978-0133866339 Chapter 14 Part 2

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45) In terms of substantiation of advertising claims, the FTC and the courts state that evidence

presented must be for the exact product being tested, not for a similar product.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-2

46) In terms of substantiation of advertising claims, the FTC and the courts consider the totality

of evidence, not the results of just one study if other studies find different results.

Question Tag: Definition (Concept)

AACSB Category: Reflective thinking

Objective: 14-2

47) Explain the difference between deception and puffery.

Question Tag: Definition (Concept)

AACSB Category: Reflective thinking

Objective: 14-2

48) When the Federal Trade Commission insists that a company stop making a false claim in an

advertisement and that company agrees to stop, it is an example of a(n):

A) legal review.

B) cease and desist order.

C) administrative complaint.

D) consent order.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

49) When the FTC makes a judgment against a company for false or misleading advertising,

which of the following would come first?

A) Administrative complaint

B) Cease and desist order

C) Consent order

D) Court-ordered reparations

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

50) An administrative complaint is:

A) a formal proceeding before an administrative law judge used by the Federal Trade

Commission.

B) a formal hearing before the Court of Appeals.

C) a formal hearing before the full Federal Trade Commission.

D) used by the National Advertising Review Board when the NAD cannot solve a complaint.

Question Tag: Definition (Concept)

Objective: 14-3

51) If a consent agreement cannot be reached with a company, the Federal Trade Commission

then issues a(n):

A) cease and desist order.

B) corrective advertising directive.

C) appeal to the Court of Appeals.

D) administrative complaint.

Question Tag: Definition (Concept)

AACSB Category: Ethical understanding and reasoning

Objective: 14-3

52) If at the end of an administrative hearing of an FTC case, the judge feels a violation of the

law has taken place, the judge issues a:

A) cease and desist order.

B) consent agreement.

C) corrective advertising directive.

D) trade regulation ruling.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

53) If after an administrative hearing a company is still not satisfied with the ruling of the FTC,

the next step would be to:

A) appeal the decision to the Court of Appeals.

B) hold a hearing before the full FTC.

C) appeal the decision to the Supreme Court.

D) hold a hearing before an administrative law judge.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

54) Company leaders who are not satisfied with the ruling of the full FTC can appeal to the U.S.

Court of Appeals. The danger in appealing is:

A) the company does not have the opportunity to present oral arguments.

B) the cease and desist orders are normally upheld.

C) a company may be ordered to pay civil penalties.

D) the decision is not binding.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

55) Occasionally the FTC bypasses its typical process and uses the court system to stop an unfair

marketing practice. Of the following, which would be the most likely to trigger this type of

action?

A) A company violates an FTC cease and desist order

B) A full commission of the FTC is not available to hear a case

C) A company violates a consent order

D) A company appeals a consent order

Question Tag: Definition (Concept)

AACSB Category: Reflective thinking

Objective: 14-3

56) Occasionally the Federal Trade Commission bypasses its typical process and uses the court

system to stop an unfair or deceptive marketing practice. Of the following, which would be the

most likely to trigger this type of action?

A) The actions of a company are so severe that immediate action is needed

B) A full commission of the FTC is not available to hear a case

C) A company violates a consent order

D) A company appeals a consent order

Question Tag: Definition (Concept)

AACSB Category: Reflective thinking

Objective: 14-3

57) Which agency has the authority to order corrective advertising?

A) Federal Communications Commission

B) Federal Trade Commission

C) Food and Drug Administration

D) Bureau of Alcohol, Tobacco, and Firearms

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

58) When a company must pay for ads that refute false claims it made in previous ads, it is called

a(n):

A) consent order.

B) administrative ruling.

C) cease and desist order.

D) corrective advertisement.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

59) The Federal Trade Commission orders corrective advertising in:

A) only the most severe instances of deceptive and misleading advertising.

B) cases involving advertising to children.

C) cases that are appealed to the U.S. Court of Appeals.

D) most cases that are investigated.

Question Tag: Definition (Concept)

AACSB Category: Reflective thinking

Objective: 14-3

60) A trade regulatory ruling by the Federal Trade Commission applies to:

A) wholesalers.

B) international companies.

C) an industry.

D) retailers.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

61) The funeral industry was sanctioned by the FTC in 1984 and 1994 for practices common in

the industry that the FTC believed were not fair to consumers. To correct these misleading

practices, the FTC issued a:

A) cease and desist order.

B) consent order.

C) corrective advertising order.

D) trade regulation ruling.

Question Tag: Application

AACSB Category: Reflective thinking

Objective: 14-3

62) Recently the FTC investigated bloggers who were being sponsored to pitch products. The

FTC ruled that the blogger must disclose any type of compensation that is received. This is an

example of a:

A) cease and desist order.

B) consent order.

C) corrective advertising order.

D) trade regulation ruling.

Question Tag: Application

AACSB Category: Application of knowledge

Objective: 14-3

63) Anyone can file a complaint to the FTC concerning what someone deems to be a deceptive

or misleading advertising or marketing practice.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

64) Complaints that are made to the Federal Trade Commission are made public and registered

on the FTC’s website.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

65) The first step a firm can take to end a FTC investigation of a complaint is the signing of a

consent order.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

66) When a consent order issued by the Federal Trade Commission is signed, the company has

agreed to a corrective advertising program.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

67) When a company’s management team signs a consent order issued by the FTC they agree to

stop the advertisement or marketing practice and they admit they are guilty of false or deceptive

advertising.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

68) When a company agrees with the Federal Trade Commission and signs a consent order, the

company agrees to stop the ad or marketing practice and also agrees to pay civil penalties.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

69) If a consent agreement cannot be reached after an investigation by the Federal Trade

Commission, the case would next go to the full commission.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

70) When the FTC issues an administrative complaint and an administrative judge rules a

violation has occurred, the judge issues a cease and desist order.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

71) Cases before the full commission of the FTC can be appealed to the U.S. Court of Appeals

and even to the U.S. Supreme Court.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

72) The FTC can use the court system to stop unfair and deceptive advertising and

communication practices but must go through the normal steps of starting with a consent

agreement.

Question Tag: Definition (Concept)

AACSB Category: Reflective thinking

Objective: 14-3

73) The Federal Trade Commission has the power to order firms to prepare and disseminate

corrective advertising.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

74) When the Federal Trade Commission orders a firm to prepare corrective advertisements, the

goal is to bring people back to the neutral state that existed before the false and deceptive

advertising was used by the company.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

75) The large number of cases of false and misleading advertising has lead the FTC to order

corrective advertising a substantial number of times.

Question Tag: Critical Thinking

AACSB Category: Reflective thinking

Objective: 14-3

76) When the Federal Trade Commission issues a trade regulating ruling, the ruling applies to

every firm in an industry, whether the individual company is guilty or not guilty of the marketing

practice in question.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

77) Before issuing trade regulation rulings, the FTC normally holds a public hearing and accepts

both oral and written arguments.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

78) Federal Trade Commission industry regulation rulings cannot be challenged by an appeal to

the U.S. Court of Appeals.

Question Tag: Definition (Concept)

AACSB Category: Application of knowledge

Objective: 14-3

79) The NARB is supported by the Federal Trade Commission and has legal authority over cases

it reviews.

Question Tag: Critical Thinking

AACSB Category: Reflective thinking

Objective: 14-3

80) Identify the typical steps in an FTC investigation sequence from the initial complaint to a

decision that is appealed to the Supreme Court.

Question Tag: Definition (Concept)

AACSB Category: Ethical understanding and reasoning

Objective: 14-3

81) What is a trade regulation?

Question Tag: Definition (Concept)

Objective: 14-3

82) If Megan wants to know if people have complained about a particular health club being

unsafe or unclean, she should contact the:

A) National Advertising Division.

B) Federal Trade Commission.

C) Better Business Bureau.

D) National Advertising Review Board.

Question Tag: Application

AACSB Category: Application of knowledge

Objective: 14-4

83) If Isabelle contacted a local Better Business Bureau about a particular landscaping service,

she would receive a:

A) detailed report of all complaints filed against the company.

B) report about any complaints that were filed against the company by individuals.

C) copy of all communications the BBB had with the particular firm.

D) carefully worded report about any complaints that have been filed with the BBB against the

company.

Question Tag: Application

AACSB Category: Application of knowledge

Objective: 14-4

84) The NAD of the Council of Better Business Bureaus becomes involved in all of the

following except:

A) cases of mail fraud.

B) collecting information about misleading advertising.

C) negotiating modification of ads deemed to be misleading.

D) dismissing unsubstantiated complaints about an advertisement.

Question Tag: Definition (Concept)

AACSB Category: Ethical understanding and reasoning

Objective: 14-4

85) Chase files a complaint with his local Better Business Bureau about an advertisement he

feels is misleading and deceptive. The BBB would:

A) keep a copy of the complaint in the company’s file for future use if someone asked about that

particular company.

B) refer the complaint to the National Advertising Division.

C) refer the complaint to the National Advertising Review Board.

D) refer the complaint to the Federal Trade Commission.

Question Tag: Critical Thinking

AACSB Category: Reflective thinking

Objective: 14-4