13.

Deception & Unfairness in Advertising

Deception and Unfairness in Advertising

 The goal of advertising: Advertising provides little

useful information about goods and services, but
has as its goal to persuade us to buy certain ones.
 Deceptive techniques: Providing frank product
information is not always the most effective way to
sell something – advertisers are tempted to
misrepresent and deceive by exploiting ambiguity,
concealing facts, exaggerating, and using
psychological appeals.

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Deception and Unfairness in Advertising

 The Federal Trade Commission’s (FTC) role:

Created in 1914 as an antitrust weapon, it was
expanded to include protecting consumers against
deceptive advertising and fraudulent practices.
 Is the FTC (or other regulatory bodies) obligated
to protect only reasonable, intelligent consumers
who act sensibly in the marketplace?
 Or should it also protect ignorant consumers who
are careless or gullible in their purchases?

3
Deception and Unfairness in Advertising

The Federal Trade Commission’s (FTC) role:

Should the FTC use the reasonable-consumer
standard or the ignorant-consumer standard?
Adopting the former would entail protecting only
reasonable people from deceptive advertising – if
so, gullible consumers would be unprotected.
Adopting the latter would mean prohibiting
advertisements that can deceive anyone – if so, the
FTC’s restrictions and caseload would expand.
It now follows a modified ignorant-consumer rule.

4
Deception and Unfairness in Advertising

 Advertising to children: Children are particularly

susceptible to the exaggerations of advertising.
Advertisers say that parents still control what
gets purchased and what doesn’t.
Critics doubt the fairness of selling to parents
by appealing to children.
 Childhood obesity: The Institute of Medicine’s
2005 report, reviewing 123 research studies over
30 years, showed that exposure to TV ads is
“associated” with obesity in children under twelve.

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 The Debate Over Advertising

 Consumer needs: Defenders of advertising (such

as Harvard business professor Theodore Levitt)
view its imaginative, symbolic, and artistic content
as answering real human needs.

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 The Debate Over Advertising

 Manipulation: Critics (such as John Kenneth

Galbraith) say that advertising manipulates those
needs or even creates artificial ones. He also
suggests that:
The same process that produces products also
produces the demand for those products (the
dependence effect).
Advertising encourages a preoccupation with
material goods and leads us to favor private
consumption at the expense of important public
goods and services.
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 The Debate Over Advertising

 Market economics, free speech, and the media:

Defenders of advertising say that it has three
advantages:
It is a necessary and desirable aspect of a free-
market system.
It is a protected form of free speech.
It is a useful sponsor of the media, especially
television.
 However, critics challenge all three claims.
Business Ethics
Chapter 6
8
 Overview
 Chapter Six examines the following topics:
(1) Product safety, legal liability, and regulation.
(2) Responsibilities of business to consumers
concerning product quality, prices, labeling,
and packaging.
(3) Deceptive advertising and the FTC.
(4) “Reasonable” vs. “ignorant” consumer
standards.
(5) The social desirability of advertising, free
speech, and consumer needs.
(6) You as Businessman vs You as customers

9
 Class Discussion
• “Advertising to children is big business, but children
are particularly susceptible to the blandishments of
advertising. Advertisers contend that parents still
control what gets purchased and what doesn’t.
Critics, however, doubt the fairness of selling to
parents by appealing to children”.
• Discuss the issue, in light of business ethics
studied.
• Discuss the ethical responsibilities of businesses
towards consumers. (Hint: 6 points)
10
13. Product Quality
13. Price, Labeling, and Packing
14. Ethics of Environmental Protection
14. Obligations to Future Generations
14. Treatment to Animals
14. Business Ecology