Introduction
Deceptive advertising and marketing practices have been around since the beginning of time and are still prevalent today. Sometimes it is done unknowingly by an advertiser, however, more often than not, it is done with the intent to mislead the consumer, making deceptive advertising a relevant marketing ethics issue. This paper will first define deceptive advertising and marketing, and describe different types of deception. Next, it will examine what makes an advertisement or marketing practice deceptive. A look into the deceptive advertising issues of the 1990’s as well as reviewing the monitoring agencies, and addressing liability issues and the penalties associated with deceptive advertising will also be covered.
What is Deceptive Advertising and Marketing?
An advertisement or marketing practice is considered deceptive if there is a "representation, omission, or practice that is likely to mislead the consumer". The advertisement does not necessarily have to cause actual deception, but, according to the Federal Trade Commission (FTC), the act need only likely mislead the consumer (Federal Trade Commission, 1998 [on-line]).
Types of Deceptive Advertising
According to David Gardner (1975) there are three types of deceptive advertising: Fraudulent advertising which is an outright lie; false advertising which "involves a claim-fact discrepancy", such as not disclosing all the conditions to receive a certain promotion or price; and misleading advertising which involves a "claim-belief interaction" (Assael, 1998). An example of claim-belief deception is the Warner-Lambert Listerine case. The label on the Listerine mouthwash bottle stated "Kills Germs By Millions On Contact" immediately followed by "For General Oral Hygiene, Bad Breath, Colds, and Resultant Sore Throats". This misled consumers to believe that by using Listerine, it could prevent the common cold and sore throat (Warner Lambert, 1978). Listerine had to redo its advertising and delete "colds and resultant sore throats".
What Makes Advertising Deceptive?
According to the Federal Trade Commission (FTC), the government agency responsible for regulating and monitoring advertising practices, there are three common elements they look for in deceptive advertising and marketing claims. First, there must be "a representation, omission or practice that will likely mislead the consumer", such as misleading price claims, or a oral or written misrepresentation of a product or service. Second, the FTC examines the misrepresentation from the view of a "reasonable" consumer or particular target group such as the elderly. And finally, "the representation, omission, or practice must be a ‘material’ one". This means that if the misrepresentation is likely to affect the consumer’s decision whether or not to use or purchase a certain product or service, this is considered material since the consumer may have decided differently if not for the deceptive advertising (Federal Trade Commission, 1998 [on-line]).
Oral and Written Misrepresentation or Omission
Let’s look first at oral or written misrepresentation, or omission, which is the most common form of deceptive marketing. According to the Better Business Bureau, "an advertisement as a whole may be misleading although every sentence separately considered is literally true. Misrepresentation may result not only from direct statements but by omitting or obscuring a material fact" (Better Business Bureau, 1998 [on-line]). This includes "bait and switch" advertising and selling, which is an alluring offer to sell a product or service in which a company has no intention to sell to the consumer. The goal of "bait and switch" is to get the consumer in the door ready to purchase one product that was advertised and then get them to switch their purchasing decision to a higher priced product or service. Vague generalities are also included in this category. A vague generality is when an advertisement makes a vague claim. There are numerous examples of vague generalities such as "our clothes are made in the USA, our cars are fuel efficient, our frozen desserts are low in fat". According to Mary Azcuenaga, Commissioner of the FTC (1994), "should we assume that these claims apply to every individual item in the product line? To most or nearly all of the products in the line? Or is the message that, on average, the products have the characteristics?". These generalities often bring up more questions than they answer for the consumer, and can be misleading and confusing.
The Reasonable Consumer
The FTC also believes that in order for an advertisement to be deceptive, the act or practice must be considered from a reasonable consumer’s point of view, or if a particular group is targeted, a reasonable member of the groups perspective; the key word being "reasonable". In fact, a company is not liable for every consumer’s point of view. One example is that some consumers may believe that a "Danish Pastry" is made in Denmark. This miscomprehension is not considered to be deception since this message is not likely to mislead a significant segment of targeted consumers (Federal Trade Commission, 1998 [on-line]). If a particular product or service is marketed to a particular group, the FTC will use the targeted group as their "reasonable member". The thought behind this decision is that some groups may be more susceptible to exaggerated claims such as an overweight person believing in a miracle pill that will make them lose weight. (Federal Trade Commission, 1998 [on-line]).
Materiality
The third factor the FTC looks for in deceptive advertising is materiality. As mentioned earlier, a material misrepresentation is one that will likely effect the buying decision of consumers. Examples of material misrepresentations include certain claims and omissions of information, particularly those that involve safety and health issues. An example would be a consumer who is very involved in environmental issues and may only purchase environmentally safe products. If a product advertises that it has reduced emissions of air pollutants by 70%, this may encourage the consumer to purchase the product, when in fact the product may still be emitting a high level of air pollutants. Additionally, "information is likely to be material if it concerns durability, performance, warranties or quality" (Federal Trade Commission, 1998 [on-line]).
The FTC believes that if a consumer can easily evaluate a product, it is inexpensive, and a regularly purchased item, the Commission will take a closer look at the deception before filing a claim. The FTC believes that companies rely on repeat sales of these items and therefore if they do not live up to their claims, consumers will not purchase them again (Federal Trade Commission, 1998 [on-line]).
Counter-Measure Misconceptions
Many advertisers feel that they have safeguarded themselves against deceptive advertising by providing money-back guarantees, warranties, and by adding disclaimers to ads. According to the FTC this is not accurate. Money-back guarantees do not eliminate deception. Sears and Roebuck learned this in 1980 when the FTC noted that "a money-back guarantee is no defense to a charge of deceptive advertising. A money back guarantee does not compensate the consumer for the often considerable amount of time and expense incident to returning a major-ticket item and obtaining a replacement" ((Federal Trade Commission, 1998 [on-line]). What a money-back guarantee and a warranty may avoid however, is prosecution if the guarantee or warranty is honored since the FTC looks more favorably on those that comply with their guarantees and warranties.
Disclaimers, accurate text or small print do not remedy the effect of a false headline either. The FTC has ruled that many reasonable consumers may only read the headline and be mislead or deceived by the advertisement, therefore, the headline must also make sure that it complies with fair advertising standards (Federal Trade Commission, 1998 [on-line]).
Deceptive Advertising Issues of the 90’s
The 1990’s have brought on some new targets for deceptive advertisers as well as a new focus for the FTC and the BBB. The main targets of the 90’s include: antioxidant claims; the diet industry for misrepresenting weight loss claims; environmental or green marketing claims for products claiming that they are good for the environment and are not; 900 numbers for misrepresenting the costs of phone calls, and the Internet (Federal Trade Commission, 1998 [on-line]). In one year, United Weight Control, Nutri/System, Inc., the Diet Center, Physician Weight Loss Clinic, Weight Watchers International, Inc., and Jenny Craig had all been cited for deceptive advertising and were made to modify their advertising and marketing practices. On one weight loss television commercial, an average weight loss is printed on the screen so consumers are not misled to believe that they will lose as much weight as the women/men in the commercial (Federal Trade Commission, 1998 [on-line]).
The Internet has also been a major source of deceptive advertising, particularly in regards to privacy issues. The Internet has allowed online companies to "collect and use personal information about consumers, often without the consumers’ knowledge or consent", and even use web sites as a guise to collect medical and financial information, and even collect information about children (American Marketing Association, 1998 [on-line]).
Monitoring Agencies
Besides the Federal Trade Commission, there are several other agencies that monitor advertising and marketing practices. Next to the FTC, the Better Business Bureau (BBB) is the key proponent of monitoring truth in advertising, and was the primary reason that the BBB was formed. The National Advertising Review Council (NARC) is another agency that was developed by advertising associations and the BBB to foster "truth and accuracy in national advertising through voluntary self-regulation". The National Advertising Division and the Children’s Advertising Review Unit (CARU) are investigative arms of the self-regulating programs in place by the NARC. The CARU was established in 1974 to promote responsible children’s advertising and is particularly interested in protecting children’s privacy and rights taking into account the vulnerability of the child audience. The FTC is the only legal enforcement arm of deceptive advertising. All other groups rely on voluntary cooperation and self-regulation (Better Business Bureau, 1998 [on-line]).
Competitors and consumers are also two important monitoring groups. Competitors can be the best watchdogs for deceptive advertising in their industry and under the Lanham Act, they are able to sue their competitors for making deceptive claims. Consumers can also monitor companies and report any deceptive advertising or marketing act directly to the Better Business Bureau or file a complaint with the National Advertising Division who will investigate the accusation.
Liability & Penalties
So who is liable for deceptive advertising? Clearly, the company who’s product or service it is, but it does not stop there. Advertising agencies are now being held liable "if the agency participated in the creation of the advertising and knew, or reasonably should have known, that the advertising was deceptive". It is the responsibility of the ad agency to substantiate the claims that a company makes and not rely on the advertiser’s word. Producers of infomercials are also held under scrutiny when a deceptive advertising claim is made against an infomercial. Producers must ask for information to back up the claims being made or risk being liable (Better Business Bureau, 1998 [on-line]).
According to Section 5 of the FTC Act, unfair or deceptive advertising, or marketing acts or practices are illegal and therefore subject to penalties. The penalties for deceptive advertising and marketing practices include 1. Cease and desist orders ~ the FTC can make a company pull an ad or stop a deceptive marketing practice immediately. This also carries an $11,000 per day per ad penalty if a company violates the law again. 2. Civil penalties, consumer redress, and monetary remedies. This could include monetary payments of millions of dollars, to giving refunds to consumers who purchased the product. 3. Corrective advertising, disclosures, and other informational remedies. This may include purchasing additional advertising to correct the misinformation or making the company inform those that purchased the product about the deception. 4. Bans and Bonds: In really bad cases of deception, a company may be required to leave the industry or post a bond before reentering the business (Federal Trade Commission, 1998 [on-line]).
Conclusion
As this paper has demonstrated, deceptive advertising is an ongoing ethical, and in some cases, controversial issue. What may appear to be a harmless advertisement to one person or group, may be very misleading to another. With the increase in technology and the ever-increasing use of the Internet, consumers remain prime targets for deceptive advertising and marketing practices. Fortunately, the laws and monitoring agencies continue to improve, and will continue to protect the consumer from many deceptive advertising and marketing practices.
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Azcuenaga, Mary L. (1994). Advertising: Interpretation and Enforcement Policy. Presented at the American Advertising Federation, National Government Affairs Conference, Washington, DC.
Better Business Bureau [on-line]. Available: www.bbb.org
Federal Trade Commission [on-line]. Available: www.ftc.gov
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