1. Chapter 24 Economic, Social, and Legal Effects of Advertising
Kleppner’s
Advertising
Procedure, 18e
Lane * King * Reichart

2. Learning Objectives_1 List three eras of advertising criticism.
Identify economic arguments for and against advertising.
Explain the difference between inadvertent and intentional social roles of advertising.
Identify social criticisms of advertising.
Explain the difference between issue-advocacy and cause-related advertising.
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3. Learning Objectives_2
Describe the FTC’s role in advertising regulation.
Discuss the components of the Central Hudson Four-Part Test.
List three negative consequences of comparison advertising.
Discuss the primary roles of the NARC, NARB, and the CARU in supporting advertising regulation.
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4. History of Advertising Criticism
Era of Exaggerated Claims,
Era of Public Awareness,
Era of Social Responsibility, 1965-present
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5. Economic Arguments For Advertising
Provides consumers with information
Supports news and entertainment media, provides social benefits and employment
Encourages continued product improvements
Permits companies to achieve economies of scale in production
Contributes to economy by increasing consumption
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6. Exhibit 24.2 Advertising Enables More Choices for Consumers
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7. Exhibit 24.3 Advertising Enhances Competition
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8. Economic Arguments Against Advertising
Intent of advertising is to persuade, not inform
Advertising mostly creates switching behavior rather than new consumption
Advertising may emphasize emotion over price competition
High rate of expenditures makes it difficult for new products to enter market
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9. Social Role of Advertising
Inadvertent Social Role:
Social Agenda
Overt Social Role:
Social Change
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10. Exhibit 24.4 Social Causes Promoted with Advertising
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11. Social Criticisms of Advertising
Privacy Concerns
Product Placement
Influence on Obesity
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12. Social Criticisms Ad content Product categories Excess
Societal influence
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13. Exhibit 24.7 The Ad Council Addresses Many Social Issues
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14. Cause-Related Marketing
The Home Depot
Foundation supports
non-profit organizations.
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15. Tactical Categories of CRM
Transactional programs
Message promotions
Licensing programs
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16. Exhibit 24.9 Causes That Matter Most to Global Consumers
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17. Advertising Influence on Editorial Decisions
Withholding advertising as an attempt to control editorial decisions
Advertiser-financed productions
Product placement
Advertorials
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18. Constraints on Advertising
Laws and regulations of legally constituted bodies such as Congress and the Federal Trade Commission
Control by media through guidelines for advertising acceptability
Self-regulation by advertising agencies using various trade practice recommendations and codes of conduct
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19. Federal Trade Commission
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20. Determining Deception in Advertising
There must be representation, omission,
or practice likely to mislead consumers.
The act or practice must be considered
from the perspective of a reasonable consumer.
The representation, omission,
or practice must be material.
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21. Steps in FTC Enforcement_1
A claim of deceptive practices is given to the FTC.
The FTC begins investigation with a request for substantiation.
If the FTC finds the practice to be unsubstantiated, a complaint is issued.
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22. Steps in FTC Enforcement_2
If advertiser refuses to sign consent decree, a cease and desist order is issued.
FTC may request that the advertiser run corrective advertisements.
If a company cannot reach an agreement with the FTC, it will move to the Federal Court of Appeals.
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23. Common Areas of FTC Inquiry
Environmental
Claims
“Free” Claims
Made in the USA
Claims
Advertising as a
Contract
Testimonials
Fact vs Puffery
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24. The Robinson-Patman Act and Cooperative Advertising
1890 Federal Sherman Antitrust Act
1914 Clayton Antitrust Act
1936 Robinson-Patman Act
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25. Responsibilities of the FDA
Extending control to cosmetics/therapeutic devices
Requiring new drugs to be shown safe
Providing safe tolerances be set for unavoidable poisonous substances
Authorizing standards of identity, quality, and fill-of-container for foods
Authorizing factory inspections
Adding the remedy of court injunctions
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26. Exhibit 24.14 Pharmaceutical Marketers Invest Billions in Advertising
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27. Central Hudson Four-Part Test
Is the commercial expression eligible for First Amendment protection?
Is the government interest asserted in regulating the expression substantial?
If the first two tests are met, the Court considers if the regulation of advertising imposed advances the cause asserted.
If met, the Court must decide if the regulation is more extensive than necessary to serve the government’s interest.
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28. Major Provisions of the CAN-SPAM Act
It bans false or misleading header information.
It prohibits deceptive subject lines.
It requires that your give recipients an opt-out method.
It requires that commercial be identified as an advertisement and include the sender’s valid physical postal address.
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29. Legal Principles Concerning Corporate Speech
Spending money to speak does not result in loss of First Amendment rights.
Speaking on commercial subjects does not entail loss of First Amendment rights.
Speaking for economic interests does not entail loss of First Amendment rights.
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30. Problems Cited for Comparison Advertising
Risk of promoting competitive brands.
May appear unfair to consumers and damage reputation of brand using it.
May precipitate lawsuits by companies who feel their brands were unfairly disparaged.
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31. Advertising Clearance Process
The advertising clearance process refers to the internal process of clearing ads for publication and broadcast, conducted primarily by ad agencies and clients.
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32. The AAF Promotes Truth in Advertising
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33. The BBB Promotes Self-Regulation
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34. Exhibit 24.21 The NARC Review Process
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35. NAD’s Primary Challenges
Product Testing
Pricing
Consumer Perception
Testimonial Evidences
Taste/
Sensory Claims
Demonstrations
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36. The Children’s Advertising Unit of the NAD
Product presentations
and claims
Sales pressure
Disclosures
and disclaimers
Comparative
claims
Endorsements
and promotions
Premiums,
sweepstakes
Safety
Interactive
media
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37. For Discussion
What are the arguments for advertising? What are those against?
What is the role of the Advertising Council in encouraging social advertising?
Why is substantiation the foundation of FTC enforcement?
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