Advertising is an important part of our free market society. It helps to develop products that meet consumer needs and encourage price competition. Advertising informs consumers of the availability and features of products as well as their prices. These information are vital for our competitive process. Advertisers use unfair business practices to gain an unfair advantage over their competitors and deceive customers. This essay will examine the most common deceptive acts and practices and the federal agency that regulates them. The government regulates consumers to strike a delicate balance between freedom of business and protection for consumers.
Advertisement is an important communication tool for businesses in order to reach potential customers. Consumers are provided with important information about the company and features of the products in order to help them find the right product for them. Advertising laws cover print, radio and television. They also include billboards, pamphlets and pictures, as well as direct and oral advertising to consumers. Advertising is covered by the guidelines for “commercial freedom to speech” in our courts. For consumers to be protected from government interference, they must perceive the information as truthful.
Advertisers who intentionally or unintentionally mislead customers in order to promote their products are prohibited from protecting consumers. False advertising, and unfair acts or practices are the main areas of protection for consumers. False advertisement refers to advertising that is misleading by a made or implied statement, word or device. This includes food, drugs and devices as well as cosmetics. An implied representation can also be considered a misleading or false representation in an advertisement.
An act or practice is generally considered unfair if it causes injury to consumers or to public policy, or if it is based upon the immoral, unethical or unscrupulous nature or practice. One example of advertising that causes injury to consumers is when regulators ruled it unfair for cigarette makers to ignore the health risks associated with smoking. The result was legislation that required health warnings to be included in advertising for cigarettes.
Federal Trade Commission is a federal government agency that monitors and challenges advertising claims that are believed to be deceptive. To challenge advertising representations, the FTC applies these criteria:
1) The advertisement makes a representation, omits information, or uses practices that are likely to mislead consumers. The advertisement may make explicit or implicit representations (literal claim or inference).
2) A misleading representation, omission or practice can be found when viewed from the perspective of a reasonable customer.
3) The materiality of the representation, omission, and practice. The FTC examines how the questionable ad affects behavior or buying patterns. When purchasing habits or behaviors are affected by the representation, omission or practice, it is considered material.
The FTC can punish companies that break deceptive advertising rules. To enforce the law, the FTC has a number of options and sanctions. The following are some of the remedies and sanctions:
An injunction is a court order that prevents or compels future conduct.
Cease-and-desist orders – The firm is prohibited from engaging in any act or practice that was found to be deceptive.
Affirmative Disclosure Orders – The company is forbidden from making any claim in the future, without further disclosure.
Corrective advertising is when the advertiser declares in future advertising that specific claims made in the past are false.
Multiple product orders – All future advertising for all products sold by the firm will be considered.
Consent order: Company agrees not to engage in certain activities.
FTC’s primary goal is to improve the accuracy of consumer product information. This is done by enforcing regulations on specific advertising practices, such as mock demonstrations and endorsements or testimonials, promotions that are based on price, advertisements regarding credit availability, and product labeling.
FTC scrutiny can be avoided by advertisers who are able to prove product claims through “reasonable grounds”. Advertisers that claim that their product “kills germs that cause flu and colds” or that it “stimulates weight loss of 25 pounds in one week” need to gather enough evidence to back up the claims. Usually, this is done before the ad goes on the air. FTC may investigate a complaint about an advertisement claim. It will determine whether it is in the public’s best interest to assess the reasonableness and credibility of the substantiation. Food, drugs and cosmetics are all subject to the reasonable basis doctrine because of their direct effects on the public.
Advertising is an important part of our economy. This can be seen in the huge amount of money we spend on advertising. Advertising fuels the economy in a certain sense. It is important to ensure the integrity and credibility of the advertising community. Advertising legislation that is misleading or deceptive is constantly being improved and updated to reflect new product lines that appeal specifically to growing public needs and desires. The balance between commercial freedom speech and free enterprise is provided by government regulation.