The purchasing decisions process begins with first recognizing a need, and then researching how to fulfill that need. Consumers will often complete the second step of the process by gathering information from advertisements. If an advertisement is untrue or misleading, then it is not fulfilling its basic function. As advertising transitions to the digital age, it becomes easier and easier for advertisers to deceive their audience. However, there are standard policies and standards, in both traditional and digital advertising, that maintain ethics in advertising.
There are many different ways that ads can mislead their audience, and they can be legal. For instance, puffery is a very common element of advertising. It is defined as when the promotion of a product or service is presented with subjective opinions, superlative words such as “greatest”, “best, or “finest”, or exaggerations. The advertisement can also be vague and generally not state any specific facts. Puffery is allowed in advertising because industries claim that consumers expect exaggerated claims and are able to recognize when it occurs. However, there are studies that claim many consumers do fall victim to puffery and perceive the inflated claims to be true. Another example of misrepresentation is a premium, which is an additional charge to an original value. In this case, premiums can easily hide the true value of merchandise. Companies are not always legally obliged to, but should list the original value at which the product was sold. Companies should also avoid adding premiums for specific audiences, such as children, in order to avoid regulation.
Luckily for consumers, many advertisers, agencies, and even media companies, recognize the importance of consumer trust and confidence. Self-regulation has become a familiar and effective mechanism for avoiding offensive, misleading, or deceptive practices. Although self-regulation is not legally enforced, it does involve a set of specific standards and policies to which advertisements must adhere to. Following these standards reflect positively on the company, gains consumer trust, and helps to limit government intervention.
Associations have been established in order promote fair advertising and business practices, such as the Council of Better Business Bureau, the American Advertising Federation (AAF), the American Association of Advertising Agencies (AAAA), and the Association of National Advertisers (ANA). These four specific association make up the National Advertising Review Council (NARC), which is used to maintain high standards of truth, accuracy, and social responsibility for advertising on a national scale. Although the council cannot technically force advertisers to modify or stop running a problematic advertisement, advertisers involved in NARC cases rarely refuse to abide by their decisions.
While many companies agree with self-regulation and comply with the NARC, there are still federal, state, and local laws that regulate agencies. Due to the fact the commercial speech is protected by the First Amendment, many legal regulations are federal. The Federal Trade Commission Act established the primary agency responsible for controlling and regulating advertising, known as the Federal Trade Commission (FTC). Today, the agency is responsible for protecting both consumers and businesses from unfair and deceptive practices. However, it was originally established with the intention to enforce antitrust laws and protect competitors for one another. It was not until later that The Wheeler-Lea Amendment was applied to the FTC Act and empowered the FTC to act if the public was misled as well, and not just competitors. It also enabled the FTC to issue cease-and-desist orders and to fine any violators.
There are a few different elements that make the FTC effective in regulating organizations. For instance, the Affirmative Disclosure Requirement states the FTC may require advertisements to include certain information so that consumers are fully aware of consequence, conditions, and limitations. The Advertising Substantiation program is another element, and it requires advertisers to provide supporting documents in order to prove that claims are truthful. If an advertiser is found guilty of deception advertising, The Corrective Advertising program allows the FTC to require additional advertising designed to remedy any misinformation previously advertised. These programs, as well as other elements of the FTC, legally bind advertisers to be truthful and avoid deception.
It is important for organizations to not only abide by the policies that they are legally bound to, such as those imposed by the FTC, but the ones set by society as well. Even though an organization could technically go against self-regulation, or any decision ruled by the NARC, doing so could be harmful to consumers, other companies, and the practicing organization itself. Doing so could destroy consumer trust and confidence in the specified industry, creating additional barriers for all companies to overcome. It could also lead to further government intervention, which most companies wish to avoid. Overall, all advertising agencies should try their best to follow societal ethical standards.