Chapter 18 Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Chapter Objectives To be familiar with the advertising regulation system in Canada To evaluate the ethical perspectives of advertising Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Chapter Objectives To understand the social effects of advertising To examine the economic role of advertising and its effects on consumer choice, competition, and product costs and prices Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Advertising Regulation in Canada Canadian Radio-television and Telecommunications Commission (CRTC) Regulation of Tobacco Advertising Quebec Regulations on Advertising to Children Advertising Standards Council (ASC) Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

CRTC Mandate is to ensure the Broadcasting Act of 1991 and Telecommunications Act of 1993 are upheld throughout Canada Make certain that all Canadians can receive broadcasting and telecommunications services Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

CRTC Advertising aspects regulated: Not covered: Advertising Limits Infomercials 900 numbers Alcohol and drugs Not covered: False and misleading ads Internet Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Regulation of Tobacco Advertising Restricted by Health Canada regulations on their use of traditional advertising media Sponsor various arts, cultural, and sporting events (will be discontinued in 2003) Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Regulation of Tobacco Industry Print ads communicating sponsorships were only permitted advertising Underground marketing has emerged, communication of brands occurs through exclusive distribution in select bars, pubs and nightclubs Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Quebec Regulations on Advertising to Children Consumer Protection Act of Quebec It is illegal to direct commercial messages to persons younger than 13 Concerns the product, the way the ad is presented, and the time and place the ad is shown Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Advertising Standards Council (ASC) Not-for-profit, self regulatory, industry body with mandate to create and maintain community confidence in advertising Represents advertisers media organizations and advertising industry suppliers Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

ASC Canadian Code of Advertising Standards Gender Portrayal Guidelines Describes what is not acceptable advertising Pertains to the content of ads only Intention is to provide standards so that responsible and effective advertising results Gender Portrayal Guidelines Ensure that women and men are portrayed appropriately in advertising Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

ASC Complaint Process Handles complaints in three streams Consumer complaints: from ordinary citizens who believe an ad is unacceptable Special interest groups: from a demonstrated organization that expresses a unified viewpoint Trade disputes: complaints from other advertisers Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

ASC Complaints Report Clearance Process Comprehensive annual report Identification of advertisers and the details of all complaints Clearance Process Alcohol Cosmetics Non-prescription drugs Ads directed towards children Food Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Ethical Effects of Advertising Advertising as Untruthful or Deceptive Advertising as Offensive or Bad Taste Advertising and Children Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Advertising as Untruthful or Deceptive Studies have shown a general mistrust of advertising among consumers Puffery: advertising or sales presentations which praise the item to be sold with subjective opinions, superlatives, or exaggerations, vaguely and generally stating no specific facts Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Advertising as Offensive or in Bad Taste Common criticism of advertisers by consumers is that ads are offensive, tasteless, irritating, boring or obnoxious More likely to dislike ads for products they do not use and brands they would not buy Type of appeal or presentation can also be offensive (especially sexual and/or nudity) Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Advertising and Children TV is a vehicle through which advertisers can reach children easily Critics argue that young children are vulnerable to ads because they lack the experience and knowledge to understand and evaluate the purpose of persuasive appeals Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Advertising and Children Others argue it is part of life and children must learn to deal with advertising as a part of life Consumer socialization process: acquiring the skills needed to function in the marketplace Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Social Effects of Advertising Advertising Encourages Materialism Advertising Makes People Buy Things They Don’t Need Advertising and Stereotyping Advertising and the Media Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Advertising Encourages Materialism Materialism: A preoccupation with material things rather than intellectual or spiritual concerns Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Advertising Encourages Materialism Critics believe advertising: Creates needs rather than showing how a product/service fulfills them Surrounds consumers with images of good life, and suggests material possessions leads to happiness and adds to the joy of living Suggests material possessions are symbols of status, success and accomplishment Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Advertising Makes People Buy Things they Don’t Need Some say advertising should just provide information useful in making purchase decision and should not persuade Persuasion criticized for fostering discontent among consumers and encouraging them to purchase products/services to solve deeper problems Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Advertising and Stereotyping Women Has received a lot of attention through the years Criticized for stereotyping women and failing to recognize their changing roles Portrayals of women emphasize passivity, deference, lack of intelligence and credibility, and punishment for high levels of effort Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Advertising and Stereotyping Visible Minorities Imbalance of visible minorities in advertising, consumers not exposed as frequently to them Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Advertising and the Media Concern because advertising plays such a role in financing the media, advertisers may influence or control the media Economic Censorship: the media avoids certain topics or even presents biased news coverage because of advertisers demands Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Advertising and the Media Arguments supporting advertising control Media’s dependence on advertiser’s support makes them susceptible to various forms of influence Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Advertising and the Media Includes: exerting control over editorial content biasing editorial opinions to favor the position of the advertiser limiting coverage of a controversial story that might reflect negatively on a company Influencing the program content of TV Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Advertising and the Media Arguments against advertiser control Best interest of the media not to be influenced too much, so that they retain public confidence, must report news fairly and accurately without bias Advertisers need the media more than they need any individual advertiser, particularly when the audience is large or does a good job of reaching a specific market Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Economic Effects of Advertising Effects on Consumer Choice Effects on Competition Effects on Product Cost and Price Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Effects on Consumer Choice Some argue that large advertisers use their power to limit options to a few well advertised brands Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Effects on Consumer Choice Economists argue advertising is used to: Differentiation: products or services of large advertisers are perceived as unique or better than competitors Brand loyalty: enables large national advertisers to gain control of the market, at the expense of smaller brands Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Effects on Consumer Choice Generally, advertising does not create brand monopolies or reduce the opportunities for new products to be introduced Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Effects on Competition Power in the hands of large firms with huge advertising budgets creates a barrier to entry making it difficult for other firms to enter the market Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Effects on Competition Large advertisers enjoy certain competitive advantages: Economies of scale Sell more products/services and can allocate more monies to advertising No clear evidence that advertising alone reduces competition, reduces entry barriers or increases market concentration Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Effects on Product Costs and Prices Critics say advertising increases the prices consumers pay for products and services through Large sums of money spent on advertising the consumer ends up paying for Increasing product differentiation and adding to the perceived value of the product Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising

Effects on Product Costs and Prices Counterarguments: Advertising may help lower the overall cost of a product Makes a market more competitive leading to greater price competition Means to market entry, stimulates product innovation, making market more competitive, keeping prices down Chapter 18 : Advertising Regulation and Ethical, Social, and Economic Effects of Advertising