Controversial Television Advertising - Essay Example

Controversial Television Advertising The most controversial innovation in advertising regulation in recent years involves corrective advertising. This remedy, designed to eradicate the effects of the previous fraud, requires advertisers who are found to have advertised falsely to purchase advertising time or space and disclose to consumers true information about the product (usually through the same media in which the false claim was disseminated). In its simplest form, this action would require the advertiser to announce that previous specified claims had been found to be false and misleading and then to state the truth about the product with respect to that claim. The problem to which corrective advertising is addressed should be one that economists would particularly appreciate. Put simply: under traditional law, the rewards for advertising deception were so great and the penalties so modest (especially when discounted against the remote likelihood of detection and suit) that it was virtually perverse for advertisers not to engage in certain kinds of false claims. It comes at a time when concern is growing about the effectiveness of television advertising regulation in light of technological developments in media. Such developments include the rapid growth of television channels that are available via a number of platforms-terrestrial, satellite, and cable-and that are being further facilitated through the transition of broadcasting from analogue to digital transmission. Digitalization means not only more television channels for viewers to choose from but also greater scope for interactivity. This, in turn, may mean more power to consumers to select what to watch, when to watch, and how to watch. Concerns about increased volumes of advertising on burgeoning television channels and the use of more subtle forms of advertising that accompany greater commercialization of the television system (e.g., program sponsorship, product placement, program-related merchandising) have led to calls for tighter regulations governing televised advertising. This development is regarded as being especially necessary where children are concerned because their psychological immaturity as viewers and consumers leaves them more vulnerable to advertising influences. Under traditional advertising law, successfully prosecuted violations resulted in a "cease-and-desist" order that directed the advertiser not to engage in similar future frauds. Violations of these orders could result in prosecutions (extremely rare in practice) leading to fines of $5,000 per day per violation.1 Since most advertising campaign themes run for a year or less, and most commission advertising enforcement proceedings span periods of two to five years - with one horrible example running to sixteen years2 -the effect of any order was usually to direct the advertiser to discontinue an advertising campaign that had long since disappeared. Thus the major risk that an advertiser ran in disseminating a false claim was that the litigation expenses necessary to delay enforcement might exceed the value to the advertiser of the business advantage generated by the deception. Any move toward tightening restrictions upon advertising will create a tension with freedom of speech rights in democratic societies. To overrule freedom of speech (which includes freedom to advertise) rights, a legislator, regulator, or complainant will need to prove that harm is being done by commercial messages. Discussion of this issue has become particularly acute in debates surrounding moves to harmonize or even to standardize advertising related regulations across national boundaries-such as in Europe. Some countries operate much tighter regulations than others over advertising to children on television, and finding common ground that satisfies all national partners' concerns about children and about the freedom for advertisers to reach consumers with promotional messages can be difficult. Beginning in 1970, the commission claimed the authority to impose corrective advertising and has since brought complaints against a score of advertisers and imposed corrective advertising as a result of several consent settlements.3 In December 1975, it ordered the imposition of corrective advertising to correct allegedly false advertising concerning the mouthwash Listerine.4 The theory underlying corrective advertising is that the effects of a false advertising campaign endure in the marketplace long after the campaign has been discontinued, with consumers who recall the deception continuing to make purchases on the basis of misleading information. A simple cease-and-desist order obviously does nothing to eliminate the consumer misimpression, nor does it return to competitors any lost market share misappropriated as a result of the deception. Incidentally, the notion that advertising has residual marketplace effects that diminish slowly over time is consistent with the view of many economists that advertising should be treated as an investment rather than an expense.5 The corrective advertising concept could embrace somewhat more exotic theories of residual effect. For example, it could be argued in some circumstances that deceptions, though no longer recalled, were the cause of an original purchase and that thereafter brand loyalty and consumer satisfaction took over to generate repeat purchases, or that while there was no present recall (and therefore no identifiable residual effect) of false claims, similar future campaigns would predictably trigger recall and then influence market behavior. To date, the commission has not needed to deal with these more imaginative theories. A likely disposition would be to grant that such marketplace effects can occur and put it to the government to prove their existence in any particular case - a problem of proof so overwhelming as to make successful enforcement under these later theories virtually impossible. In what sort of cases will corrective advertising be applied in the future Most likely, the remedy will be reserved for use against major advertising themes. Purchase of advertising space is expensive and the remedy unusually embarrassing to companies against which it is directed. More important, a corrective message broadcast after all but a few consumers have forgotten the original fraud is likely to be confusing. Similarly, a corrective message for an insignificant fraud or for a false claim of marginal significance in most consumers' purchasing decisions would disserve the goal of emphasizing key market information on which consumer choices should be made. Corrective advertising will almost certainly be limited to those situations in which the government is able to prove clear recall of the fraud by a substantial segment of consumers at the time the complaint is Med. If the commission moves with reasonable dispatch - that is, if it brings cases fairly promptly after deception is detected - even twenty-six week ad campaigns, assuming they include a vivid and memorable fraudulent theme, should be reachable under this remedial approach. Conclusion. To a considerable extent, the "consumer movement" of the 1960s and early 1970s has been fueled by the fact that characteristic consumer injuries are usually so small in dollar amount that it almost never makes sense for individuals to seek compensation or relief through the slow and expensive processes of the courts. Frustrated consumers, feeling they have been exploited and unable to vindicate what they believe are their rights, have turned to government agencies (or have demanded the establishment of new agencies) to represent their interests. Also, many consumer advocates have turned their attention to the reform of institutions that protect consumers from injury before the event. Advertising regulation was an obvious target for that kind of approach. It is worth noting that most of the major departures in regulation described in this paper, including the ad substantiation program, corrective advertising, and required disclosure of product information, such as octane rating and tar and nicotine content, were initiated by petitions from consumer groups. It is not my intention to argue that all cases, rules, and programs undertaken under the influence of a more consumer-oriented program of ad regulation have been sound and sensible. My point is a much more United one of suggesting that many of the major changes that have occurred reflect a more realistic appreciation of the true role of advertising in a free market process and as such should result in higher levels of consumer welfare. References: 1. Yale Brozen, "Entry Barriers: Advertising and Product Differentiation," and H. Michael Mann, "Advertising, Concentration, and Proftability " in Harvey J. Goldschmid, H. Michael Mann, and J. Fred Weston Industrial Concentration: The New Learning (Boston: Little, Brown and Co., 1974), pp. 114-161 2. John Sutton, Sunk Costs and Market Structure: Price Competition, Advertising, and the Evolution of Concentration (Cambridge: MIT Press, 1991). Read More