Monash Marketing Ethical and Legal Issues in Advertising and Promotion Irene Powell and Paul Gaskin

Monash Marketing Ethical and Legal Issues n People’s attitudes to the institution of advertising n Frameworks for thinking about ethics n Legal issues and ethical issues n Voluntary Codes in Advertising several Industry associations agreements

Monash Marketing Attitudes to Advertising Advertising is… % who agree Boring & repetitious Out of touch with everyday life Out of touch with econ. reality In tune with my needs Insults my intelligence Provides useless infona7877 Sexist Entertainingna4648 Source: Eye on Australia Grey/Sweeney, 1997

Monash Marketing Information Sources Most reliable source, from 1-10, 10=most reliable: Personal previous experience8.5 Advice from people you know7.5 Endorsements from reputable sources7.0 TV programs (Money,Better Homes & Gnds)6.6 Testimonials from experts6.4 Articles in newspapers & magazines5.6 Advice from staff in stores5.5 TV, press and magazine ads4.7 Internet4.6 Direct mail4.0 Source: Eye on Australia Grey/Sweeney, 1996

Monash Marketing Only after the event? “Most of us have a child’s notion of ethics and a graduate school notion of finance, marketing & management.” Paul Thayer, former CEO of LTV after being sentenced to 4 years in prison for stock fraud.

Monash Marketing Anita Roddick, Body and Soul, London, Ebury Press, 1991 founder of the Body Shop n “I am still looking for the modern day equivalent of those Quakers who ran successful businesses, made money because they offered honest products and treated their people decently, worked hard, spent honestly, saved honestly, gave honest value for money, put back more that they took out and told no lies. This business creed, sadly seems long forgotten.

Monash Marketing Why we study ethics To help decision-making n Some decisions are easy because they are correct ie compliance with the law n Some decisions are problematic because there is no correct answer. Conflicts may arise as we balance the demands of doing business in a competitive environment and an ethical position personally, professionally and organisationally

Monash Marketing Ethical Issues in Advertising n Not what to think BUT what to think about (utilising agenda setting theory) n LAW sets minimum standards, beyond that ETHICS (organisation/individual & professional) + CODES OF CONDUCT (organisation/industry)

Monash Marketing The relationship between legal and ethical issues in Advertising Overview EthicsLegislation Culture Minimum standards Advertising controls eg TPA, AANA, AFA, organisational professional individual influence each other & often result in Codes of Conduct arise from forms can be inform the decisions on eg

Monash Marketing Action to encourage ethical behaviour n Examine values - corporate conscience, professional and individual values n Philosophical analysis - principles such as: Teleology - the study of ends. A utilitarian approach maximises benefits and/or minimises harm. Deontology - the study of duty. A humanist approach epitomised by ‘do as you would be done by’ …..role of socially acceptable behaviour

Monash Marketing Ethical Decision-making Models n Frank Navran & Associates model 1 Define the problem 2Identify available alternative solutions 3 Evaluate the alternatives 4 Make the decision 5 Implement the decision 6 Evaluate the decision

Monash Marketing Ethical Decision-making Models PLUS = Set of filters P = Policies Is it consistent with my organisation’s policies, procedures, and guidelines? L = Legal Is is acceptable under applicable laws & regulations? U = Universal Does it conform to the universal principles/values my organisation has adopted? S = Self Does it satisfy my personal definition of right, good and fair?

Monash Marketing Ethical behaviour Three Rules of Thumb 1.The Golden Rule Act in the way you would expect others to act towards you. 2.The Professional Ethic Take actions that would be viewed as proper by a disinterested group of colleagues. 3.The TV Test Ask yourself ‘Would I feel comfortable explaining to a national TV audience why I took this action?’!

Monash Marketing Control of Advertising Legal Controls Advantages Pervasive Wider scope Level playing field Disadvantages Slow to act Over restrictive Time consuming

Monash Marketing Legal controls “….black letter law frequently acts as a road map for the unscrupulous. It encourages the attitude that what is not explicitly forbidden is permissable. This in turn leads to a search for loopholes in legislation.” Henry Bosch, Business Council of Australia, 1992

Monash Marketing Legal controls “Legislation is not an appropriate means of achieving ‘morality’. Legislation is results oriented, is often assessed in terms of increased costs, and tends to encourage a minimal response.” Company Directors’ Duties, Australian Senate Standing Committee, 1989

Monash Marketing Main legal issue concerning advertising and promotion n Is it “misleading and/or deceptive”? Trade Practices Act requires that sellers do not act so as to mislead or deceive n See subject Marketing Law n Where advertising is involved in cases mostly product, price or availability are the problem, but advertising them brought it to notice! tiny proportion involve only the “creative expression” being the major legal problem

Monash Marketing Control of Advertising Ethics in business = sound economics BUT Voluntary Controls Advantages Preventative Flexible Self-governing Disadvantages Adherence Interpretation

Monash Marketing Voluntary Codes Basis of SELF REGULATION system n Advertiser Code of Ethics n Therapeutic Goods Advertising Code n Slimming Advertising Code n Alcoholic Beverages Advertising Code See AANA handout for detail

Monash Marketing Regulatory Framework for Advertising n Australian Association of National Advertisers Self regulation system with support of major industry players (agencies, media buyers & clients) Funded by media levy of 0.035% on all media invoices Advertiser Code of Ethics

Monash Marketing AANA Code of Ethics n Advertising should be legal, decent, honest & truthful n Obligations to consumer, society & competitors n 11 Clauses comply with law not (likely to be) misleading & deceptive no damaging misrepresentations to competitors

Monash Marketing Clauses of the Code of Conduct (con’t) no portrays which discriminates or vilifies race, ethnicity, nationality, sex, age, sexual preference, religion, disability, political belief no unjustifiable violence sensitive sex, sexuality & nudity no alarm or distress to children appropriate language (no strong/obscene) health & safety according to prevailing community standards no misleading environmental benefits no misleading Australian origin or content claims

Monash Marketing Regulatory Framework for Advertising n Advertising Federation of Australia Business Code of Ethics (Telstra/Mojopartners issue) Pitching Ethics –relationship between pitching agencies ideas not paid for not to be stolen, even if client wants to do it! issues of intellectual property and mechanisms to gain rights to that property

Monash Marketing Advertising Industry Players n Australian Association of National Advertisers (AANA) 1928 clients’ body members mainly large consumer goods & services Considerable clout To represent advertisers’ views (took leadership role on behalf of members in post accreditation agenda development) To educate via management training

Monash Marketing AANA created two Boards Advertising Standards Board 1997 n AANA driven with Register of Public Persons n To maintain standards of taste & decency in national advertising having regard to prevailing community values n To handle complaints from any source Advertising Claims Board 1997 n To resolve claims, especially with competitors

Monash Marketing Regulation funding n Media Levy of percent on all media invoices from 1 Sep 1997 n remitted (by media receiving) to Australian Advertising Standards Council, which runs the two boards on previous slide

Monash Marketing Advertising Industry Players n Advertising Federation of Australia (AFA) 1975 advertising agencies’ body 160 members with top 20 accounting for 60% of billings To represent agency views To provide training via AFA Training Program

Monash Marketing Advertising Industry Players n Media Planning and Buying Association (name????) 1999 n perhaps aims to be a countervailing power (in policy development terms) to large TV, newspaper and magazine groups n identifies separate interests from advertising agencies

Monash Marketing The Grand Council Australian Advertising Industry Council (AAIC) 1978 n AANA, AFA, media owners (and maybe soon media buyers?) n To create positive attitudes to advertising n only acts if advertising threatened