Chapter Objectives
• To be familiar with the advertising regulation
system in Canada
• To evaluate the ethical perspectives of advertising
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Chapter Objectives
• To understand the social effects of advertising
• To examine the economic role of advertising and
its effects on consumer choice, competition, and
product costs and prices
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Advertising Regulation in Canada
• Canadian Radio-television and
Telecommunications Commission (CRTC)
• Regulation of Tobacco Advertising
• Quebec Regulations on Advertising to Children
• Advertising Standards Council (ASC)
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
CRTC
• Mandate is to ensure the Broadcasting Act of
1991 and Telecommunications Act of 1993 are
upheld throughout Canada
• Make certain that all Canadians can receive
broadcasting and telecommunications services
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
CRTC
• Advertising aspects regulated:
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Advertising Limits
Infomercials
900 numbers
Alcohol and drugs
• Not covered:
– False and misleading ads
– Internet
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Regulation of Tobacco Advertising
• Restricted by Health Canada regulations on their
use of traditional advertising media
• Sponsor various arts, cultural, and sporting
events (will be discontinued in 2003)
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Regulation of Tobacco Industry
• Print ads communicating sponsorships were only
permitted advertising
• Underground marketing has emerged,
communication of brands occurs through
exclusive distribution in select bars, pubs and
nightclubs
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Quebec Regulations on Advertising
to Children
• Consumer Protection Act of Quebec
– It is illegal to direct commercial messages to persons
younger than 13
– Concerns the product, the way the ad is presented, and
the time and place the ad is shown
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Advertising Standards Council (ASC)
• Not-for-profit, self regulatory, industry body with
mandate to create and maintain community
confidence in advertising
• Represents advertisers media organizations and
advertising industry suppliers
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
ASC
• Canadian Code of Advertising Standards
– Describes what is not acceptable advertising
– Pertains to the content of ads only
– Intention is to provide standards so that responsible and
effective advertising results
• Gender Portrayal Guidelines
– Ensure that women and men are portrayed
appropriately in advertising
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
ASC
• Complaint Process
– Handles complaints in three streams
– Consumer complaints: from ordinary citizens who
believe an ad is unacceptable
– Special interest groups: from a demonstrated
organization that expresses a unified viewpoint
– Trade disputes: complaints from other advertisers
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
ASC
• Complaints Report
– Comprehensive annual report
– Identification of advertisers and the details of all
complaints
• Clearance Process
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Alcohol
Cosmetics
Non-prescription drugs
Ads directed towards children
Food
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Ethical Effects of Advertising
• Advertising as Untruthful or Deceptive
• Advertising as Offensive or Bad Taste
• Advertising and Children
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Advertising as Untruthful or
Deceptive
• Studies have shown a general mistrust of
advertising among consumers
• Puffery: advertising or sales presentations which
praise the item to be sold with subjective opinions,
superlatives, or exaggerations, vaguely and
generally stating no specific facts
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Advertising as Offensive or in Bad
Taste
• Common criticism of advertisers by consumers is
that ads are offensive, tasteless, irritating, boring
or obnoxious
• More likely to dislike ads for products they do not
use and brands they would not buy
• Type of appeal or presentation can also be
offensive (especially sexual and/or nudity)
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Advertising and Children
• TV is a vehicle through which advertisers can
reach children easily
• Critics argue that young children are vulnerable to
ads because they lack the experience and
knowledge to understand and evaluate the
purpose of persuasive appeals
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Advertising and Children
• Others argue it is part of life and children must
learn to deal with advertising as a part of life
• Consumer socialization process: acquiring the
skills needed to function in the marketplace
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Social Effects of Advertising
• Advertising Encourages Materialism
• Advertising Makes People Buy Things They Don’t
Need
• Advertising and Stereotyping
• Advertising and the Media
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Advertising Encourages Materialism
• Materialism: A preoccupation with material things
rather than intellectual or spiritual concerns
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Advertising Encourages Materialism
• Critics believe advertising:
– Creates needs rather than showing how a
product/service fulfills them
– Surrounds consumers with images of good life, and
suggests material possessions leads to happiness and
adds to the joy of living
– Suggests material possessions are symbols of status,
success and accomplishment
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Advertising Makes People Buy
Things they Don’t Need
• Some say advertising should just provide
information useful in making purchase decision
and should not persuade
• Persuasion criticized for fostering discontent
among consumers and encouraging them to
purchase products/services to solve deeper
problems
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Advertising and Stereotyping
• Women
– Has received a lot of attention through the years
– Criticized for stereotyping women and failing to
recognize their changing roles
– Portrayals of women emphasize passivity, deference,
lack of intelligence and credibility, and punishment for
high levels of effort
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Advertising and Stereotyping
• Visible Minorities
– Imbalance of visible minorities in advertising,
consumers not exposed as frequently to them
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Advertising and the Media
• Concern because advertising plays such a role in
financing the media, advertisers may influence or
control the media
• Economic Censorship: the media avoids certain
topics or even presents biased news coverage
because of advertisers demands
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Advertising and the Media
• Arguments supporting advertising control
– Media’s dependence on advertiser’s support makes
them susceptible to various forms of influence
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Advertising and the Media
– Includes:
• exerting control over editorial content
• biasing editorial opinions to favor the position of the advertiser
• limiting coverage of a controversial story that might reflect
negatively on a company
• Influencing the program content of TV
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Advertising and the Media
• Arguments against advertiser control
– Best interest of the media not to be influenced too
much, so that they retain public confidence, must report
news fairly and accurately without bias
– Advertisers need the media more than they need any
individual advertiser, particularly when the audience is
large or does a good job of reaching a specific market
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Economic Effects of Advertising
• Effects on Consumer Choice
• Effects on Competition
• Effects on Product Cost and Price
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Effects on Consumer Choice
• Some argue that large advertisers use their power
to limit options to a few well advertised brands
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Effects on Consumer Choice
• Economists argue advertising is used to:
– Differentiation: products or services of large advertisers
are perceived as unique or better than competitors
– Brand loyalty: enables large national advertisers to gain
control of the market, at the expense of smaller brands
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Effects on Consumer Choice
• Generally, advertising does not create brand
monopolies or reduce the opportunities for new
products to be introduced
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Effects on Competition
• Power in the hands of large firms with huge
advertising budgets creates a barrier to entry
making it difficult for other firms to enter the
market
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Effects on Competition
• Large advertisers enjoy certain competitive
advantages:
– Economies of scale
– Sell more products/services and can allocate more
monies to advertising
• No clear evidence that advertising alone reduces
competition, reduces entry barriers or increases
market concentration
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Effects on Product Costs and Prices
• Critics say advertising increases the prices
consumers pay for products and services through
– Large sums of money spent on advertising the
consumer ends up paying for
– Increasing product differentiation and adding to the
perceived value of the product
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising
Effects on Product Costs and Prices
• Counterarguments:
– Advertising may help lower the overall cost of a
product
– Makes a market more competitive leading to greater
price competition
– Means to market entry, stimulates product innovation,
making market more competitive, keeping prices down
Chapter 18 : Advertising Regulation and Ethical,
Social, and Economic Effects of Advertising