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2004 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

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Chapter 3

The Economic, Social, andRegulatory Aspects of Advertising

Identifies and explains the

economic, social, ethical, and

legal issues advertisers must

consider

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Objectives

Classify the two main

types of social criticisms

of advertising

Employ an economic

model to discuss

advertisings effects

Explain the differencebetween social

responsibility and ethics

Understand howgovernments regulate

advertising here and

abroadDiscuss court rulings that

affect advertisersfreedom of speech Describe how federal

agencies regulate

advertisingDefine the roles state

and local governments

play in ad regulation Discuss self-regulation

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The Many Controversies AboutAdvertising

affect product value?make us more

materialistic?

increase prices?

discourage

competition?

affect demand?

make us buy thingswe dont need?

affect us subliminally?

debase

language?

Does advertising . . .

influence consumer choice?affect art?

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The Many Controversies AboutAdvertising

affect product value?

make us more

materialistic?

increase prices?

discourage

competition?

affect demand?

make us buy things

we dont need?

affect us subliminally?

debase

language?

influence consumer choice?

Economic Societal

affect art?

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Economic Impact of Advertising

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Economic Impact of Advertising

Effects on . . .

value of

products

pricescompetition

demand

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Economic Impact of Advertising

Effects on . . .

demand

Primary demand

Secondary demand

Consumer choice

Business cycle

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Abundance Principle: The EconomicImpact of Advertising in Perspective

Abundance

Principle

Complete information

Self-interest

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Social Impact of Advertising

Short-term manipulative

arguments

Deception in advertising

Subliminal advertising myth

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Social Impact of Advertising

Long-term macro

arguments

Effect of advertising on

values

Proliferation of advertising

Use of stereotypes in ads

Offensive ads

Advertisings social impact in

perspective

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Social Responsibility and AdvertisingEthics

Ethical advertising Social responsibility

Advertisers social responsibility

Ethics of advertising

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How Government Regulates Advertising

Federal

State

Local

Legislative Executive Judicial

Legislative Executive Judicial

Legislative Executive Judicial

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Government Restraints on InternationalAdvertisers

Tobacco

ChildrenPuffery

Premiums and

product placements

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Current Regulatory Issues AffectingU.S. Advertisers

Freedom of

commercial speech

Virginia State Board of

Pharmacy v. Virginia CitizensConsumer Council

Central Hudson Gas v. Public

Service Commission

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Current Regulatory Issues AffectingU.S. Advertisers

Tobacco

advertising

Advertising to

children

Consumer

Privacy

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Federal Regulation of Advertising inNorth America

Federal Trade Commission (FTC)

Defining deception

Defining unfairness

Comparative advertising

Investigating violations

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Federal Regulation of Advertising inNorth America

Federal Trade Commission (FTC)

Defining deception

Defining unfairness

Substantiation

EndorsementsAffirmative disclosure

Comparative advertising

Investigating violations

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Federal Regulation of Advertising inNorth America

Federal Trade Commission (FTC)

Defining deception

Defining unfairness

Comparative advertising

Investigating violations

Remedies for unfair or

deceptive advertising

Consent decree

Cease-and-desist

order

Corrective advertising

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Federal Regulation of Advertising inNorth America

Food and Drug Administration (FDA) NutritionalLabeling and

Education Act

Trademark

Copyright

U.S. Patent and

Trademark Office

Federal Communications

Commission (FCC)Patent and Trademark Office and

Library of Congress

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State and Local Regulation

Regulation bystate

governments Regulation by

localgovernments

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Nongovernment Regulation

Better Business Bureau

National Advertising Review Council (NARC)

NAD NARB

Regulation by media

Newspapers Magazines Radio TV

Regulation by consumer groups

Self-regulation by advertisers

Self-regulation by agencies and associations

Agencies AAAA AAF ANA