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Social, Ethical, andRegulatory Aspectsof Advertising

Chapter 4

© 2006 Thomson/South-Western

Ch 4: Ethics & Regulation 2

Social Aspects ofAdvertising

• Advertising Educates Consumers– Pro: Advertising informs– Con: Advertising is superficial

• Advertising improves living standards– Pro: Ads lower the costs of products– Con: Ads are wasteful and help only some

© 2006 Thomson/South-Western

Critics of advertisingfeel that advertising issuperficial becausemany ads carry littleactual productinformation. Do youthink advertising issuperficial?

© 2006 Thomson/South-Western

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Advertising AffectsHappiness and Well-Being

Con: Ads create needsPro: Ads address a wide variety of basic

human needsCon: Ads promote materialismPro: Ads reflect society’s priorities

Ch 4: Ethics & Regulation 4© 2006 Thomson/South-Western

Critics feel advertisingpromotes materialism

© 2006 Thomson/South-Western

Advertising: Demeaning anddeceitful, or liberating and artful?

Con: Ads perpetuate stereotypesPro: Advertisers are more sensitive now

Con: Ads are often offensivePro: Ads are a source of liberation

Con: Ads deceive via subliminal stimulationPro: Advertising is art

Ch 4: Ethics & Regulation 6© 2006 Thomson/South-Western

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Do you think this adperpetuates stereotypes?

© 2006 Thomson/South-Western

Advertising has apowerful effect on

mass media

Pro: Ads foster a diverse and affordablemass media that provides

informationCon: Advertising affects and controls

programming. “Advertainment” hasmade matters worse

Ch 4: Ethics & Regulation 8© 2006 Thomson/South-Western

Ethical Aspects ofAdvertising

Ethics are the moral standards againstwhich behavior is judged. Key areasof debate regarding ethics andadvertising are:

• Truth in advertising• Advertising to children• Advertising controversial products

Ch 4: Ethics & Regulation 9© 2006 Thomson/South-Western

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Ethical Aspects of Advertising

Truth in Advertising• Deception is making false or misleading statements,

but puffery (commercial exaggeration) is legal.

• Cannot legislate against emotional appeals

Ch 4: Ethics & Regulation 10© 2006 Thomson/South-Western

Ethical Aspects of Advertising

Advertising to Children—Issues• Advertising promotes superficiality and materialism in

children• Children are inexperienced and easy prey• Persuasion to children creates child-parent conflicts• What does the literature say about kid’s abilities to

process persuasive information?

Ch 4: Ethics & Regulation 11© 2006 Thomson/South-Western

Ethical Aspects of Advertising

Advertising Controversial Products• Critics question “targeting” minorities• Tobacco, alcohol, gambling and lotteries are product

categories of greatest concern• How does the concept of “primary demand” provide

insights here?• What does the literature say about advertising’s

impact on these product categories?

Ch 4: Ethics & Regulation 12© 2006 Thomson/South-Western

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Regulatory Aspects ofAdvertising

Areas of advertising regulation:• Deception and unfairness• Competitive issues

– Vertical cooperative advertising– Comparison advertising– Monopoly power

• Advertising to children

Ch 4: Ethics & Regulation 13© 2006 Thomson/South-Western

Key Regulatory Agents

Government Regulation• Federal Trade Commission (FTC)

– Wide range of regulatory programs and remedies

• Federal Communications Commission (FCC)

• Food and Drug Administration (FDA)

• U.S. Postal Service

• Bureau of Alcohol, Tobacco, and Firearms

Ch 4: Ethics & Regulation 14© 2006 Thomson/South-Western

Key Regulatory Agents--FTC

FTC Programs and Remedies• Advertising Substantiation Program

• Consent Order

• Cease and Desist Order

• Affirmative Disclosure

• Corrective Advertising

• Control of Celebrity Endorsements

Ch 4: Ethics & Regulation 15© 2006 Thomson/South-Western

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Key Regulatory Agents (con’t)

Industry Self-Regulation• National Advertising Review Board

(NARB)• State and Local Better Business

Bureaus• Ad Agencies and Associations• Media Organizations

Ch 4: Ethics & Regulation 16© 2006 Thomson/South-Western

Key Regulatory Agents (con’t)

Internet Self-Regulation• No industry-wide trade association has

emerged to date

• Global Dialogue on Electronic Commerce(GBDe) is emerging as a governing body

• Little progress has been made to addressconsumers’ complaints

Ch 4: Ethics & Regulation 17© 2006 Thomson/South-Western

Key Regulatory Agents (con’t)

Consumers as Regulatory agents• Consumerism: Grass roots consumer

movements

• Consumers Organizations– Consumer Federation of America– Consumers Union– Consumer Alert– Commercial Alert

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Regulation of OtherPromotional Tools

• Direct Marketing and e-Commerce– Privacy, Contests, Telemarketing– Spam=10 million messages/minute

worldwide

• Sales Promotion– Premiums, Trade Allowances, Contests

• Public Relations– Privacy, Copyright Infringement,

Defamation (slander and libel)Ch 4: Ethics & Regulation 19© 2006 Thomson/South-Western