Regulation of Advertising: Self-regulation and Federal Trade Commission - Prof. Eugene Sen, Study notes of Communication

Download Regulation of Advertising: Self-regulation and Federal Trade Commission - Prof. Eugene Sen and more Study notes Communication in PDF only on Docsity! FEDERAL and OKLAHOMA REGULATION OF ADVERTISING-31 Know the definitions, rules and examples. Be able to correctly recognize and apply them in hypothetical situations.  How is regulation achieved through: o Self-regulation  Newspapers, magazines, broadcasting stations, online service providers and other mass media have rules that more or less regulate the kind of advertising they will carry.  These regulations stem from a variety of concerns. Sometimes the owner believes the medium is too offensive. Sometimes the ads are regarded as tasteless. Sometimes an ad is rejected because of its economic interests (i.e. competing companies often won’t be shown on the same network).  It is not uncommon for an advertisement to be rejected because of economic interests.  Media is permitted to reject any content it chooses, with or w/out reason.  Advertising industry tries to self-regulate.  Under the First Amendment, are newspapers, magazines and broadcasting stations permitted to refuse to carry an advertisement? (see Page 554)  No. The long standing legal doctrine is that the First Amendment is not even implicated; such a situation is one private entity, the mass medium, refusing to do business with another private entity. o Lawsuits by competitors and consumers  What are such lawsuits typically about?  False and deceptive advertising o Lanham Act  What is it intended to do?  Stop unfair competition in the marketplace.  What was changed in 1989?  Amended so that it prohibits advertiser from making false claims about a competitors’ product as well.  What is the three-part test that makes it easier for plaintiffs to win Lanham Act lawsuits for false advertising?  1. What message, either explicitly or implicitly, does the ad convey?  2. Is this message false or misleading?  3. Does this message injure the plaintiff?  What monetary claims can the plaintiff win?  Plaintiffs can win actual damages and court costs from the defendant, and can tap into any profit made by the competitor through the use of a bogus advertising campaign. Judge can also double/triple the damage award in cases of especially flagrant falsity.  Federal Trade Commission o What is the FTC? Its background and purpose? How many members? How are they selected? How is it that the FTC can regulate nearly all advertising in the country? ( On quiz #1, #2, #3)  FTC: Leading regulator of deceptive advertising, primary agent of the government to enforce consumer protection laws.  Background/purpose: Created by Congress in 1914 to police unfair methods of business competition. 1938 – could proceed against all unfair and deceptive acts or practices in commerce, regardless of whether they affect competition. Now one of the nation’s largest independent regulatory agencies.  Members/How selected: 5 members appointed by president and confirmed by the Senate for a term of 7 yrs. Chairperson appointed by the president. No more than 3 of the commissioners can be from the same political party. 1  B/c the agency was created under the authority of Congress to regulate interstate commerce, p/s must be sold in interstate commerce or the advertising medium must be somehow affected by interstate commerce before the FTC can intervene. Although many p&s are sold locally only, nearly every conceivable advertising medium is somehow affected by or affects interstate commerce.  Ex: All bdcst. Newspapers cross state lines.  The Federal Trade Commission is the primary agent of the government empowered to enforce consumer protection laws. It was created by Congress in 1914 to police unfair methods of business competition. There are five members of the commission who are appointed by the president and confirmed by the Senate for a term of seven years.  Practically, the FTC can regulate nearly all advertising nationally, because it was created under the authority of Congress to regulate interstate commerce, products or services must be sold in interstate commerce or the advertising medium must be somehow affected by interstate commerce before the FTC can intervene. Even though some products are sold locally only, nearly all advertising is somehow affected by or affects interstate commerce. o FTC's definition of deceptive advertising. (On Quiz #4)  Deceptive advertising – a material representation, omission or practice that is likely to mislead a consumer acting reasonably  There must be a representation, omission or practice that is likely to mislead the consumer.  The act or practice must be considered from the perspective of a consumer who is acting reasonably.  The representation, omission or practice must be material. o FTC tools to combat deceptive ads. Which tool is used most often?  Publicity is the FTC’s strongest ally in combating deceptive ads, because time is the FTC’s greatest enemy, and publicity the fastest means to combat the deception. However, other methods are:  Guides  Voluntary compliance  Consent agreement/consent order – Most often used  Litigated orders  Substantiation  Corrective advertising  Injunctions  Trade regulation rules o FTC's regulatory process.  Complaint filed, staff attorneys examine it – nothing = nothing, something – proposed complaint, consent agreement and memorandum is prepared for the commissioners, who vote on whether to issue a complaint or not.  Cs agree violation of law, advertiser notified, given opp to sign consent agreement/negotiate w/ agency for more favorable order.  1 – a can agree sign, cs vote to accept. Order published, made final in 60 days.  2 – a agree sign, cs reject it.  3 – a refuse sign.  2/3 – complaint issued against advertiser, hearing scheduled before administrative law judge. Judge wks w/in FTC and officiates at hearings. Informal trial. Judge thinks a violate, issue order to a to stop illegal 2 o Knowingly makes false representation as to the characteristics, ingredients, uses, benefits or quantities of g/s or a false representation as to the sponsorship, approval, status, affiliation or connection of a person therewith o Represents that goods are original or new if they are not o Represents that g/s are a particular standard, quality or grade or that goods are a particular style or model, if they are another o Disparages the g/s/business of another by false or misleading representation of fact o Advertises g/s which differ from those offered for sale in the advertisements o Advertises g/s w/ intent not to supply reasonably expectably public demand, unless the advertisement discloses a limitation of quantity o Makes false or misleading statements of fact concerning the reasons for, existence of, or amounts of price reductions o Advertises the price of an item after deduction of a rebate unless the actual selling prices is advertised and clear in conspicuous notice is given in the advertisement that an mail-in rebate is required to achieve the lower net price. o Listing a fictitious business name or assumed business name in a directory assistance database and misrepresenting the geographic location of a supplier by listing a fictitious business name or assumed business name in a local telephone directory. o What civil lawsuits may be brought against deceptive advertising? What damages may the plaintiff recover?  Any person damaged or likely to be damaged by a deceptive trade practices may sue to prevent or stop the practice.  Proof of actual monetary damages, loss of profits or intent shall not be required. But plaintiff is entitled to recover actual damages upon proof. o What liability do the media have for disseminating deceptive advertising?  “Publishers, broadcasters, printers, or other persons engaged in the dissemination of information” are exempted from the Act if they reproduced the material without knowing it was deceptive  Oklahoma Consumer Protection Act o Understand bait and switch advertising.  The seller has no intention of selling the advertised product. The seller instead switches the buyer to a higher-priced product, typically by disparaging the one that was advertised. o What are the criminal penalties?  A first offense under the Act is a misdemeanor with a $1000 fine and/or up to one year in the county jail. Punishment for an offense valued at $500 or more, or for a second or subsequent violation, is a fine up to $5000 and/or ten years in state prison. A violator also is liable for actual damages suffered by the consumer, who also can file a civil lawsuit against the seller.  Oklahoma's regulation of deceptive spam o What does it prohibit and require?  The statute prohibits sending a commercial e-mail that falsifies the transmission of information or other routing information.  It also prohibits using a third party’s Internet address or domain name without consent to send e-mail in a way that makes it appear that the third party was the sender. 5  Cannot contain “false or misleading information in the subject line.”  Requires unsolicited commercial e-mail to include certain characters in the subject line:  “ADV:” as the first four characters  “ADV-ADULT” as the first ten characters for spam containing sexually explicit material or advertising sexually explicit goods or services  Spammers are required to “provide a mechanism allowing recipients to easily and at no cost remove themselves from the sender’s electronic mail address lists so they are not included in future mailings” o What are the penalities?  A person injured from the sending of spam may recover attorney’s fees and costs; plus actual damages, or the lesser of $10 for each unsolicited commercial e-mail transmitted in violation of the Act or $25,000 per day.  An e-mail service provider injured from the sending of spam may recover attorney’s fees and costs; plus actual damages, or the greater of $10 for each unsolicited commercial e- mail transmitted in violation of the Act of $25,000 per day. o What liability do e-mail service providers have for allowing spam or attempting to block spam?  E-mail service providers that merely transmit the spam over their computer networks are granted immunity for damages caused to others by the spam.  Also cannot be held liable for any action they voluntarily take in good faith to block the receipt or transmission through their services of any e-mail advertisements they believe are, or will be, sent in violation of the statute. 6