McGraw-Hill/Irwin

2004 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 3
The Economic, Social, and Regulatory Aspects of Advertising
Identifies and explains the economic, social, ethical, and legal issues advertisers must consider

Objectives
Classify the two main types of social criticisms of advertising Explain the difference between social responsibility and ethics Discuss court rulings that affect advertisers freedom of speech Define the roles state and local governments play in ad regulation Employ an economic model to discuss advertisings effects Understand how governments regulate advertising here and abroad Describe how federal agencies regulate advertising Discuss self-regulation

The Many Controversies About Advertising

Does advertising . . . affect product value? affect us subliminally? affect art?
influence consumer choice?

make us buy things we dont need?

make us more materialistic?

discourage competition? debase language?

increase prices? affect demand?

The Many Controversies About Advertising

Economic make us buy things we dont need? affect product value? discourage competition? increase prices? affect demand? Societal

make us more materialistic?

affect art? affect us subliminally?
influence consumer choice?

debase language?

Economic Impact of Advertising

Economic Impact of Advertising

Effects on . . .

prices competition demand value of products

Economic Impact of Advertising

Effects on . . .

Primary demand Secondary demand

demand

Consumer choice Business cycle

Abundance Principle: The Economic Impact of Advertising in Perspective

Complete information Self-interest

Abundance Principle

Social Impact of Advertising

Short-term manipulative arguments
Deception in advertising Subliminal advertising myth

Social Impact of Advertising

Long-term macro arguments
Proliferation of advertising Use of stereotypes in ads Effect of advertising on values Offensive ads Advertisings social impact in perspective

Social Responsibility and Advertising Ethics

Ethical advertising Social responsibility

Advertisers social responsibility Ethics of advertising

How Government Regulates Advertising

Federal Legislative Executive State Legislative Executive Local Legislative Executive Judicial Judicial Judicial

Government Restraints on International Advertisers

Children Tobacco

Puffery

Premiums and product placements

Current Regulatory Issues Affecting U.S. Advertisers

Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council

Freedom of commercial speech

Central Hudson Gas v. Public Service Commission

Current Regulatory Issues Affecting U.S. Advertisers

Tobacco advertising

Consumer Privacy

Advertising to children

Federal Regulation of Advertising in North America

Federal Trade Commission (FTC)
Defining deception Defining unfairness Comparative advertising Investigating violations

Federal Regulation of Advertising in North America

Federal Trade Commission (FTC)
Defining deception Defining unfairness Comparative advertising Investigating violations Substantiation Endorsements Affirmative disclosure

Federal Regulation of Advertising in North America

Federal Trade Commission (FTC)
Defining deception Defining unfairness Comparative advertising Investigating violations

Remedies for unfair or deceptive advertising Consent decree Cease-and-desist order Corrective advertising

Federal Regulation of Advertising in North America

Food and Drug Administration (FDA) Federal Communications Commission (FCC) Patent and Trademark Office and Library of Congress
Trademark Copyright U.S. Patent and Trademark Office
Nutritional Labeling and Education Act

State and Local Regulation

Regulation by state Regulation by governments local governments

Nongovernment Regulation
Better Business Bureau National Advertising Review Council (NARC)
NAD NARB

Regulation by media
Newspapers Magazines Radio TV

Regulation by consumer groups Self-regulation by advertisers Self-regulation by agencies and associations

Agencies AAAA AAF ANA