Chapter 6 – The Regulatory and Ethical Environment of Promotions
TRUE/FALSE
1. Critics of advertising maintain that society is not better off with advertising because it “shuffles
existing total demand” rather than expanding total demand that would stimulate the economy.
2. According to critics of advertising, advertising educates consumers and informs them of the choices
they have including product features and benefits and is helpful in comparing one product to another.
3. There is much confusion about subliminal advertising, but research has shown that while people do
process some information subliminally, there is no proof that subliminal messages persuade anyone to
do anything.
4. Those who argue that advertising promotes conformity and status seeking consumption behavior are
rebutted by those who assert that advertising reflects, not causes, America’s age of consumption.
5. Some argue that one of the best aspects of advertising is its contribution to the society’s art and
culture, sometimes critiquing it and sometimes celebrating it.
6. Television programs like the Smurfs and the Muppets have been banned by the U.S. government
because they constitute program-like advertisements to children.
7. Medical research journals have published articles claiming survey data indicate that advertising
“caused” young consumers to begin smoking, but all assessments by the FTC from the 1950s to the
present indicate that the primary influences on the decision to smoke are family and peers.
8. One critical point in the FTC’s regulations regarding deception is that they not only include false or
deceiving claims but also include missing information that may deceive.
9. An advertisement for Ziploc freezer bags that compares this Johnson Family of Companies product
with a competing product that is factual is viewed as illegal.
10. To judge whether a particular instance of vertical cooperative advertising is a form of unfair
competition, you must know if the advertising allowances involved represent hidden price
concessions.
11. The Children’s Advertising Review Unit is a government agency that has issued a set of guidelines
regarding the use of comparison ads.
12. If supermodel Kate Moss endorses a line of Kmart clothing, the FTC requires that she actually use the
product.
13. One of the basic remedies used by the FTC in dealing with unfair advertising is a consent order, where
an advertiser accused of running deceptive advertising agrees to stop without admitting guilt.
14. The NARB is a government agency that has the power to enforce government regulations and create
new federal standards regarding unfair or deceptive advertising practices.
15. The National Advertising Review Board (NARB) and the National Advertising Division (NAD)
ability to regulate advertisers depends on the cooperation of members.
MULTIPLE CHOICE
1. The argument that “advertising educates consumers” is supported by the claim(s) that
a.
advertising provides information consumers need to make informed decisions.
b.
by regularly assessing advertising claims, consumers become more educated regarding the
features, benefits and functions, and values of products.
c.
consumers become more aware of their own tendencies toward being persuaded by certain
types of product information.
d.
all of these are offered as arguments that advertising educates consumers.
2. When critics argue that advertising is superficial, the main criticism is that
a.
there is too much product information for consumers to process.
b.
the product performance information is too complex to understand.
c.
ads do not contain enough information on functional features and performance results.
d.
when ads highlight the emotionally satisfying features of products they ignore value
3. Which of the following is considered by advertising critics to be a con of advertising in society today?
a.
advertising provides too much information
c.
advertising creates needs
b.
advertising lowers cost of products
d.
advertising reflects society’s desires
4. Which one of the following would not be offered as support for the argument that advertising benefits
consumers?
a.
The desire to have products that are supported by advertising encourages companies to
offer improved products.
b.
Advertising increases the probability of the success of a new product, so it increases the
variety of products.
c.
The speed and reach of advertising allows for quicker diffusion of innovations.
d.
Advertising is a remarkably efficient system for moving demand from one brand to
another.
5. According to Maslow, when Clorox wipes highlight the germ-harboring aspect of conventional
sponges, it is addressing
a.
the self-actualizing level of needs
b.
the need for love and belonging
c.
physiological need for health
d.
the esteem need that accompanies keeping a clean house
6. Stephen Fox, chronicler of advertising history, maintains that
a.
advertising didn’t cause America’s consumption culture; it’s just a very visible
manifestation of that culture.
b.
America‘s rush to progress and advertising emerged at the same time, so it’s impossible to
prove that advertising caused it.
c.
in portraying brands as symbols of success, advertising creates wants and aspirations that
are artificial and selfish
d.
advertising created America’s consumer culture, and for that, it should be praised.
7. Advertising critics argue that it contributes to many problems in society. Which of the following is
typically given by proponents as a positive aspect of today’s advertising?
a.
advertisers are showing more sensitivity as consumers have raised their awareness of
issues that offend them
b.
advertising now recognizes that stereotypes are often unfair and disrespectful
c.
advertising is an evolving form of art
d.
all of these
8. Over the past few years, more and more women, elderly persons, and ethnic minorities have started
appearing in advertisements. Critics of advertising would respond that
a.
until every ad features this kind of diversity, it’s still not enough.
b.
it’s just a more modern form of stereotyping.
c.
people of any type should not appear in advertisements.
d.
now young white males are the victims of stereotyping.
9. Some argue that a “pro” of advertising is that it fosters a diverse and affordable mass media; if so,
which of the following is (are) true?
a.
newspapers, magazines, TV and Radio stations are supported by advertising – which
ensures an informed democracy
b.
advertising forces materialistic consumption that should be appreciated and encouraged.
c.
ads themselves are more crass and offensive than in earlier times with fewer media.
d.
addresses animalistic needs to a greater degree than before
10. Some advertising critics suggest that advertising can communicate below the threshold of
consciousness. Which of the following cons of advertising does this issue most closely relate to?
a.
advertising affects programming
b.
advertisers deceive via subliminal stimulation
c.
advertising is often offensive
d.
advertising perpetuates stereotypes
11. In terms of advertising to children, which are areas of great concern?
a.
children are inexperienced consumers and therefore more naively persuadable
b.
creating demand in children leads to parent-child conflicts
c.
many kids programs featuring commercial products are simply long advertisements
d.
all of these are areas of great concern
12. Critics of advertising charge that alcohol and tobacco firms are targeting adolescents with ads that
make dangerous and addictive products appealing; which of the following is true
a.
medical journals have proved that advertising makes adolescents start smoking
b.
beer and alcohol makers are oblivious to these concerns
c.
repeated research studies since the 1950s have shown that family, friends and peers are the
strongest influences on the use of tobacco and alcohol products
d.
use of tobacco and alcohol is hereditary
13. Ethics is defined as
a.
that which can be shown to be truthful.
b.
the moral standards and principles by which behavior is judged.
c.
the legal limits placed on personal practices.
d.
the timeless, unwavering standard of what is good.
14. Determining what is ethical or unethical in advertising
a.
can be determined specifically from the advertiser’s code of ethics.
b.
is subject to absolute rules of right and wrong.
c.
is an easy question since all advertising is unethical.
d.
comes down to personal judgment.
15. While it is legal, the use of superlatives (“Number One” or “Best in the World”) in advertising is often
called ____.
a.
unethical
c.
puffery
b.
deception
d.
none of these
16. Which one of the following is a controversial product other than tobacco or alcohol
a.
automobiles because auto accidents kill so many each year
b.
fast food because critics claim it causes obesity
c.
prescription medicines because they are overused
d.
low fat products because they lull consumers into complacency about their cholesterol
17. The desire to restrict advertising to children is based on the concern that
a.
advertising promotes superficiality.
b.
advertising promotes values founded in material goods and consumption.
c.
children are inexperienced consumers and are easy prey for the sophisticated persuasions
of advertisers.
d.
all of these.
18. With regard to deception in advertising, the FTC and various court decisions have concluded that
a.
there must be a representation, omission or practice that is likely to mislead the consumer
b.
the representation, omission or practice must be judged from the perspective of the
consumer
c.
the representation, omission or practice must be a “material” one
d.
all of these are the essential elements in declaring an ad deceptive
19. You have been asked to determine whether an advertisement is deceptive or not. It is important to
remember that
a.
puffery is acceptable only if the claims made are provable.
b.
claims that are literally true still may be deceptive.
c.
just because a fact is misrepresented does not mean the advertisement is deceptive.
d.
explicit deception must occur for an advertisement to be considered deceptive.
20. Vertical cooperative advertising is usually legal, except when
a.
there is a representation, omission, or practice that is likely to mislead.
b.
bogus advertising allowances are given, amounting to hidden price concessions
c.
large mega-retailers are involved
d.
all of these are correct
21. The FTC holds a degree of regulatory power over advertising aimed at children. In general, its efforts
have been
a.
more successful than the efforts of industry groups and consumer groups.
b.
more successful than the efforts of industry groups, but not as successful as those of
consumer groups.
c.
more successful than the efforts of consumer groups, but not as successful as those of
industry groups.
d.
not as successful as the efforts of industry groups and consumer groups.
22. The passage of the Wheeler-Lea Amendment in 1938 had a substantial impact on advertising
regulation in the United States. The passage of the amendment
a.
established the Federal Trade Commission.
b.
granted the FTC control over the effects of advertising on competition.
c.
allowed the FTC to regulate practices that it considered misleading to consumers.
d.
granted industries the right to form self-regulatory organizations.
23. Which of the following is true of consumerism
a.
Can be traced to 17th-century England
b.
Comes from the fact that consumers want a greater voice in the process of product
development, distribution and information dissemination
c.
Consumers create pressures on firms through boycotts of brands as well as organizing to
bring about regulation
d.
All of these are aspects of consumerism
24. Which of the following are regulatory issues in PR, direct marketing and e-commerce?
a.
privacy, spam, sweepstakes and telemarketing practices
b.
premium offers, trade allowances and product/brand placement
c.
image appropriation, copyright infringement, defamation, slander and libel
d.
all of these are part of regulatory issues in direct marketing, PR and e-commerce
25. This act does not outlaw all unsolicited email, but rather targets fraudulent, deceptive, and
pornographic messages, which is estimated to make up about two-thirds of all commercial unsolicited
email. Violators face jail time and fines up to $1 million.
a.
Regulatory Reference Act
c.
Can Spam Act
b.
The Wheeler Lea Act
d.
Free Trade Act
Scenario 6-1
A group that calls itself Adbusters has a site on the World Wide Web. The site contains many pages
that address issues of consumption and culture, media practices and corporate responsibilities. For
example, “the momentum has clearly accelerated. By some measures humans have used more physical
resources since World War II than in all of history before it. It’s now taking a toll beyond anything we
could ever have imagined. What does it mean when one-sixth of the world’s population consumes
without any real restraint?”
Throughout the website, there are many references to advertising’s role in creating and maintaining this
situation. Not surprisingly, virtually all of the references to the practice of advertising are negative.
(http://www.adbusters.org/home/)
26. (Scenario 6-1) Some of the statements made by Adbusters echo the words of advertising historian
Stephen Fox when he wrote, “One may build a compelling case that American culture is—beyond
redemption—money-mad, hedonistic, superficial and rushing needlessly down a track called Progress.”
Fox concluded that
a.
advertising must be held accountable for its transgressions.
b.
all cultures are as consumption oriented as America.
c.
terms like money-mad, hedonistic, and superficial were used to describe America before
the dawn of national advertising.
d.
advertisers are hidden persuaders who serve a malevolent purpose.
27. (Scenario 6-1) Adbusters faults cigarette companies for targeting billboard campaigns at ethnic and
minority groups. In the same vein, advertisers are criticized as portraying women:
a.
as superior to men
c.
as the head of government agencies.
b.
as homemakers or objects of desire.
d.
as intermediate formularies for agencies.
28. (Scenario 6-1) Organizations like “Adbusters” encourage consumers to be proactive and contact
government agencies to enforce regulations. This organization would want you to contact the FTC,
because it:
a.
is the most powerful government agency regulating advertising.
b.
is a consumer-regulated board.
c.
is a crucial participant in advertising self-regulation.
d.
is a state organization directly tied to the federal government.
29. (Scenario 6-1) In the past, Adbusters cited 12 magazines that it said are responsible for pushing “a
clean, exciting image for one of the dirtiest products around: tobacco.” They suggested that Americans
cancel their subscriptions to these magazines until the magazines stopped accepting this advertising.
This is an example of
a.
a yet-to-be-proved-effective tool called a boycott.
b.
the activities of one of the three most powerful consumer organizations in the United
States.
c.
a group of consumers functioning as a regulatory agent.
d.
a recently emerging phenomenon called consumerism.
OBJ: 6-5
Scenario 6-2
When the Rally’s hamburger chain’s Big Buford ad campaign — “It’s not the size; it’s the taste” — began
running a few years ago, Louisville’s Southeast Christian Church’s weekly newspaper, The Southeast
Outlook, quickly responded with a series of columns and editorials, all vehemently denouncing the ads
as obscene and urging a boycott of Rally’s. They included the telephone numbers of Rally’s corporate
offices and of local television stations. The Outlook later reported that each station received several
hundred calls and that Rally’s prematurely ended the campaign. (Henry Hoenig, “The Gospel of
Growth”, Louisville.com, http://www.louisville.com/loumag/oct98/sec.shtml, 01/08/05).
30. (Scenario 6-2) The Big Buford example is evidence that
a.
taste is not a personal and subjective evaluation.
b.
fast food must be considered a highly controversial product category.
c.
small segments of the population can cause considerable controversy over matters of taste.
d.
the concept of political correctness has not been embraced by franchise owners.
31. (Scenario 6-2) If the church goers wanted to launch a complaint with a government agency stating that
the Big Buford ads are obscene, they would contact
a.
the Consumer Federation of America.
b.
the Federal Communications Commission.
c.
the National Advertising Division of the Better Business Bureau.
d.
the National Advertising Review Board of the Better Business Bureau.
32. (Scenario 6-2) The FCC could conceivably become involved in the complaint. The FCC is empowered
to regulate
a.
unfair methods of competition.
b.
the advertising of food and medical products.
c.
the disclosure of annual securities reports.
d.
fraud on radio and television.
33. (Scenario 6-2) The editors of the newspaper have asked individual local radio stations to boycott the
advertisements. They also have the option of working with a media self regulatory organization. If
they wish to work with a media self-regulatory organization, they should contact the ____ with any
concerns over issues of truth, fairness, or good taste.
a.
NAB’s Code Authority
b.
American Association of Advertising Agencies
c.
Better Business Bureau
d.
Federal Trade Commission
Scenario 6-3
“Consumerism is a pattern of behavior that helps to destroy our environment, personal financial health,
the common good of individuals and human institutions” begins the first page on a World Wide
website entitled “Overcoming Consumerism.” It continues, “This site details ways that you can help
defeat consumerism, save money, work less and lead a more satisfying and environmentally benign
life while helping to restore the self-sufficiency of your community.” (http://www.verdant.net/)
As one travels from page to page in the site, advertising is often implicated as a source of the
movement toward consumerism. Many of the same criticisms of advertising found in the site were
outlined in the textbook.
34. (Scenario 6-3) One quote from the site reads, “Time, the shrinking commodity of our lives, is
exchanged for money to buy things that there is usually little time to enjoy. What’s left over is often
devoured by television, basically a series of ever-more mediocre filler programs between ever-more
spectacular commercials whose sole purpose is to stoke further desire for more things.” To respond to
the implication that advertising robs people of time, a proponent of advertising may logically argue
that
a.
advertising actually saves time, because people don’t have to search as hard to find
information about products they desire.
b.
the extra time spent processing advertising is offset by increased enjoyment of the
products purchased.
c.
most television advertisements contain a great deal of functional information.
d.
people go out of their way to see advertising; therefore, it must play a positive role in their
lives.
35. (Scenario 6-3) The writers of “Overcoming Consumerism” believe that as consumerism grows, people
will buy anything and everything. This reduces the incentive for companies to manufacture quality,
long-lasting products. On the other hand, according to the textbook, a proponent of advertising might
argue that
a.
the need for long-lasting, high-quality products no longer exists in today’s fast-paced
world.
b.
research has shown that personal happiness increases along with consumption.
c.
advertising is not creating a materialistic culture; it is a manifestation of that culture
d.
this wrongly assumes that America is a highly consumption-oriented culture.
36. (Scenario 6-3) A quote from the site states, “Consumerism encourages people to buy for the sake of
buying, with little regard for the true utility of what is bought.” Which one of the following is not
representative of the point of view of the writer?
a.
Advertising creates false needs instead of fulfilling existing needs.
b.
The emotional benefit one receives from a product is sometimes more important to the
consumer than functional attributes
c.
Only functional benefits of a product are meaningful.
d.
Consumers are relatively easy to seduce into buying things they don’t need.
37. (Scenario 6-3) The site urges people to buy the goods that they need at small businesses and from
small manufacturers. This practice
a.
reduces the effectiveness of emotional appeals in advertising.
b.
undermines the presumed monopoly power that big businesses with big ad budgets acquire
through advertising is
c.
eliminates the need for advertising regulation.
d.
expands existing demand, rather than shuffling it.
Scenario 6-4
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42. (Scenario 6-5) Joe Rowan was frustrated to learn that such a large percentage of the price of a car
came from advertising expenses. He said to the dealer spokesperson, “If you would stop advertising so
much, I could save money on this car. Heck, I would be willing to spend hundreds of my own money
to do a complete search on the Internet and other literature to find the best car for me. I don’t need you
guys to do that for me with all your advertising!” Which criticism of advertising is most disconcerting
to Joe at this moment?
a.
advertising is superficial and silly
b.
advertising is a poor method to inform consumers
c.
advertising wastes resources and money
d.
advertising is often offensive
43. (Scenario 6-5) After the comments in the above question were made, the salesperson replied, “If our
industry didn’t do so much advertising you probably couldn’t afford to buy that computer to do your
own research.” Which of the following pros of advertising is the salesperson likely using to support his
comment?
a.
advertising fosters a diverse and affordable mass media
b.
advertising is very artistic in its nature
c.
advertising reflects the priorities of a society
d.
advertising fosters more rapid new product success, thus lowering the cost
44. (Scenario 6-5) Joe Rowan saw a television ad that stated the Toyota Camry was “The world’s best car
for reliability.” Some critics of advertising argue that the use of such absolute superlatives in
advertising is ____.
a.
unethical
c.
deception
b.
illegal
d.
puffery
45. (Scenario 6-5) Which of the following government agencies would be most appropriate to contact if
Jow Rowan felt like he should file a complaint about advertising in the automotive industry?
a.
The Federal Trade Commission
b.
The Federal Communications Commission
c.
The Food and Drug Administration
d.
The Securities and Exchange Commission
b.
Internalization
d.
Slander
ESSAY
1. Some people believe that advertising serves as a tool of education. Others believe it serves only to
confuse and entice. Choose an advertisement that you have seen recently and use it to make a
convincing argument for the pro-advertising position. Be sure to explain how the advertisement can
affect an individual consumer. Choose another advertisement that you have seen recently and use it to
make a convincing argument for the con-advertising position. Again, be sure to explain how the
advertisement can affect an individual consumer.
2. It has been said on many occasions that advertising promotes materialism. Do you agree or disagree
with this statement? Support your position.
3. Disney’s Dave the Barbarian and Lizzie McGuire are a popular television shows which are featured as
McDonald’s Happy Meal toys that are popular among boys and girls. Products featuring characters
from movies and television are heavily advertised on television to this audience. Outline the concerns
that a critic of advertising would have about this practice.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
4. Give two reasons why it is in the best interests of advertising agencies and the advertising industry to
engage in self-regulation.
5. The concept of “privacy” as it relates to online e-commerce is emerging as a critical concern for
advertisers, regulators and consumers. Explain how this problem is currently being addressed.