This is “Do Ads Need to Tell the Truth?”, section 12.2 from the book Business Ethics (v. 1.0).
This book is licensed under a Creative Commons by-nc-sa 3.0 license. See the license for more details, but that basically means you can share this book as long as you credit the author (but see below), don't make money from it, and do make it available to everyone else under the same terms.
This content was accessible as of December 29, 2012, and it was downloaded then by Andy Schmitz in an effort to preserve the availability of this book.
Normally, the author and publisher would be credited here. However, the publisher has asked for the customary Creative Commons attribution to the original publisher, authors, title, and book URI to be removed. Additionally, per the publisher's request, their name has been removed in some passages. More information is available on this project's attribution page.
For more information on the source of this book, or why it is available for free, please see the project's home page. You can browse or download additional books there. You may also download a PDF copy of this book (20 MB) or just this chapter (847 KB), suitable for printing or most e-readers, or a .zip file containing this book's HTML files (for use in a web browser offline).
An initial way to distinguish informational advertising from branding is by asking whether consumers are supposed to ask whether the claims are true. In the case of the Old Spice body wash TV spot, there’s no question. The actor asserts that “anything is possible with Old Spice” as diamonds flow magically from his hands. But no one would buy the product expecting to receive diamonds. They wouldn’t because branding ads are neither true nor false. Like movies, you enjoy them (or you don’t) without worrying about whether it could really happen. Informational ads, on the other hand, derive their power from selling consumers hard facts. When the ad claims the product costs less than similar offerings from rivals, the first question is “really?” When the answer is “no,” the advertising is deceitful.
There are four ways that informational advertising can be deceitful:
Deceitful advertising, finally, is not the same as false advertising. All false ads are also deceitful, but there are many ways of being deceitful that don’t require directly false claims.
Created in the early 1900s, the Federal Trade Commission (FTC)An agency of the federal government charged with investigating and preventing unfair and deceptive marketing practices. was originally tasked with enforcing antitrust laws. With time, its responsibilities have expanded to include consumer protection in the area of marketing and advertising. Today, many legal conflicts over truth and sales run through its offices.
The act authorizing the FTC to begin regulating advertising declares that “unfair and deceptive practices” are illegal, and the agency is charged with the responsibility to investigate and prevent them.Section 5, Federal Trade Commission Act. In judging what counts as deceptive, two models are frequently used. The reasonable consumer standardA presumption that protections against deceitful advertising should only be extended to cover marketing efforts that would significantly mislead a thoughtful, moderately experienced consumer. is the looser of the two. It presumes that protections should only be extended to cover advertising that would significantly mislead a thoughtful, moderately experienced consumer. One advantage of this stance is that it allows the FTC to focus on the truly egregious cases of misleading advertising, and also on those products that most seriously affect individual welfare. Very close attention is paid to advertising about things we eat and drink, while fewer resources are dedicated to chasing down garden-variety rip-offs that most consumers see through and avoid.
One borderline case is the FTC v. Cyberspace.com. In that case, and according to their press release, the FTC charged that the defendants
engaged in an illegal scheme to deceive consumers by mailing $3.50 “rebate” checks to millions of small businesses and consumers. The check came with an attached form that looked like an invoice and used terms like “reference number,” and “discount taken,” making it look like there was a previous business relationship. By cashing the checks, the FTC alleged that many small businesses and consumers unknowingly agreed to allow the defendants to become their Internet Service Provider. After the checks were cashed, the defendants started placing monthly charges of $19.95 to $29.95 on the consumers’ telephone bills. According to the FTC, the defendants then made it very difficult to cancel future monthly charges and receive refunds.“Bogus ‘Rebate’ Offers Violate Federal Law,” Federal Trade Commission, August 5, 2002, accessed June 2, 2011, http://www.ftc.gov/opa/2002/08/cyberspace.shtm.
The judge sided with the FTC.
Whether or not these businesspeople should have seen through the free-money scam and thrown the “check” in the trash, it’s certain that the FTC should have stepped in under the ignorant consumer standardA presumption that protections against deceitful advertising should be extended to cover marketing efforts that would significantly mislead any consumer, including those much less sophisticated or experienced than typical buyers.. Within this framework—which is much stricter than the reasonable consumer version—consumers are protected even from those scams and offers that most people recognize as misleading. One point to make is that the “ignorant consumer” isn’t synonymous with dumb. Though the category does catch some people who probably should’ve tried a bit harder in school, other ignorant consumers may include immigrants who have little experience with American advertising practices and customs. The elderly too may fall into this category, as might people in situations of extreme or desperate need. One example would be late-night TV commercials appealing to people in deep debt. Some ads promise that loan consolidation will lower their overall debt. Others imply that filing for bankruptcy will virtually magically allow a start-over from scratch. Both claims are false, but when creditors are calling and threatening to take your home and your car, even the most reasonable people may find themselves vulnerable to believing things they shouldn’t because they want to believe so desperately.
The federal government, finally, through the FTC has the power to step in and protect these consumers. Strictly from a practical point of view, however, their resources are limited. The task of chasing down every ad that might confuse or take advantage of someone is infinite. That factor, along with good faith disagreements about the extent to which companies should be able to shine a positive light on their goods and services, means (1) the ignorant consumer standard will be applied only sparingly by government regulators, and (2) borderline cases of advertising deceit will be with us for the foreseeable future.
One way to enter the ethical debate about dubious product claims is by framing the subject as a conflict of rights. On one side, producers have a right to talk sunnily about what they’re selling: they’re free to accentuate the positives and persuade consumers to reach for their credit card. On the other side, consumers have a right to know what it is that they’re buying. In some fields, these rights can coexist to some significant extent. For example, with respect to food and drink, labeling standards imposed on producers can allow consumers to literally see what’s in their prospective purchase. Given the transparency requirement, companies can make a strong argument that they should be allowed to advocate their products with only minimal control because consumers are free to check exactly what it is they’re buying.
Even these clear cases can become blurry, however, since some companies try to stretch labeling requirements to the breaking point to suit their purposes. One example comes from breakfast cereal boxes. On the side, producers are required to list their product’s ingredients from high to low. At the top you expect to see ingredients including flour or similar, as quite a bit of it goes into most dry cereals. At the bottom, there may be some minor items added to provide a bit of flare to the taste.
One specific ingredient many parents worry about is sugar: they don’t want to send their little ones off to school on a massive sugar high. So what do manufacturers do? They comply with the letter of the regulation, but break the spirit by counting sugar under diverse names and so break up its real weight in the product. Here are the first few lines of the ingredients list from Trix cereal:
Corn (Whole Grain Corn, Flour, Meal), Sugar, Corn Syrup, Modified Corn Starch, Canola and/or Rice Bran Oil, Corn Starch, Salt, Gum Arabic, Calcium Carbonate, High Fructose Corn Syrup, Trisodium Phosphate, Red 40, Yellow 6, Blue 1.
Sugar is sugar, corn syrup has a lot of sugar, high fructose corn syrup has even more sugar. We’d have to get a chemist to tote up the final results, but it’s clear that a reasonable consumer should figure this is a sugar bomb. Is it fair, though, to assume that an immigrant mother—or any mother not well versed in sugar’s various forms—is going to stop and do (or be able to do) a comprehensive ingredient investigation? The question goes double after remembering that the first image consumers see is the product’s advertising on the box featuring a child-friendly bunny.
More generally, in terms of a pure rights-based argument, it’s difficult to know where the line should get drawn between the right of manufacturers to sell, and the right of consumers to know what they’re buying. The arguments for pushing the line toward the consumer and thereby allowing manufacturers wide latitude to make their claims include the following:
On the other side, distinct arguments are frequently proposed to defend the position that sellers should operate within tight restrictions when advertising the virtues of their goods and services. The consumer should be vigorously shielded, the reasoning goes, from claims that could be deceptive. Arguments include the following:
Conclusion. There’s a lot of space between truth and lies in advertising; there are many ways to not quite tell the whole truth. Both legally and ethically, the limits of the acceptable can be blurry.