumers from unwanted promotions
FTC adopted rules that prohibit sending unwanted commercial messages to wireless devices without prior permission. Took effect, March 2005 FTC adopted detailed rules that restrict sending unwanted commercial messages to computers

6 Laws that protect Children
Children’s Advertising Review Unit (CARU): promotes responsible children’s advertising CARU sets high standards to assure advertising is not deceptive, unfair or inappropriate CARU monitors and reviews advertising directed to children, initiates and receives complaints about advertising practices, and determines violations

7 Laws that protect Children (continued)-
Federal Communications Commission (FCC) carried out the Children’s Television Act of 1990 Limits amount of commercials to be aired in certain children’s programming to 10.5 minutes per hour on weekend and 12 minutes per hour on weekdays Programming at issue is original productions for audiences 12 and younger

8 Regulation of Telemarketing
National Do Not Call Registry: or Your number is registered for 5 years Telemarketers have to purchase the list from the FTC and delete numbers from their registry Violators are subject to penalties of $11,000 per call Exemptions: preexisting relationship, surveys, political or charitable soliciation

9 Regulation of Data privacy
Children’s Online Privacy Protection Rule (COPPA), enacted by Congress in 1998 – parents control what information is collected online, protects 13> Health Insurance Portability and Accountability Act (HIPPA) – covers handling of medical records Gramm-Leach-Billey Act of 1999 (GLBA) – covers handling of financial records

10 Actions taken by FTC to correct misleading advertising
1st – establish that advertising is false or misleading Typical inquiry follows these steps: looks at the ad from the point of view of the "reasonable consumer" looks at both "express" and "implied" claims looks at what the ad does not say looks at whether the claim would be "material" looks at whether the advertiser has sufficient evidence to support the claims in the ad

11 Reasons for regulation
Protect children Protect consumers from false or misleading information Health risks involved Protection against harm to animals

12 Legality of products used in advertising can vary from country to country
Laws vary from country to country Don’t forget about cultural issues Be flexible about the promotion structure Be prepared to administer the promotion differently Privacy Don’t rely on One “Representative” Country Budget time and Money to get it done right

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