Commerce exists in a less than perfect world. Were there perfection,
the economic forces of the marketplace would be sufficient to reign
in abuses that routinely distort -- to the detriment of consumers and
business -- the distinction between competition and predation. Were
there perfection in advertising, there would be little need to regulate
the content to assure the fairness and truth of commercial messages.
In a less than perfect marketplace, therefore, governments have turned
to regulation as a method of controlling abuse and, specifically, in
the case of advertising, false claims and misleading content. Thompson
and Jones define regulation as the imposition of rules by government
with the power to levy penalties, within the context of modifying the
economic behavior of businesses to the benefit of the common good. Such
regulatory activity in the pursuit of veracity in advertising claims
has been the purview of the Federal Trade Commission in the United States
for most of this century. Thousands of cases have been adjudicated,
settled, and otherwise disposed of by the FTC.
But action by the FTC is neither the only nor the most common regulatory
activity over advertising in this country. Given that advertising is
a conscious act that routinely requires planning and some degree of
professional expertise, the companies who engage in commercial promotion
have both control over the content of their advertising messages, as
well as some interest in the accuracy of those messages. Indeed, in
a period of limited resources, the consumer is faced with trusting advertising
information as truthful. This may be the central core of self-regulation:
advertisers know that consumers in most situations will match the product's
attributes to those advertising claims that affected the consumer choice
of that product. If the consumer's understanding of the advertising
message and the consumer's evaluation of the product's attributes are
asymmetrical to any significant degree, the consumer simply will not
purchase the product a second time.
Thus, meeting consumer expectations can be assumed as a baseline for
self-regulation by advertisers, an activity that is part -- to a greater
of lesser degree -- of every advertising activity.
However, as Ivan Preston has argued, complex, unclear advertising
messages, "puffery" -- advertising messages that are false, but not
deceptive by law (such as "The Best"), and the almost constant barrage
of commercial information, leaves consumers less capable of determining
if the promise of the advertisement matches the truth of the product.
Furthermore, as Priscilla LaBarbera notes, complex products are themselves
difficult for consumers to understand.
Thus, the consumer -- and by extension, the advertiser -- needs help.
The consumer's dilemma is apparent: false claims may result in disappointment,
lost resources, or physical injury. The advertiser's need for advertising
accuracy may be more subtle. Lack of truth in advertising may result
in consumers reducing their dependence on advertising as a method of
as certainly product attributes prior to product trial. As Joe Cappo,
publisher of Advertising Age, has noted, consumers in the former Soviet
Union had little faith in advertising because it was used by the government
only to promote products that otherwise would not sell. Thus, Soviet
consumers learned to equate advertising with shoddy products and to
give little credence to claims including in those advertisements. Lack
of faith in advertising places additional demands on the advertiser
to drive consumer sampling of the product. That is, if consumers mistrust
advertising, the advertise must find other methods to drive demand.
In addition, lack of standards may result in some advertisers enjoying
a short-term advantage over others by utilizes misleading advertising.
Thus, while most advertisers in a product category adhere to the "rules,"
the advertiser who uses misleading or false advertising can reap short-term
rewards. These rewards will almost always be short-term -- if only because
consumers will be able, in most cases, to ascertain the accuracy of
the advertising claims after a single sampling (purchase) of the product.
However, even short-term gains can be significant if the product is
a high price point (such as contact lenses) or infrequent purchases
(such as automobiles).
Advertisers may not be able to control the activity of the market
itself. For example, when environmental claims were perceived as an
important selling point for advertisers in the mid 1980s, there existed
no standard for many of the terms, such as "biodegradable," or "earth
friendly," or even "recycled." Industry, faced with some advertisers
using the terms in ways that were misleading consumers, turned to government
to establish definitions by which all advertisers could communicate
product attributes within a level playing field.