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CONTENTS:
Introduction | Current Issues
| Ethics | First Amendment
| Deception | Unfairness
| Subliminal Appeals | Tobacco &
Alcohol | Children | Privacy
| Trademark & Copyright | Sweepstakes,
Contests & Lotteries | Political | Telemarketing
| Self-Regulation | Other Issues
| Research Sources
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Introduction |
This page provides information, and
links to information, about advertising law and ethics. This site is intended to supplement,
not replace, the popular Advertising Law Internet
Page created by Lewis Rose, at the Arent Fox Kintner Plotkin
& Kahn law firm. Some of the links below are to resources on that site.
- Jef I.
Richards
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| Current
Issues |
Advertising is constantly bombarded by
criticism. It is accused of encouraging materialism and consumption, of stereotyping,
of causing us to purchase items for which we have no need, of taking
advantage of children, of manipulating our behavior, using sex to
sell, and generally contributing to the downfall of our social system. Critics
of advertising abound. Barely a week goes by without some advertisement or
campaign, or the ad industry, being the focal point of some controversy. There even are web sites
dedicated to criticizing various aspects of advertising.
To illustrate some of the many attacks on advertising, I have compiled
a list of relatively recent examples that have
appeared in newspapers and magazines. This is far from being an exhaustive list. It is intended merely
to provide you with some ideas about how the public-at-large perceives
advertising, and to give you a sense of the many legal and ethical problems
inherent in the advertising profession.
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Ethics |
Law and ethics are not coterminous. All the issues discussed
on this page have ethical dimensions, but not all of them implicate legal
realities. The law is confined by limitations on government authority,
principally through the Constitution, while ethics bear no such limitations.
Ethics, therefore, should be subject to a higher standard of expectation
than law. See:
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| First
Amendment |
The United
States Constitution, through the First Amendment, places constraints
on government repression of speech. Advertising is recognized
by the courts as a form of "commercial speech." Commercial speech has
been defined by the Court as speech "which does no more than propose a
commercial transaction." Although the courts never have recognized it as
being as valuable as some other forms of speech, commercial speech is
protected by the First Amendment.
This means that many of the criticisms aimed at advertising are not
regulable by government. However, the Supreme Court, in Central Hudson
Gas & Electric v. Public Service Commission, declared that commercial
speech can be regulated if:
- It is misleading or concerns an illegal product, OR if
- There is a substantial government interest, AND
- The regulation directly advances that government interest, AND
- The regulation is narrowly tailored to that interest.
If a regulation can pass that test, it will be held constitutional.
You can read some of the advertising-related
Supreme Court decisions here. In addition, we have provided a
bibliography of articles and books about commercial speech,
to help you learn more about this topic, along with some quotes
about advertising and free speech.
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| Deception
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The Federal Trade Commission
(FTC) is the primary regulator of deceptive advertising in the U.S.
It was created by the FTC Act
in 1914.
Section 5 of the Act gave the Commission the authority to regulate "unfair
methods of competition." The Act was later changed, by the Wheeler-Lea
Amendment, to give the FTC authority over both "unfair methods of competition"
and "unfair or deceptive acts or practices." It is through this latter
power that the FTC regulates deceptive advertising.
Commissioners of the FTC act like judges, hearing cases when marketers
are charged with violating the FTC Act. The Commission also publishes
advertising guidelines
for marketers, which are not law but merely advisory, and adopts
trade regulation rules,
which are law.
Basic Principles
According to its 1993 Policy Statement on
Deception, the FTC considers a marketing effort to be deceptive if: (1)
there is a representation, omission, act or practice, that (2) is likely to mislead consumers
acting reasonably under the circumstances, and (3) that representation,
omission, or practice is "material." The term "material" refers to
the fact that some deceptive claims are trivial, and that the FTC
will only regulate deceptions that are important to consumers, i.e.,
those that affect consumers' "choice of, or conduct regarding, a
product." Our bibliography
on deceptive advertising and our bibliography
on "materiality" can point you to numerous articles that
discuss the intricacies of this definition.
Evidence
To prove that an ad claim is, in fact, deceptive, the FTC is not generally
concerned with what the claim says, but what it conveys to consumers.
If that conveyed message differs from the reality of the product attribute
being advertised, the claim is considered deceptive. This requires the
Commission to look at two types of evidence: (1) evidence concerning what
message is conveyed to consumers, and (2) evidence concerning the
product attribute's true qualities.
The former requires looking into the heads of consumers. The FTC
considers surveys the best form of evidence to discover what message is
conveyed by an ad, though sometimes the Commission relies on other evidence.
The question of how best to unearth the inner thoughts of consumers has
been an issue of significant research efforts and theoretical discussion.
See our bibliography
about evidence used to discover the conveyed message.
The second form of evidence can require a variety of different methods
of assessing a product's attributes. If, for example, the claim refers
to the fuel mileage of an automobile, laboratory testing of the vehicle's
fuel efficiency would normally be required. However, the FTC requires
that advertisers conduct such testing prior to making the ad
claim. If a claim is made without evidence in hand that the product will
perform as advertised, the claim will be considered deceptive.
This is known as "substantiation," and the Commission's requirements
are detailed in the 1984 FTC Substantiation
Policy. See, also, the bibliography on substantiation.
Remedies
Most cases started by the FTC never require the Commission to make
a final decision about the deceptiveness of an advertiser's claim.
Those cases end, instead, in a "consent order," whereby the advertiser simply
agrees to do what the FTC staff asks. No hearing is required.
In those cases that do end in a final FTC decision, if the claim is found
deceptive, the advertiser will face one of three possible remedies:
(1) a Cease and Desist Order, which requires the advertiser to stop
making the claim, (2) an Affirmative Disclosure Order, which forces the
advertiser to provide consumers with more information, or (3) Corrective
Advertising, which is a form of affirmative disclosure that is
intended to correct lingering deception that results from a long history
of deceiving the consumer. See our bibliography
on Corrective Advertising.
Puffery
Historically, claims that were "mere exaggerations" or "hyperbole" were
considered to be puffery, and therefore not deceptive. Terms like
"the best" or "the greatest" were sales talk, and the FTC would not
regulate them. After all, everyone knows that "Wonder Bread" is
not really a wonder, and "The Greatest Show on Earth" is not what everyone
considers the greatest. Puffery, therefore, was a form of opinion
statement, and considered unregulable.
Some observers have expressed concern that the "puffery defense" was
a loophole through which many deceptive claims fell. The Commission has
been criticized for allowing deceptive claims to slip through under
the guise of puffery.
On the other hand, the FTC has defined puffery as claims that (1)
reasonable people do not believe to be true product qualities, and
(2) are incapable of being proved either true or false. Consequently,
if deception is the creation of a "false belief" about the product
in the mind of a consumer, claims that fall into the FTC definition
of puffery cannot be deceptive. By definition, such claims can be
neither false nor can they create belief. This means that if deceptive
claims have slipped through regulation as puffs, it is because the
FTC has failed to follow its own definition. See our bibliography
on puffery and puffery
quotes.
Additional Information
See, also, the following:
- A Brief Review of the FTC's Environmental
and Food Advertising Enforcement Programs. A speech by Commissioner
Roscoe B. Starek, III, October 1995.
- Advertising & Law in the Electronic Age.
A speech by C. Lee Peeler, Associate Director for Advertising Practices
in the FTC Bureau of Consumer Protection, February 1995.
- Advertising and Unfair Competition: FTC
Enforcement. A speech by FTC Commissioner Christine A. Varney,
January 1996.
- Advertising Regulation & the Free Market.
A speech by FTC Commissioner Mary L. Azcuenaga, May 1995.
- How the FTC Brings an Action. This describes
the basic process by which the FTC discovers potential violations, begins
proceedings against a company, makes its decision, as well as the
appeals process that can follow that decision.
- Quotes
on Advertiser Honesty
- To Your Health: An FTC Review of Safety
Related Marketing. A speech by FTC Commissioner Christine A. Varney,
February 1996.
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| Unfairness |
In addition to its power to regulate deceptiveness, the
FTC can regulate marketing practices for unfairness. It is possible for
marketers to treat consumers unfairly without deceiving them.
In the past, the unfairness power enabled the FTC to reach a wide variety
of marketing practices. Until 1980, the Commission defined unfairness to
include "immoral, unethical, oppressive, or unscrupulous conduct."
This, many business people felt, allowed the Commission too broad
a range of authority. Responding to pressure from Congress, in 1980
the FTC published a Policy Statement on
Unfairness that re-defined the scope of this authority.
After 14 years of debate, the FTC Act Amendments of 1994
incorporated a definition of "unfairness" into the Commission's enabling
Act. This new definition limits the application of the FTC's unfairness
power to an act or practice that:
- causes or is likely to cause ... substantial injury to consumers,
- which is not reasonably avoidable by consumers themselves,
- and is not outweighed by countervailing benefits to consumers or to competition.
How this definition will be interpreted by the Commission remains subject
to speculation, until some cases of unfairness are decided.
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| Subliminal
Appeals |
Subliminal
stimulation has become one of the more popular
advertising-related topics for students and lay-people. Popularized by
Wilson Bryan Key's book, Subliminal Seduction (1973), this subject has
captured the imagination of people everywhere.
The term "subliminal" means "below the limen," or below the threshold
of consciousness. The idea is that certain things are heard, seen,
or felt, that never reach our conscious thought processes, and that
those things may still be recorded somewhere in our mind and have an
impact on our decisions and behavior. Key argued that advertising
professionals use this concept to hide images within advertisements,
and that these images manipulate our behavior without our even realizing
we have seen them.
Key uses the term "subliminal perception," which is something of
a misnomer, since perception implies conscious awareness. Psychologists
have studied this phenomenon since the late 1800s, and originally called
it "subception." However, while this is a real psychological phenomenon, all
research on this topic indicates that subliminal stimulation is incapable of
affecting our purchasing behavior, contrary to the allegations
of Key.
While this is a fun topic of discussion, there is no evidence that
advertisers embed hidden images in advertisements, and there is ample
evidence that such efforts would be a waste of time. For more information,
see:
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| Tobacco &
Alcohol |
Tobacco and alcohol advertisements are extremely popular
targets for regulation. Both products can cause death or injury,
and both are subject to attack by activist groups opposed to those products.
Much debate has surrounded ad regulation proposals for these products.
Many critics have argued that ads cause consumption of these products,
and that the harmful impact of these goods can be diminished by curtailing
or severely restricting the ads. Others counter that there is no
real evidence that the ads cause consumption and that it is the
product, not the advertising, that is the danger, so it is the product that
should be regulated. Central to this debate is the question of whether
the First Amendment would allow such regulation.
For more information, see our:
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| Children
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Issues of advertising law and ethics often center around
advertising's potential impacts on children. Since about 1970,
many concerns and criticisms have been expressed about the effects of
ads on kids, and many laws have been proposed to deal with those effects.
In addition to the Federal Trade
Commission's active involvement in protecting children, because much of
the advertising targeting children historically has appeared on television,
the Federal Communications Commission
likewise has been heavily involved in regulating such advertising.
More recently it has become common for advertising's critics to cast
otherwise unconstitutional regulatory proposals in terms of child
protection. For example, after several congressional bills designed
to curtail tobacco advertising failed, their sponsors began introducing
bills to stop tobacco advertising that might have an impact on children.
The obvious hope is that courts will be more forgiving of laws aimed at
protecting kids.
For additional information, see the following:
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| Privacy
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In marketing communications, issues of privacy have historically
been the province of direct marketing. However, new technologies
- particularly the Internet - have spurred an "interpersonalization" (or
"demassification") of advertising. This has wrought a blurring of
the lines that traditionally separated various types of marketing
communication. In years past, advertising was one-way communication through
a mass medium. Today, it is taking on characteristics of direct
marketing, enabling two-way communication between buyer and seller.
As a result, it inherits some of the legal and ethical considerations
of direct marketing, which largely concern invasion of consumers' privacy.
For more information, see:
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| Trademark
& Copyright |
Trademark and copyright are part of what the legal community
calls "intellectual property." These two areas of advertising law
are too frequently overlooked by both scholars and practitioners.
Too often, trademarks are violated, or the marketer fails to protect
a mark. And, commonly, advertisements are published with no effort to
protect the copyrights in the art and copy of the ads.
As a simple primer to the copyright laws, for students, I prepared
How
to Copyright Your Creative Work. For other information about both
copyright and trademark law, see:
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Sweepstakes,
Contests &
Lotteries |
Games of chance have been popular promotional devices for
nearly 500 years. In the 1500s merchants in Italy used prizes by chance
as a means of increasing business. But anti-gambling laws have restricted
their use as a marketing tool. Over the past century games of chance have
been severely limited by both state and federal laws. In recent years,
however, sweepstakes and contests have become popular marketing tools.
Generally, these games of chance are permitted, so long as they do
not constitute "lotteries" or "gift enterprises."
Although restrictions vary somewhat from one jurisdiction to another, a
lottery, gift enterprise or similar scheme exists when:
- the distribution of a prize,
- according to chance, and
- for consideration.
So long as a sweepstake or contest does not involve all three of
these elements, it normally will not run afoul of legal restrictions.
Those three elements are frequently typically defined as follows:
- Prize - Anything of value offered as inducement to participate.
- Consideration - Consumers must pay some value (e.g., money,
purchase of a product, etc.) ... usually substantial value. The mere
act of tuning in a TV program or paying for postage is not an act of value.
- Chance - This involves the happening of some subsequent event,
incapable of ascertainment by means of known foresight or ingenuity.
If skill or judgment are involved, such as betting on horse races,
it is not a lottery.
Games of chance already have appeared on the Internet. See our Sweepstakes
& Contests links.
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| Political |
Political advertising is subject to different rules than
ads for commercial products and services. Because "political speech"
is widely acknowledged as the core reason behind the free speech provisions
of the First Amendment, the Supreme Court treats such speech as the
most valuable (and, hence, most protected) form of speech. Political
advertising is both advertising and political speech, but since it
does not fall within the definition of "commercial speech" it is
considered political speech and receives the highest degree of protection
under the First Amendment.
Political advertising is not wholly unregulated, though. It is subject
to some minor restraint under the Federal Communications Commission's
Equal Access law, and under the Federal Election Act. Also, most states
have some laws that apply to political advertising, though most of
those restrictions never have been tested for constitutionality
and they are largely unenforced.
At this point little information specifically dealing with political
advertising has been posted on the Internet. However, feel free to
look at our Political
Advertising links and Political
Advertising quotes.
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| Telemarketing |
Telemarketing has become increasingly unpopular with consumers in recent years, as the practice has become more pervasive. New technologies have made it possible for computers to place the calls, dramatically increasing the calls received by many people. It is seen by some as an invasion of their privacy, an unwanted interference, an annoyance, and when the consumer is paying for phone services by the minute (e.g., mobile telephones) sellers are costing consumers money. In effect, the marketers are seen by many as using the consumer's property (telephone) for their own purposes. This has led to numerous legal and self-regulatory measures aimed at curtailing the practice or, at a minimum, putting more control over this practice in the hands of the individual consumers.
To this end, there are many telemarketing laws that have emerged at the end of the 20th Century. Several states now require marketers to obtain lists of people who prefer not to receive telemarketing calls, and make it illegal for marketers to call anyone whose name appears on the do-not-call lists. In many cases the state's Attorney General creates and maintains such a list, in some cases they must use other lists like the one maintained by the Direct Marketing Association, and in some instances it is up to the individual marketer to establish and maintain its own list. At least two states now are requiring telemarketers to register and obtain a bond before calling consumers in that state. And some states are starting to place limits or specific requirements on calls, like prohibiting the use of automatic calling devices or requiring clear disclosures be made at the beginning of a telemarketing call. Note that many or most of these rules also apply to Unsolicited Advertising Faxes.
For additional information, see the FTC Telemarketing Sales Rule and other FTC Telemarketing publications and guidelines. Also see the Direct Marketing Association's
State Telephone Marketing Laws and the Telephone Consumer Protection Act.
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| Self-Regulation |
The advertising industry has no real Code of Ethics or
Code of Professional Conduct. This is largely because advertising is
a profession of communication, and communication is protected by
the First Amendment. While other professions can adopt a Code that
is enforceable by law, any attempt to license or otherwise legally enforce
an ethical code for advertising would run afoul of free speech guarantees.
The closest thing to an Advertising Code of Ethics is the Code
of Advertising adopted by the Council
of Better Business Bureaus (CBBB). That code applies to all Better
Business Bureau members, and is enforced through the CBBB's
National
Advertising Division (NAD).
As the CBBB receives consumer complaints about an advertiser, those complaints
are referred to the NAD. If the NAD receives a significant number of
complaints about that advertiser, it asks the advertiser to comply with
the provisions of the Code by modifying or discontinuing the offending
advertisement(s). If the advertiser feels that the ad does not
violate the Code, or otherwise chooses not to make the requested change,
the case is "appealed" to the CBBB's
National
Advertising Review Board (NARB). At that stage the case is heard by a
panel, composed of representatives from three other advertisers, an
advertising agency representative, and a member of the public. The panel
then renders a decision. If the decision requires the advertiser to make changes in
the ad, and the advertiser refuses, the NARB can notify the media
and the Federal Trade Commission of the decision and the advertiser's
refusal.
In addition, the CBBB sponsors the Children's Advertising Review Unit
(CARU). The CARU publishes Self-Regulatory
Guidelines For Children's Advertising, and monitors children's
advertising for ethical offenses.
See, also:
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| Other
Issues |
There are many topics that could be
addressed here. The following are intended to provide you with pointers to information
on some of these issues:
Advertising is "Evil"
Food & Drug Advertising
Manipulation of Consumers
Picturing Money in Ads
Sexual Sell
Stereotyping
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| Research
Sources |
To find information that is not provided (or linked) on this
page, the following provide some good starting points for your research:
In addition, there are many other resources that can be used for research
in this area. Two commercial computer-based services of particular value
are Lexis-Nexis, and Westlaw. If you have no access to those services,
you can use:
- Advertising Law Anthology, Arlington, VA: International
Library Law Book Publishers. This is a compilation, published twice
a year, of law journal articles that concern advertising.
- Journal of Public Policy & Marketing, published by
the American Marketing Association. This journal publishes research articles
about various topics of public policy as applied to marketing, including
those involving advertising law.
- Rosden & Rosden, The Law of Advertising, New York: Matthew
Bender. This is a four (4) volume treatise, updated frequently.
- Advertising & Society Review, published by the Advertising Educational Foundation. This publication deals with issues related to advertising's social and economic effect on society, and is designed to represent a wide range of viewpoints.
And, law journal articles can be found using the Index to Legal Periodicals,
while advertising & marketing journal articles can be found in
the Business Periodicals Index. To find articles in the popular press
(i.e., newspapers, magazines, etc.), the Readers' Guide to Periodicals is
a useful index. These sources are available in printed versions, but
many of them are becoming available in computer-based versions.
One cautionary note: most of the computer-based research tools
are incomplete and may only go back a few years, and most of them
are sensitive to the key words you input. This means that you can
easily overlook vast numbers of relevant articles if you rely solely
on a computer search. I strongly recommend that you use both
computer search tools and traditional hard-bound indexes when researching one
of these topics.
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SITE LAST REVISED: 29 NOV 00
Department of Advertising at
UT Austin. E-mail comments to: advertising@mail.utexas.edu
© 1995-2000 Jef I. Richards
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