Chapter 21 Regulation of Advertising and Promotion

McGraw-Hill/Irwin 21-2 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Self-Regulation Self-Regulation by... Advertisers and Agencies Trade Association Business National Advertising Review Council Media

McGraw-Hill/Irwin 21-3 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Sources of NAD Cases 70% 17% 9% 4% Consumer Challenges Local BBB Challenges NAD Monitoring Competitor Challenges

McGraw-Hill/Irwin 21-4 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Decisions on NAD Cases, % 17% 5% Referred to Government Substantiated Modified/Discontinued

McGraw-Hill/Irwin 21-5 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. TV Network Guidelines for Children’s Advertising ABC CBS NBC Must not overglamorize product Yes Yes Yes No exhortative language, such as “Ask Mom to buy Yes Yes Yes No realistic war settings Yes Yes Generally no celebrity endorsements Yes Yes Can’t use “only” or “just” in regard to price Yes Yes Yes Show only two toys per child or maximum of six per commercial Yes Yes 5-sec. “island” showing product against plain background at end Yes Yes Yes Animation restricted to one-third of a commercial Yes Yes Generally no comparative or superiority claims Yes No costumes or props not available with the toy Yes Yes No child or toy can appear in animated segments Yes Yes Three-second establishing shot of toy in relation to child Yes Yes No shots under one second in length Yes Must show distance a toy can travel before stopping on its own Yes

McGraw-Hill/Irwin 21-6 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4As Policy on Comparative Ads 1.The intent and connotation of the ad should be to inform and never to discredit or unfairly attack competitor5, competing products, or services. 2.When a competitive product is named, it should be one that exists in the marketplace as significant competition. 3.The competition should be fairly and properly identified but never in a manner or tone of voice that degrades the competitive product or service. 4.The advertising should compare related or similar properties or ingredients of the product, dimension to dimension, feature to feature. 5.The identification should be for honest comparison purposes and not simply to upgrade by association.

McGraw-Hill/Irwin 21-7 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4As Policy on Comparative Ads 6.If a competitive test is conducted, it should be done by an objective testing source, preferably an independent one, so that there will be no doubt as to the veracity of the test. 7.In all cases the test should be supportive of all claims made in the advertising that are based on the test. 8.The advertising should never use partial results or stress insignificant differences to cause the consumer to draw an improper conclusion. 9.The property being compared should be significant in terms of value or usefulness of the product to the consumer. 10. Comparatives delivered through the use of testimonials should not imply that the testimonial is more than one individual~s thought unless that individual represents a sample of the majority viewpoint.

McGraw-Hill/Irwin 21-8 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Federal Regulation of Advertising The First Amendment Freedom of speech or expression Commercial speech included Federal Trade Commission FTC Act of 1914 Wheeler-Lea Amendment of 1938 Concept of Unfairness Unfair and deceptive ads prohibited The terms remain undefined

McGraw-Hill/Irwin 21-9 Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. FTC Law Enforcement Focus Tobacco and alcohol advertising, including monitoring for unfair practices or deceptive claims, and reporting to Congress on cigarette and smokeless tobacco labeling, advertising, and promotion. Advertising claims for food and over-the-counter drugs, particularly those relating to nutritional or health benefits of foods and safety and effectiveness of drugs or medical devices. Performance and energy-savings claims made for energy-related household and automotive products. Environmental performance claims made for consumer products, including claims that products are environmentally safe, ozone- friendly, or biodegradable. Infomercials, long-form (30-minute) broadcast advertising, to ensure that both the format and content of programs are non-deceptive. General advertising at the national and regional level, particularly advertising making objective claims that are difficult for consumers to evaluate.

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. FTC Complaint Procedure Early Stage

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. FTC Complaint Procedure Late Stage

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Direct Selling Association Code of Ethics 1.Deceptive or Unlawful Consumer Practices No member company of the association shall engage in any deceptive or unlawful consumer practices. 2.Product or Services The offer of products or services for sale by member companies of the association shall be accurate and truthful as to price, grade, quality, make, value, performance, quantity, currency of model, and availability. 3.Terms of Sale A written order or receipt should be delivered to the customer at the time of sale, which sets forth is language that is clear and free of ambiguity: A.All the terms and conditions of sale, with specification of the total amount the customer will required to pay, including all interest, service charges and fees,and other costs and expenses as required by federal and state law. B.The name and address of the salesperson or the member firm represented.

McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Direct Selling Association Code of Ethics 4.Warranties and Guarantees The terms of any warranty or guarantee offered by the seller in connection with the sale shall be furnished to the buyer in a manner that fully conforms to federal and state warranty and guarantee laws and regulations. The manufacturer, distributor, and/seller shall fully and promptly perform in accordance with the terms of all warranties and guarantees offered to consumers. 5.Pyramid Schemes For the purpose of this code, pyramid or endless chain schemes shall be considered consumer transactions actionable under this code. The code administrator shall determine whether such pyramid or endless chain schemes constitute a violation of this code in accordance with applicable federal, state and/or local law or regulation.