Public Policy and Consumer Protection

What is public policy? n Government intervention in the process or outcome of marketing exchanges which policymakers believe will benefit society as a whole. n New policies usually result from: n Marketplace abuses n Need for economic or social welfare

The Public Trusts Who?

Types of Government Interventions n Regulation n Consumer education n Incentives

Regulation n Effectiveness of government regulation is inconsistent n Consumers end up bearing costs of regulation n Requires cost vs. benefit analysis n Regulation does not always help the original intent n Because not based on consumer research

Regulatory Agencies n FTC n FDA n EPA n SEC n Local governments

Framework for Determining Regulation Is government intervention appropriate? Select the form of remedy from the “remedies continuum” Apply 3 key principles: Incentive compatibility First Amendment protection Communication effectiveness Remove restraints Enhance information flow Restrict information flow Yes No DROP! Stage 1 Stage 2 Stage 3 Least Restrictive Most Restrictive

Deceptive Advertising n Unfair ad n The advertiser witholds information which could result in injuries to consumers n Deceptive ad n Contains explicit or implied claims or omissions which are likely to “mislead a consumer acting reasonably under the circumstances”

Three Categories of Deception n Unconscionable lies n Completely false claims made intentionally

n Claim/fact discrepancies n Some relevant qualifications of a claim are omitted, resulting in misrepresentation

n Claim/belief discrepancies n No deceptive claim is made, but a deceptive belief is created

What’s done about deceptive advertising? n Corrective ads

Consumer Education n Provide better product information to protect against market abuse n labeling

Incentives n Encourage certain types of consumer behaviors by offering them incentives n Rebates n Tax deductions

Socially Responsible Marketing n Marketplace works best when it’s free and is being socially responsible.