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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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

32. 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

33. 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

34. 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

35. 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

36. 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