In 1938 Congress adopted the Wheeler-Lea Amendment to the Trade Commission Act, which gave the FTC the power to proceed against all unfair and deceptive acts or practices in commerce, regardless of whether they affect competition. Freedom to advertise Litigated Orders and Injunctions: If the advertising campaign is successful and long running, a residue of misleading information remains in the mind of the public after the offensive advertisements have been removed. _____ are industry-wide rules used by the Federal Trade Commission that define unfair or deceptive practices. In 2008 the 7th U.S. B. ad substantiation is not needed because most advertisements make very legitimate claims. If the advertiser loses this final appeal before the commissioners, he or she can appeal the litigated order in federal court. The registry, however, would also prove controversial. B. Acme's competitors may sue the company under the Lanham Act if it cannot substantiate its claims. The advertiser can refuse to sign the agreement. -jurisdiction is not particularly limited For instance, in 2010 the FDA issued a warning letter to Dreyers Grand Ice Cream regarding the labeling off its Nestle Drumstick Classic Vanilla Fudge Product. The advertiser is not responsible for every interpretation or behavior by a consumer. Advertising by professionals (attorneys and physicians) may be regulated in a more restrictive fashion. They speed up and simplify the process of enforcement. Distribution . -contributory D. NARC can handle cases at lower cost as compared to a court. * One of the most pervasive and annoying forms of advertising today is on the ________________. A prepackaged milkshake sold in convenience stores advertises that it has more chocolate-taste than shakes purchased at restaurants. B. -On top of this, the judge can double or triple the damage award in cases of especially flagrant falsity. -the court held it went against First Amendment The key elements in the FTC's definition of deception are that the representation, omission, or practice must be likely to mislead the reasonable consumer and that it has: B. A. are used to regulate public service announcements. A. selective exposure the death benefit paid will be what the premium would have been purchased at the correct age, a 10% excise tax is normally applied to an early withdrawal from an IRA. -fully insured WebTerms in this set (100) Advertisers are often supportive of voluntary self-regulation because: s self-regulation is viewed as a way of limiting government interference of advertising. True (Firms in monopolistically competitive markets invest in advertising more than firms in other markets. A. Nearly a century later, the FTC today is the only federal agency with jurisdiction to protect consumers and maintain competition in broad sectors of the economy. an agent is required to keep replacement forms on file for at LEAST __ years.. a producer who sells an individual life insurance policy in new jersey MUST deliver to the policy owner a(n), contain content approved by the commissioner, the names of the insurance companies represented by the producer 3 sections of the act expanded the remedies the FTC can use against deceptive advertising. WebA life insurable policy's advertising material MUST contain all of the following information EXCEPT: Agent's commission. E. the advertising relies on the use of puffery to make its point. Several airlines challenged the rule on First Amendment grounds in Spirit Airlines v. U.S. De'p of Transporatition. It may also regulate truthful advertising for lawful activities and goods if it can prove (1) there is a substantial state interest to justify the regulation, (2) that such regulation directly advances this interest, and (3)that there is a reasonable fit between the interest asserted and the governmental regulation. -indemnity \end{array}\right]+\left[\begin{array}{ll} One commissioner is chosen by the president to be the chairman of the FTC. A. a commercial is rejected at the storyboard stage. Parramore Corp has 12 million dollars of sales, 3 million dollars of inventories, 3.25 million dollars of receivables, and 1.25 million dollars of payables. Under this policy, express substantiation claims, such as "doctors recommend" and "specific tests prove," require the level of proof advertised. D. Affirmative disclosure E. Telephone Consumer Protection Act, ) The Federal Trade Commission and U.S. The basic defense against any false advertising complaint is truth-that is, proving that a product does what the advertiser claims it does, that it is made where the advertiser says it is made, or that it is as beneficial as it is advertised to be. -may raise premiums at policy renewal Endorsements must reflect honest opinions, findings, beliefs or experiences of the endorser. 2. E. peripheral importance. A. Puffery is illegal. B. Lanham Act -terminated employee Law greatly enlarged both the power and the jurisdiction of the FTC. the insured must now wait 60 days before bringing in legal action against the insurer. C. is regulated by affiliates. E. National Association of Broadcasters. Consumer Redress, Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Marketing Essentials: The Deca Connection, Carl A. Woloszyk, Grady Kimbrell, Lois Schneider Farese. C. not requiring consumers to make a purchase as a condition for entering. It is very expensive to get a case solved through NARC. In dealing with false advertising, the FTC's greatest enemy is the time needed to bring an action against an advertiser. which of the following must be included in the ad? A. B. speech that promotes a commercial transaction. Self Regulation by the Advertising Industry, Local Regulation and Better Business Bureau. If advertisers make such claims, they are in violation of the law. B. The appellate court reasoned that Craigslist "is not the author of the ads and could not be treated as th 'speaker' of the posters' words." Sometimes filing a lawsuit is the only effective way for the FTC to pressure some companies. E. puffery. ) An appeal of an adverse ruling by a circuit court can be taken to the Supreme Court, but only if certiorari is granted. -Court said overbroad and law shut down Vision Council of America For instance, in 2012 CARU recommended that the maker of Bratz Party Dolls alter packaging that featured the text "now with 100s of poses" and included photos of 3 dolls posed without assistance in various stances. Another angle that advertisers can pursue is to attack a different aspect go the government's case rather than try to prove the statement true. Does this message injure the plaintiff? D. NARC can handle cases at lower cost as compared to a court. Robocalls are illegal even if the number dialed is not on the Do Not Call Registry. -person's hire date The 5 members of the commission are appointed by the president and confirmed by the Senate for a term of 7 years. D. an affirmative disclosure. These guides are policy statements that alert businesses to what the agency believes are permissible advertising claims or practices. Ad substantiation C. any type of comparative advertising. Which of the following statements describes the NAD/NARB review process? A. C. NAD/NARB. * If an advertiser refuses to sign a consent order, the inquiry is handed to the U.S. Department of Justice. Since these firms have differentiated products, they If an ad represents, wither directly or by implication, that the endorser is an expert, then the endorser's qualifications must in fact give him or her the expertise that he or she is represented as possessing with respect to the endorsement. E. Network standards have become more stringent in response to competition from independent and cable stations. -split Three major divisions of the Federal Trade Commission are the Bureaus of: FTC's rules against deceptive advertising (2 components), 1) advertising must be truth and not misleading, with misleading ads sweeping up those in which relevant info is omitted, those that imply something that's not true and those in which any disclaimers are not clear and not prominent enough for reasonable consumers to see, hear, and understand them 2) all claims made in advertisements must be substantiated, such that before disseminating an ad, advertisers must have a reasonable basis for any and all express and/or implied product claims, with claims relating to health and safety coming under even closer FTC scrutiny that typically requires proof by competent and reliable scientific evidence. Which of the following statements about a consent order is true? WebA) It is effective in situations in which competitors are able to undercut prices easily. -does not include political calls or spam artists Pr(\operatorname{Pr}(Pr( Audi after VW) =0.8Pr(=0.8 \quad \operatorname{Pr}(=0.8Pr( Ford after VW)=0.2\mathrm{VW})=0.2VW)=0.2. B. consideration -issue subpoenas how are survivorship life insurance policies helpful in estate planning? continued coverage under COBRA would be provided to all of the following EXCEPT -lengthy elimination period, premium mode is a term used to describe the When advertisements or sales practices are targeted to a specific audience, such as those aimed at children or people who are elderly or terminally ill, they will be viewed from the perspective of a reasonable member of that group. Consent Agreement: 48 of those cases were resolved with court orders that cumulatively required payment of nearly $21 million in civil penalties and $12 million in redress or disgorgement of profits. 1. 7. C. Bureau of Alcohol, Tobacco and Firearms. -There was no substantial state interest. Which of the following statements about the use of puffery in advertising is true? A number of self-regulatory mechanisms have been established by the business community in an effort to control advertising practices and among them the largest and best known is the ____. -very easy for FTC to obtain Guidelines developed by the FTC are used by state courts to administer regulations. Each violation of such an order may result in a civil penalty of up to $16,000. D. California Test of Affirmation -Exceptions include: -If the spokesperson was paid E. speech governed by the First Amendment to the U.S. Constitution. 4. E. a commercial is rejected at the idea generation stage. -$400,000 (c) How do we test a binary predictor for significance? E. unsubstantiated order. B. advertising substantiation B. The 10th Circuit ruled in 2004 that the Registry did not violate First Amendment rights because the government asserted a _______ and the Registry directly advanced that interest. Complaints against advertisers are prepared by the FTC staff and approved by a vote of the commission. b. that harms the environment. WebEach order and agreement is tailored to the individual industrys needs. -Plaintiffs in Lanham Act cases had traditionally sought only to stop the competitor's advertising claims. B. Acme's competitors may sue the company under the Lanham Act if it cannot substantiate its claims. Weban insurance applicant has made a false statement on the application that will affect the insurer's decision on whether or not to issue the policy. c. competence. B. FTC Act B. Under section 5 of the FTC Act (as amended by the 1938 Wheeler-Lea amendment), the FTC is responsible for regulating: According to FTC policy, a trade practice or action is "unfair" if it: "the Commission will find deception if there is a misrepresentation, omission or practice that is likely to mislead the consumer acting reasonably in the circumstances, to the consumer's detriment", "a misrepresentation, omission, or practice" E. Most media reject political ads. Sometimes an advertiser doesn't want to sign a consent agreement. Postal Service. -If you use a spokesperson, that spokesperson should support the product D. FDA Act -policy owner -treatment for alcoholism -Advertisers cannot engage in practices that discourage purchase of advertised merchandise as part of a bait scheme to sell other merchandise, such as refusing to show or sell the product offered in accordance with the terms of the offer. d. adopted the principle of strict liability. The challenge wad filed with NAD by a competitor of Gillette, namely Schick, which makes "Intuition Plus" razors. -agents commission rate A television station won't advertise a sporting event that will be telecast on a competing channel. By 2010, the FTC had brought more than 60 telemarketing cases alleging do-not-call violations. A. unfairness If the NAD and an advertiser fail to resolve an advertising controversy, either party can appeal the case to the NARB, The _____ examines advertising claims in direct-response advertising, including infomercials and home-shopping channels. D. Freedom of speech WebRegulatory concerns never play a major role in the advertising decision-making process. -receive matching funds to expand public assistance programs -This act protects American consumers even more by preventing mergers or acquisitions that are likely to stifle competition. *Normally, what the FTC says in an advertisement is considered to be an advertisement fir purposes of regulation. Postal Service have laws that govern the use of a(n) ____, whereby a company proposes to send merchandise to consumers and expects payment unless a rejection or cancellation notice is sent by the consumer. A. [4230]+[wxyz]=[2305]\left[\begin{array}{rr} The agency has never outlined a hard-and-fast policy regarding when corrective advertising will be used. D. discourage comparative advertising. C. Affirmative Disclosure B. injunctive power. -medical underwriting, claims payable to a disability income insured, even when the insured can continue to work, are the result of a In the actual implementation and application of the 2 critical components of the FTC's rules against deceptive advertising, 3 key considerations emerge that are set forth: Advertising claims that significantly involve health and safety are usually presumed to be material. Injunctions The issue of truth and deception in such ads gained both public and congressional attention in 2008 when Pfizer, Inc. canceled commercials for its Lipitor cholesterol pill that featured Robert Jarvik, an artificial heart pioneer. The problem for Roommates.com was that it solicited specific content from users and forced them to use pull-down menus with questions featuring specific answer options in which they could express illegal and discriminatory views. General FTC Advertising Rules. Federal Communications Commission The long-standing legal doctrine is that the First Amendment is not even implicated; such a situation is one private entity, the mass medium, refusing to do business with another private entity. Injunctive power to immediately halt advertising campaigns that could cause harm to consumers First anti-trust law was passed in 1890: the Sherman Act. Remedies for deceptive and unfair advertising, Require Substantiation The consent agreement is merely a promise not to do something in the future. 0 & 5 Although the agency is located Washington D.C., it had 11 regional offices throughout the nation. Under the proposed new guides, such disclaimers indicating that the results of the endorser are unusual or out of the ordinary would not be enough to protect the advertiser from potential liability. The good news for consumers is that they sometimes get part of their money back. B. negative option There must be a representation, omission or practice that is likely to mislead the consumer* Between 1946 and 1968 the courts heard fewer than 30 false advertising cases. D. puffery; legal D. is more stringently self-regulated than any other medium. Self-regulation by the advertising industry has increased in recent years, especially with the growth of comparative advertising. Which of the following statements is TRUE? 3. B. E. Independent Business Alliance, D. Electronic Retailing Self-Regulation Program. -brokers and consultants There is just an agreement not to repeat that particular claim in future advertising campaigns. -covered employee is terminated for gross misconduct, a covered employee who is terminated for gross misconduct. C. Robinson Patman Act The law also gave the agency important new power. 57a, empowers the Commission to promulgate trade regulation rules with the force and effect of law that "define with specificity" acts or practices that the Commission finds, based on substantial evidence in the rulemaking record, are prevalent and are unfair or deceptive. All TV viewers have seen famous athletes and celebrities, as well as experts and ordinary consumers, on commercials making claims abut products they supposedly use or in which they otherwise believe. The FTC 's rules state, among other things, the following: The media cannot refuse to accept advertising for an entire product class such as hard liquor. B. if the ad does not provide sufficient information to the consumers so as to make an informed decision. In response to a request from the Institute for Public Representation for such a policy statement, the FTC said corrective advertising may be applied: "If a deceptive advertisement has played a substantial role in creating or reinforcing in the public's mind a false and material belief which lives on after the false advertising ceases, there is clear and continuing injury to competition, and to the consuming public as consumers continue to make purchasing decisions based on the false belief." agreed, observing that the adult struggles to attain intimacy and C. puffery; illegal Under the corrective advertising scheme, the FTC forces the advertiser to inform the public that in the past it has not been honest or has been misleading. Newspapers, magazines, broadcasting stations, online service providers and other mass media all have rules that more or less regulate the kind of advertising they will carry. -5 commissioners, appointed by the President, including the chair man Writing for a 6-justice majority, Justice Antonin Scalia wrote that "the message set out in the beef promotions is from beginning to end the message established by the Federal Government" and that the secretary of agriculture "exercises final approval authority over every word used in every promotional campaign." D. run the promotion only in the state where the Super Bowl is being held. National Advertising Review Board State regulation of advertising predates federal regulation buy several years. B. puffery has detrimental effect on consumers' purchase decisions. -are the only ones to involve courts WebLaws must be static and unyielding in order to provide stability for a society. "individually identifiable health information" ? food and pharmaceuticals Which promotional strategy requires a d. generativity. These are the probabilities that he drives each of the other cars the next day: Pr(\operatorname{Pr}(Pr( Ford after Audi )=0.7Pr(VW)=0.7 \quad \operatorname{Pr}(\mathrm{VW})=0.7Pr(VW after Audi )=0.3)=0.3)=0.3 B. a superlative; illegal E. puffery, unethical. reggie purchased a life insurance policy with a face amount of $500,000. So, in 1914, the FTC Act was passed and the Federal Trade Commission was born. -only includes calls about goods or services what is an insurance policy's grace period? -Interstate commerce - anything that involves commerce between 2 states E. fraud, Which of the following is one of the two of the factors the FTC considers in evaluating an ad for deception? All claims made in advertisements must be substantiated such that, before disseminating an ad, advertisers must have a reasonable basis for any and all express and/or implied product claims, with claims relating to health and safety coming under even closer FTC scrutiny that typically requires proof by competent and reliable scientific evidence. Rarely have these challenges been successful. Way back in the 1800s, there were several giant businesses known as Trusts that controlled whole sections of the economy. Postal Service Central Hudson E. Federal Communication Reform Act. Ads that promote illegal goods and services, that contain claims that appear to be deceptive or are not substantiated, or that unfairly trash a competitor's products might also be ___________. 1. National Advertising Division B. affirmative disclosure Misinterpretation C. the Better Business Bureau may sue Acme if it cannot substantiate its claims. Trade regulation rules, guides & Child's Online Privacy Protection Act, FTC issues industry guides for a variety of products, services, and marketing practices. Sometimes the owner of the medium thinks the product that is being advertised is offensive, like NC-17 or adult movies, or condoms. Advertisers claimed the Registry violated their First Amendment rights to free speech. -third party administrators Falsely implying that a benefit is needed. Worked, however, some companies then decided to just merge together. In this case the commission can issue an order, usually called a *litigated order,* to stop the particular advertising claim. Litigated orders after an insured gives a notice of loss, what must he/she do if the insurer does not furnish forms? Express claims as to the attributes of a product are always considered material. B. ad substantiation. Because the agency was created under the authority of Congress to regulate interstate commerce, products or services must be sold in interstate commerce or the advertising medium must be somehow affected by interstate commerce before the FTC can intervene. -all serve 7 terms * Federal Trade Commission If the advertiser has had a good record in the past and if the offense is not too great, the company can voluntarily agree to terminate the advertisement and never use the claim again. B. -insured C. affirmative disclosures There * "The commission generally will not bring advertising cases based on subjective claims (taste, feel, appearance, smell)," according to the guidelines. D. U.S. E. Freedom of press. II. -waiver of premium E. an illegal comparative advertisement. E. Treasury Department, Which of the following agencies is responsible for tax collection for the liquor industry? E. Association of American Publishers, Which of the following is the appellate unit of the National Advertising Review Council? This agency was responsible for putting warning labels on alcoholic beverage advertising and In fact, the FTC makes it clear that an agency has "a duty to ascertain the existence of substantiation for the claims which it makes." One Bratz doll, for example, was shown standing on one leg with her right knee bent at about a 30-degree angle and arms outstretched. WebThe Telephone Disclosure and Dispute Resolution Act of 1992 requires FTC to promulgate regulations concerning advertising for, operation of, and billing and collection procedures for, pay-per-call or "900 number" telephone services.The regulations must include certain provisions, such as price disclosure requirements, mandatory warnings on services -method of payment These guidelines spring from a variety of concerns. -never protection of proceeds, there is protection of proceeds against the insured's and the beneficiary's creditors, which of the following is MANDATORY coverage for all group health care service contracts? These acts are often called "Little FTC Acts," and the guidelines developed by the FTC in applying federal advertising law are used by the state courts in administering these state regulations. A. It is only acceptable to lie when done to protect an innocent person. By July 2012, the FTC had brought a dozen enforcement cases targeting illegal robocalls, with violators paying $5.6 million in total fines. Substantiation On the other hand, to the extent that spam pertains to a lawful product and is neither false nor deceptive, it constitutes commercial speech protected by the First Amendment. -establish new insurance laws, establish continuing education requirements, which of the following is true concerning the proceeds of a life insurance policy? There was no government ban on the disclosure of the alcohol content in advertising for these brews, Justice Clarence Thomas wrote. B. Also, advertising aimed at a special vocational group, such as physicians, will be evaluated from the perspective of a reasonable member of that group. A. deception; legal Professional Development. (a) What is a binary predictor? C. are issued by the Federal Trade Commission. Guides and the Child Online Privacy : The division of Consumer Protection With the rapid growth of comparative advertising (in which the advertised product is compared to a competitor's product), more and more advertisers have taken competitors to court over what they claim is deceptive and false advertising. The signing of a consent order is an admission of guilt by the advertiser. (2) An advertisement shall not state or imply that the payment or amount of nonguaranteed elements is guaranteed. -beneficiaries D. any advertising on a broadcast media. The next remedy on the ladder is voluntary compliance and is used for advertising campaigns that are over or nearly over. -statements that dividends are not guaranteed Acme Tire is developing an advertising campaign that will claim cars with its new RX model stop 25 percent faster on wet pavement compared to other brands of tires. Guides or advisory opinions that attempt to outline in advance what advertisers may say about a product This the First mendment plainly permits." A. uses puffery. -set sales quota right to transfer ownership and dividend entitlement. *Aggravated Violations*. -But judges have said past facts can be misleading, It's not nearly as easy to prove "substantial state interest" in commercial speech than porn and obscenity. The NARC became involved in the self-regulation of electronic retailing when it initiated the: The National Advertising Division and the Child Advertising Review Unit, divisions within the Better Business Bureau, are the primary agents for this self-regulation. Commercial speech is most accurately defined as: Several developments propelled the growth of Lanham Act false advertising activity: A. within one month of the appearance of the ad. Television advertising: A. U.S. *In addition to the federal CAN-SPAM Act, some states have their own statutes targeting such e-mails.*. A life insurance policy sold in Louisiana can be contested by the insurer only during the first ____ years of the contract. A. ad substantiation * Food and Drug Administration Free Speech Matrix The 7th Circuit, however, held that Craigslist was protected by Section 230 of the CDA, which generally shields online service providers from liability when they are mere conduits (rather than publishers or speakers) for information posted by third parties. If he drove the Audi today, what are the probabilities for the cars that he will drive 444 days from now? A. Direct-response advertisers that use the U.S. mail to deceive consumers by marketing get-rich-quick schemes fall under the jurisdiction of the: What's more, the FTC made sure in 2012 that more than 477,000 consumers received monetary redress totaling $26.8 million. This provision of the Lanham Act was seldom used by advertisers until the 1970s. E. Federal Communications Commission. Under the commercial speech doctrine and the Central Hudson test, the government may prohibit advertising (1) that promotes an unlawful activity or (2) that is misleading or untruthful. The FTC enforces rules regarding endorsements of products and services by consumers, celebrities, experts and organizations. In brief, Roomates.com was more akin to a publisher or speaker rather than a mere conduit for the information that it posts. Postal Service A. *Remember, a mass medium is permitted to reject any content it chooses, with or without a reason. Cease-and-desist orders: The representation, omission or practice must be material. D. Lanham Act -Lawyers are only allowed to state past facts, they can't promise future things A. Corrective advertising D. STP Corporation. Food and Drug Administration -Also court said this case was "in the public interest". Which of the following programs is more likely to be the most controversial of all the Federal Trade Commission's programs? According to the FTC's definition of deception, a representation, omission, or practice has materiality if it: 3) The advertiser can refuse to sign the agreement. The substantiation does not have to be in the ad itself. is false or misleading, promotes unlawful goods or services, or is discriminatory on the basis of race. D. Trademark Revision Act of 1988 voting power on major issues and ownership in a portion of the company. -The test of false advertising, for years a complex configuration of criteria, was reduced to basically 3 parts: E. Advertising guidelines, According to Federal Trade Commission policy, the criteria for determining _____ are (1) a trade practice causes substantial physical or economic injury to consumers, (2) could be reasonably avoided by consumers, and (3) it must not be outweighed by countervailing benefits to consumers or competition. D. multiple interpretations. Individuals who are represented in the ads must be actual consumers, unless stated otherwise.