Marketing Clow

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Chapter 14

Regulations and Ethical Concerns

LEARNING OBJECTIVES

Students should be able to answer the following questions:

1)What agencies and laws regulate marketing communications? 2)Why is it that puffery is legal and deception is not? What role does substantiation play in the process? 3)What legal remedies can be used to correct deceptive communications practices? 4)How do the three major industry regulatory agencies help keep advertising and business practices from injuring customers or other businesses? 5)What ethical criticisms have been registered against advertising and marketing practices? 6)What marketing tactics raise ethical concerns?

7)How can marketers apply the various ethical frameworks and ethics programs to their activities and actions? 8)What international issues influence the discussion of legal and ethical marketing activities?

LEAD-IN VIGNETTE

A Salty Situation

Many health care professionals are concerned about the amount of sodium in food products, especially processed foods. These concerns have been well known for many years. Food companies must balance the need for better taste and food preservation with negative effects on health for customers. There has been some response with newer, low-sodium products.

Questions for Students:

1. Is this an ethical issue, a legal issue, or both?
2. Do your parents suffer from high blood pressure? Have they changed their diets in response? 3. Is this an individual responsibility, should companies become more responsible, or is this a matter for the government?

CHAPTER OVERVIEW

The final level of an IMC program includes making certain the communications program meets ethical and legal requirements and is properly evaluated. Figure 14.1 displays the final, top level of an IMC program in relation to the other elements.

The first part of this chapter describes the legal environment surrounding marketing and marketing communications

The second part features views of ethics, morals, and social responsibility as they relate to marketing, advertising, and promotions.

CHAPTER OUTLINE

Learning Objective # 1: What agencies and laws regulate marketing communications? Marketing Communications Regulations

The U.S. Federal government has passed a considerable amount of legislation designed to keep companies from taking advantage of consumers.

Governmental Regulatory Agencies

Various governmental agencies are listed in Figure 14.2, including:

• Food and Drug Administration (FDA)—regulates food and drug safety issues, packaging, and labels • Federal Communications Commission (FCC)—regulates television, radio, and the telephone industry • U.S. Postal Service (USPS)—has jurisdiction over all mailed marketing materials • Bureau of Alcohol, Tobacco, and Firearms (ATF)— regulates the sale of alcohol and tobacco

Federal Trade Commission (FTC)

The FTC was created in 1914 with the original intention of enforcing anti-trust laws and protecting businesses from one another.

Unfair and Deceptive Marketing Practices

The Wheeler-Lea Act (1938)—Section 5 of the FTC Act prohibits false and misleading advertising, when:

• A substantial number of people, or the “typical person,” is left with a false impression or misrepresentation that relates to the product

• The misrepresentation induces people or the “typical person” to make a purchase

Learning Objective # 2: Why is it that puffery is legal and deception is not? What role does substantiation play in the process?

Deception vs. Puffery

Puffery exists when a firm makes an exaggerated claim about its products or services, without making an overt attempt to deceive or mislead. Terms normally associated with puffery— friendliest, best, greatest, and finest. Deception occurs when a firm makes a claim that is...
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