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Chapter 6:

THE REGULATION
ENVIRONMENT FOR
PROMOTION
and
ETHICAL ISSUES
6.1
2.1
Regulation, Ethics and
a Free Enterprise Economy
PROMOTION DID NOT COME FROM MADISON AVENUE
MARKETING PROCESSES, INCLUDING PROMOTION:
 Naturally Emerge in Highly Industrialized, High Consumption
Societies from a Need to:
 Efficiently, Effectively Distribute the Production Output of
Society
BASIS FOR EXISTENCE OF PROMOTIONAL PROCESS
 Economic: Free-Enterprise Economy Fundamentals
 Social: Mixed Economy that is Somewhat Free, Partially Socialistic
and Heavily Regulated.

6.2
Regulation of Promotion: Government,
Industry & Consumers

FEDERAL GOVERNMENT REGULATION


 FTC Legal Powers - Broadest & Most Direct Power Over
Promotional Practices
 Advertising Substantiation Program
 Consent Order
 Cease & Desist Order
 Affirmative Disclosure
 Corrective Advertising
 Celebrity Endorsements
6.3
Regulation of Promotion: Government,
Industry & Consumers (con’t)
STATE GOVERNMENT REGULATION

 States Do Not have Extensive Policing Power over


Promotional Activities of Firms
 Attorney General’s (AG) Office Investigates
 National Association of Attorneys General (NAAG) are
an Active Group
 13 States have Prize Notification Laws Regarding
Sweepstakes and Contests

6.4
Regulation of Promotion: Government,
Industry & Consumers (con’t)
INDUSTRY SELF-REGULATION ORGANIZATIONS
 Promotion Industry’s Attempt to Police Itself
 National Advertising Review Board
 State and Local Better Business Bureaus
 Better Business Bureau Code of Online Business Practices
 Advertising Agencies & Promotion Trade Associations
 The Direct Marketing Association (DMA)
 Point-of-Purchase Advertising Institute (POPAI)
 Media Organizations
 Internet Self-Regulation

6.5
Regulation of Promotion: Government,
Industry & Consumers (con’t)

CONSUMERS ARE REGULATORY AGENTS


 Consumerism - Actions of Individual Consumers or Groups
of Consumers Designed to Exert Power in the Marketplace
 Earliest Consumer Efforts - 17th Century England
 Consumers want More Voice in Process of Product
Development, Distribution, & Information Dissemination
 Consumers Try to Create Pressure on Firms Through
Boycotts

6.6
Regulation of Promotion: Government,
Industry & Consumers (con’t)

CONSUMERS ARE REGULATORY AGENTS (con’t)


 Consumer Organizations
 Consumer Federation of America (CFA)

 Consumers Union

 Action for Children’s Television (ACT)

6.7
Issues in the Regulation of Promotion
ISSUES IN THE REGULATION OF ADVERTISING
 Deception & Unfairness

 False Testimonials
 Bait-and-Switch Advertising
 Misleading Demonstrations
 “Free Offers”
 Puffery

6.8
“Puffery” is a Completely
Legal Approach to
Touting a Brand’s Value

6.9
Issues in the Regulation of Promotion (con’t)
ISSUES IN THE REGULATION OF ADVERTISING (con’t)

 Competitive Issues
 Vertical Cooperative Advertising
 Comparison Advertising
 Monopoly Power

6.10
Advertisements Using
Comparison are Subject to
Regulation by the FTC

6.11
Issues in the Regulation of Promotion (con’t)
ISSUES IN THE REGULATION OF ADVERTISING (con’t)
 Advertising Aimed at Children
 Critics say Continually Bombarding Children
w/Persuasive Stimuli Can Alter Their Motivation and
Behavior
 Children’s Television Act (199) - Limits Amount of
Commercial Airtime During Children’s Programs
 Children’s Review Unit Issues Set of Guidelines
 Major TV Networks Set Their Own Guidelines
6.12
Advertising Aimed at
Children is Scrutinized
Both Legally and Ethically

6.13
Issues in the Regulation of Promotion (con’t)
ISSUES IN REGULATION OF DIRECT MARKETING
& e-COMMERCE
 Privacy
 Contests & Sweepstakes
 Telemarketing

6.14
Issues in the Regulation of Promotion (con’t)

ISSUES IN THE REGUALTION OF SALES PROMOTION

 Premium Offers
 Trade Allowances
 Contest & Sweepstakes

6.15
Issues in the Regulation of Promotion (con’t)
ISSUES IN THE REGULATION OF PUBLIC RELATIONS
 Rights of Privacy
 Appropriation
 Copyright Infringement
 Defamation
 Slander

 Libel

6.16
Issues in the Regulation of Promotion (con’t)
ISSUES IN THE REGULATION OF PERSONAL SELLING
 Price Discrimination
 Price Fixing

 Tying Agreements
 Bribery

6.17
Ethical Issues in Promotion
ETHICAL ISSUES IN ADVERTISING
 Advertising is Superficial
 Advertising Wastes Resources
 Advertising Creates Needs
 Advertising Promotes Materialism
 Advertising Perpetuates Stereotypes
 Advertising is Often Offensive & In Poor Taste
 Advertisers Deceive with Subliminal Stimulation
 Advertising Affects Programming on Mass Media
 Advertising Causes People to Use Alcohol & Tobacco
6.18
Critics Argue that Advertising Creates an
Emphasis on Materialism
Ethical Issues in Promotion (con’t)
ETHICAL ISSUES IN SALES PROMOTION, DIRECT
MARKETING, and e-COMMERCE
 Issue of Privacy
 Trade Channels - Recently Acquired Power
 Slotting Fees

 Question of Retailers Not Following Through the Promised

Rewards of a Promotion

6.20
Ethical Issues in Promotion

ETHICAL ISSUES IN PUBLIC RELATIONS

ETHICAL ISSUES IN PERSONAL SELLING

6.21