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Lecture 14

MARK 453 Lecture 14: Mark 453 – Chapter 14

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MARK 453
Caroline Roux

Mark 453 – Marketing Communications Week 13 – Regulations and Ethical Concerns There are many legal and ethical concerns with marketing communications MAIN AREAS  Legal environment  Self-regulation  Ethical concerns REGULATIONS Who regulates marketing communications in Canada? WHO  CRTC  Broadcast media  Competition Bureau  Message  Provincial governments WHAT  Who can be targeted  What can be shown  What support must be offered  When and where it can be placed What unfair and deceptive marketing practices are prohibited by law? WHEN  False impression or misrepresentation  Induced to make a purchase WHAT  Deception vs. puffery  Substantiation of claims Regulations regarding deception vs. puffery PUFFERY  Legal  Exaggerated statement  Opinion DECEPTION  Illegal  False claim  Factual statement  Must be substantiated or proven true Regulations regarding the substantiation of marketing claims CLAIMS MUST  Be proven  Be truthful  Reflect customers’ typical experience HOW  Clearly substantiated  Same product  Supported by experts  Supported by totality of evidence The marketing communications industry also self-regulates itself  Advertising Standards Canada  Canadian Code of Advertising Standards  Broadcast Code for Advertising to Children ETHICS Even if IMC adhere to legal and self-regulatory guidelines… … they can still be considered unethical! MORALS  Beliefs or principles concerning what is right and what is wrong ETHICS  Moral principles that serve as guidelines American Marketing Association’s Statement of Ethics ETHICAL NORMS  Do no harm  Foster trust in the marketing system  Embrace ethical values ETHICAL VALUES  Honesty  Responsibility  Fairness  Respect  Transparency  Citizenship What are some of the ethical concerns with marketing communications? CONCERNS  Cause to buy more than one can afford  Overemphasizes materialism  Increase cost of goods  Perpetuate stereotypes  Make unsafe products seem attractive  Often offensive  Children as a vulnerable population How do marketing communications try to convince us to always buy more? Instead of perpetuating stereotypes, can we help change them? Brands need to be authentic when trying to embrace change Advertising is considered immoral when it takes advantage of consumers Which marketing tactics tend to raise ethical concerns? TACTICS  Brand infringement  Marketing of professional services  Gifts and bribery (B2B)  Spam and cookies  Ambush marketing  Stealth marketing Brand infringement can take different forms Ambush marketing is not illegal, but is considered unethical Book – Chapter 14: Regulations and Ethical Concerns 1. Which agencies and laws regulate marketing communications? Marketing Communications Regulations - US federal government enact considerable legislation designed to keep companies from taking unfair advantage of consumers and other businesses - States regulate for-profit companies - Federal and state law enforced by regulatory agencies Governmental Regulatory Agencies - Monitor for potential violations of the law - Food and Drug Administration (FDA) o Regulate and oversees packaging and labeling of products o FDA monitors advertising on food packages and advertisements for drugs o Primary responsibilities: ensuring food quality and drug safety - Federal Communications Commission (FCC) o Regulates television, radio and telephone industry o Grands and revokes operating licenses for radio and TV stations o Holds jurisdiction over telephone companies o Does not have jurisdiction over content of advertisements transmitted by mass media o Does not control which products may be advertised o Monitor advertising directed toward children o Rules limit TV stations to 12 minutes/ hour of children’s advertisements during weekdays and 10min/ hour on weekends - US Postal Service (USPS) o Holds jurisdiction over all mailed marketing materials o Investigates mail fraud schemes - The Bureau of Alcohol, Tobacco and Firearms (ATF) o When sale, distribution and advertising of alcohol and tobacco are at issue - Federal Trade Commission (FTC) o Examines incidents involving deceptive or misleading marketing tactics The Federal Trade Commission - Originally to enforce antitrust laws and to protect businesses from one another - Little authority over advertising and marketing communications - Except when ad considered unfair to competition, thereby restricting free trade Unfair and Deceptive Marketing Practices - Wheeler-Lea Amendment: prohibit false and misleading advertising - Agency granted the authority to stop unfair or deceptive advertising practices and to levy fines when necessary - Firm can violate act even when company did not intended to deceive - An ad or communication deemed to be deceptive/misleading when: o Left with false impression or misrepresentation that relates to the product o Misrepresentation induces people or “typical person” to make purchase - Consumer may be misled by ads, mailings, corporate literature, labels, packaging, website materials and oral and written statements made by salespeople 2. What are the relationships between puffery, deception, and substantiation? Deception vs Puffery - Puffery o Can be legally used in ads and marketing messages o Exists when a firm makes an exaggerated statement about goods or services o Does not constitute a factual statement o Firms may make puffery statements without proving them o Terms associated with puffery: friendliest, best, greatest, finest - Claim o Makes factual statement that can be proven true or false o Must be substantiated or proven in some manner Substantiation of Marketing Claims - Substantiation o Applies to claims that are not puffery o Means that an ad claim or promise must be proven with data, facts… o Failure to do so  lawsuit or governmental action - Endorser’s ad must contain statements representing person experiences or opinions - Claims must reflect typical experience a customer would expect to encounter - To increase probability substantiation accepted by FTC and courts: o Assumes consumers do not pay much attention to fine print and qualifying language  hiding qualifier not accepted as substantiation o Evidence must be for exact product being tested, not for a similar product o Evidence should be accepted by experts in the relevant area of the product and would be considered valid and reliable by the experts. Studies by company or found on the Internet not acceptable o FTC consider totality of evidence - FTC prohibits unfair or deceptive marketing communications 3. What legal remedies can agencies use to correct deceptive communications practices? How Investigations begin - Sources of complaints can be registered by: o Consumers o Businesses o Congress o The media - Each raise questions about what appears to be an unfair or deceptive practice - Investigations by FTC confidential at first  protect agency and company under investigation Consent Orders - When FTC believes law has been violated  consent order issued - Company leaders signing it agree to stop disputed practice without admitting guilt FTC Settlements - Occurred when auto dealerships charged by FTC with deceptive and misleading advertising and marketing practices Administrative Complaints - Formal proceeding like a court trial is held - Both sides submit evidence and render testimony - Judge makes a ruling - When concludes violation of law  cease and desist order is issued - Company must stop disputed practice immediately and refrain from similar practices in the future - Company can appeal case to the full FTC commission, US Court of Appeals, and highest level US Supreme Court - Any company found guilty of violating laws can be ordered to pay civil penalties Courts and Legal Channels - Occasionally, FTC uses court system to stop unfair and deceptive IMC practices - When company violates previous FTC cease and desists orders - When negative effects of activities are so severe that they require immediate action - FTC works with other legal entities such as state and federal attorneys general Corrective Advertising - Rare situations - Occur when members of FTC believe that discontinuing false ad not sufficient - Require firm to produce corrective ads to bring consumers back to neutral state - Consumers should return to the beliefs they had prior false/misleading advertising Trade Regulation Rulings - Applies to an entire industry - Commission holds a public hearing and accepts both oral and written arguments - Commission makes a ruling that applies to every firm within an industry - Decisions can be challenged in US Court of Appeals - Recent rise in personal blogs lead to explosion of product reviews by bloggers - Bloggers are paid or receive free merchandise to post positive comments - Bloggers who review products must disclose connection with ad or product, whether product provided was free or if compensated in any way - Merchant issuing gift card must “boldly” display fees or expiration dates on the card 4. How do the three major industry regulatory agencies help keep advertising and business practices from injuring customers or other businesses? Industry Oversight of Marketing Practices - Federal regulatory agencies cannot handle all industry activity - Industry regulatory agencies have no legal power - All three agencies are part of Council of Better Business Bureaus Council of Better Business Bureaus - Provides resources to both consumers and businesses - Consumers and firms may file complaints with the bureau about unethical business practices or unfair treatment - Complies summary of charges leveled against individual treatment - Customers seeking legitimacy of a company or its operations can contact bureau - Provides a carefully worded report containing complaints against the company - Reveals the general nature of customer concerns - Helps individuals make sure they are dealing with firm with a low record of problems National Advertising Division - Complaints about advertising or some aspect of marketing communications - Reviews specific claims - Collect info and evaluate data concerning complain to determine whether an advertiser can substantiate a claim - If not, NAD negotiates with advertiser to modify or discontinue the ad - When claim can be substantiated, NAD dismisses complaints - Individuals and companies may file complaints about unfair ads - Most complaints are from competing brands and deal with comparative ads - Few don’t deal with competitor but are result of misleading advertising National Advertising Review Board - When complaint cannot be resolved by the NAD - NARB composed of advertising professionals and prominent civic individuals - When ads cann
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