• How does public policy affect your businesses?
• Are your ads governed by the FTC? Are there any words, phrases, etc that are explicitly governed?
• Are any of your products governed by the FDA? Labeling? Instructions? Nutrition information?

Regulation of Marketing Practices

• Not all marketers act in the best interest of consumers! Consider Nydia Han’s reports
• Fraud is a real problem whether online or offline
• Let the buyer beware ? let the seller beware
• Consumer advocacy groups
• Laws alone may not be enough

The Consumer Bill of Rights
The right to be informed
The right to safety
The right to choose
The right to redress
The right to a healthful environment
The right to privacy
 

Right to Be Informed

• …is the right to be “protected against fraudulent, deceitful, or grossly misleading information, advertising, labeling, or other practices, and to be given the facts he [or she] needs to make an informed choice.”
• The Federal Trade Commission (FTC) is responsible for ensuring that this right is protected

FTC Programs Designed to Protect the Right to Be Informed

• Advertising substantiation
• Companies that make claims about a product’s safety, performance, efficacy, quality, or comparative price must provide tests, studies, or other data to support their claims
• Corrective advertising
• The FTC has the power to compel marketers to correct wrongful beliefs consumers form about a product as a result of deceptive advertising
• Laws differ globally

Drug Advertising – in the past, ads only went to physicians – now to consumers

• Studies have indicated that consumers miss much of the important information in the “small print” of drug ads
• Web site invites consumers to free trial

FTC Programs – policymakers study consumer understanding and use of this information

• Information disclosure
• The FTC mandates the use of warning labels on several products and their supporting advertising
• Truth in advertising complaints
• Objective claims – this product can ….
• Implied claim – the ad makes it look this way but the consumer fills in the blanks

The FTC web site is full of information for consumers
http://www.ftc.gov/
Go to consumer section for useful information on consumer protection.
Go to the business section for examples of advertising, labeling, etc from the FTC’s point of view
 
 

Marketing and point-of-sales practices that are likely to mislead consumers are also deceptive.

For instance, in bait and switch cases, a violation occurs when the offer to sell the product is not a bona fide offer.14

 The Commission has also found deception where a sales representative misrepresented the purpose of the initial contact with customers.15

When a product is sold, there is an implied representation that the product is fit for the purposes for which it is sold. When it is not, deception occurs.16 There may be a concern about the way a product or service is marketed, such as where inaccurate or incomplete information is provided.17 A failure to perform services promised under a warranty or by contract can also be deceptive.18
 

Identifying Express and Implied Claims in Advertising
When identifying claims, advertisers should not focus just on individual phrases or statements, but rather should consider the ad as a whole, assessing the "net impression" conveyed by all elements of the ad, including the text, product name, and depictions.
When an ad lends itself to more than one reasonable interpretation, the advertiser is responsible for substantiating each interpretation.
Copy tests, or other evidence of how consumers actually interpret an ad, can be valuable.
 

An advertisement for a vitamin supplement claims that 90% of cardiologists regularly take the product.
In addition to the literal claim about the percentage of cardiologists who use the product, the ad likely conveys an implied claim that the product offers some benefit for the heart.
 Therefore, the advertiser must have adequate support for both representations.
 

Unit pricing
The FTC has ruled that retailers must provide consumers with two prices for every packaged goods item: the price per package and the price per unit of measure
 

FTC Programs (continued)

• Product Labeling
• Federal law mandates labeling on most food products to indicate appropriate product warning, use-by dates, and nutritional value
• Disclosure of Interest Rate Provisions
• The 1968 Truth-in-Lending act was enacted to give consumers information on credit terms to help them seek favorable interest rates

Consumer Advocacy and the Right to Be Informed

• Consumer advocacy groups work in five important ways to protect consumers by:
• Improving the decision-making skills of consumers
• Identifying and monitoring case of deceptive advertising
• Identifying and addressing consumer information problems
• Designing product information programs that make specific and objective information available to consumers
• Exerting pressure on marketers to provide accurate and complete information about the costs and benefits of their goods and services

Right to Safety
The Consumer Product Safety Commission (CPSC)
Established in 1972 under the Consumer Product Safety Act
See Exhibit 16-7
http://www.fda.gov/
 

• Product quality and safety
• Ford and Firestone
• Product recalls
• Consumer advocacy and the right to safety
• Cigarette advertising
• Drinking and driving

The FDA has regulations on cosmetics labeling
http://www.cfsan.fda.gov/~dms/cos-labl.html
 Special rules apply to the ingredient declaration on products that are both cosmetics and over-the-counter drugs.

• An example of such a product is an anti-dandruff shampoo: A shampoo is a cosmetic, while an anti-dandruff treatment is a drug. Regulations enacted in 1999 require such combination products to have the drug ingredients listed separately as "Active Ingredients," in alphabetical order, followed by the cosmetic ingredients, which are listed as "Inactive Ingredients" in descending order of predominance

Right to Redress

• The right to be heard—is the right to complain and express grievances about product failure
• What can we do about unsatisfactory products?
• Is litigation the solution?
• Handling complaints properly is of paramount importance to marketers
• Consumer advocacy groups may act on behalf of consumers by expressing their grievances and taking legal action

Right to Choose
“Consumers have the right to assured access, whenever possible, to a variety of products at competitive prices. In those industries in which competition is not workable, government regulation is substituted to assure satisfactory quality and service at fair prices.”
Monopoly versus competition AND choice
 

Right to a Healthful Environment

• Environmental pollution is a growing concern in industrialized nations
• The Environmental Protection Agency (EPA) sets and regulates policies to protect the environment
• Green marketing and the right to a healthful environment
• Consumer Advocacy and the Right to a Healthful Environment
• Opportunities for action
• Waste control and recycling, concern for wildlife and the biosphere, environmental labeling, concern for health, and energy awareness
• The Department of Energy (DOE) and social marketing
• Developing consumer behaviors consistent with environmental protection

New Jersey "Clean Indoor Air Act"

• Researchers at Cornell University found that a smokefree policy for restaurants attracts more business -- and revenue -- than it drives away.
•  The conclusion was based on a study, "Should NYC's Restaurateurs Lighten Up?" that examined the economic effects of New York City's Smoke-Free Air Act, a law that banned smoking in almost all restaurants in the city.
• The findings refute assertions made by the tobacco industry and some restaurant groups before the Act went into effect in April 1995 that banning smoking would cause a tremendous loss of business for restaurants.

Right to Privacy

• It is an issue of increasing urgency
• The use of database marketing and concerns about privacy
• Four out of five consumers report that they value their privacy and believe it should be protected by law
• The Fair Credit Reporting Act of 1970

The Internet and Privacy

• Online merchants may know more about consumers and their purchasing habits than consumers would like them to
• Cookies and tracking software
• Information about consumers may be shared with other online merchants
• A lot of information about behavior online may be stored in one place
• Merchants can link all purchasing information from different places in one place and create a profile