MenuItem 13: {Topic 13} Legal and ethical issues
Section A: True or False
1. The ACCC is the federal organisation whose charter is to strengthen the rights of consumers.
Answer: T page 380
2. Consumer protection laws in Australia exist only at federal level.
Answer: F page 380
3. The advertising industry has adopted a system of self-regulation, which means they don’t need to pay attention to the ACCC.
Answer: F page 380
4. Voluntary industry codes of practice cover ethical areas of behaviour by marketers in their dealings with consumers.
Answer: T page 381
5. The Advertising Standards Board is responsible for making sure that advertisements reach a certain standard of excellence.
Answer: F page 381
6. Industry codes of practice are designed to enhance the image of the industry by making sure that members behave legally and ethically.
Answer: T page 381
7. Industry codes of practice, particularly those associated with advertising, are always adhered to.
Answer: F page 384
8. One of the major legislative impacts on this industry in recent years is the introduction of the National Privacy Principles.
Answer: T page 388
9. The ADMA code of conduct covers the use of SMS in direct marketing.
Answer: T page 388
10. Activities which are unethical are also illegal.
Answer: F page 390
Section B: Multiple Choice
Test Bank t/a Consumer Behaviour by Karen Webb 13-1

Question 1
The Australian Consumer Association is: a) Independent b) Non-political c) Government funded d) a and b only
Answer: D page 380
Question 2
One of the most significant changes in the Australian government regulatory environments is: a) The abolishment of the Trade Practices Act b) The establishment of the Australian Competition and Consumer Commission
(ACCC) c) The abolishment of the Price Surveillance Act d) All of the above are significant
Answer: B page 380
Question 3
Industry self-regulation means the: a) State level regulates a certain industry b) Federal level regulates a certain industry c) Local municipal level regulates a certain industry d) Industry regulates itself through its own formulation of rules
Answer: D page 380
Question 4
In Australia, the various forms of self-regulation cover a broad range of industries, including: a) Advertising b) Direct marketing c) Financial services sector d) All of the above
Answer: D page 380
Question 5
The ACCC has conducted enquiries into: a) Telecommunications b) Petrol
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c) Fitness products d) All of the above
Answer: D page 380
Question 6
In Australia, the ________________ is responsible for handling complaints about the content of particular advertisements in all media, and whether or not an ad has breached certain codes. a) Media Council of Australia b) Advertising Standards Board c) Advertising Federation of Australia d) Advertising Council
Answer: B page 381
Question 7
An industry code of practice is: a) An attempt to raise the image of the industry through ethical behaviour b) The same as the Trade Practices Act, but focused on the industry c) Something to make consumers think the industry cares about them d) Compulsory for all businesses within the industry
Answer: A page 381
Question 8
The existence of an industry code of practice: a) Means consumers can trust everyone in the industry b) Means businesses that do not sign up for it will be excluded from the industry c) Does not provide a guarantee that all businesses within the industry will behave ethically d) Means the industry association can force members to adhere to it
Answer: C page 381
Question 9
The federal and state governments are considering introducing legislation to cover car advertising, because: a) They feel like it b) Advertisements show unsafe driving practices, despite the voluntary code of conduct c) There is too much bad language in car advertisements d) To blame advertisers for road accidents
Answer: B page 382
Test Bank t/a Consumer Behaviour by Karen Webb 13-3

Question 10
The Therapeutic Goods Act 1989 covers products such as: a) Prescription products only b) Products that are only sold in health food stores c) Any products that are marketed as having therapeutic or health benefits d) Health products excluding prescription products
Answer: C page 383
Question 11
Advertisers of products targeted at children have: a) Additional ethical responsibilities, with a separate code for advertising to children b) The same ethical responsibilities as all other advertisers c) Fewer ethical responsibilities than all other advertisers d) All of the above
Answer: A page 383
Question 12
Health and obesity is: a) The latest thing politicians think they can gain votes by addressing b) An important issue to consumers c) A great marketing opportunity where advertisers can exaggerate claims because consumers want to believe in quick fixes d) A social problem, but not one that advertisers need to give special attention
Answer: B page 383
Question 13
The NSW alcohol abuse summit in August 2003: a) Didn’t discuss alcohol advertising b) Threatened to impose compulsory regulations if advert isers didn’t start obeying the voluntary code of practice c) Seemed to think there was no real problem with alcohol advertising d) Criticised alcohol advertising for anti-social and irresponsible behaviour
Answer: D page 384
Question 14
The beer industry’s main lobby group’s ‘retailer alert’ is designed to persuade retailers to: a) Stop beer theft b) Stop blatant in-store advertising of spirits
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c) Withdraw in-store advertising of products directed at teenagers, but continue selling the products to responsible adults d) Withdraw products that are marketed aggressively to teenagers
Answer: D page 384
Question 15
The reason Australian Associated Brewers proposed the ‘retailer alert’ is to: a) Protect the liquor advertising self-regulation system from interference by government b) Control all alcohol advertising c) Force the industry to behave ethically d) Transfer the responsibility for teenage over-drinking from advertisers to retailers
Answer: A page 384
Question 16
The National Privacy Act 1988 : a) Protects the privacy rights of businesses b) Protects people from their busy-body neighbours c) Includes regulations about the collection and use of information about individuals d) Includes regulations about the use of people’s pictures taken in public settings
Answer: C page 385
Question 17
The Privacy Amendment (Private Sector) Act applies to: a) Businesses with an annual turnover of over $3 million b) Businesses with an annual turnover of over $3 million and smaller businesses in health services, direct marketing and contract services c) All businesses d) Businesses that keep data bases of their customers
Answer: C page 386
Question 18
What does adherence to the National Privacy Principles mean to business? a) A marketing tool that can increase sales through greater consumer confidence b) Another additional cost for business c) The removal of opportunities to increase sales d) Different rules for businesses that trade in a number of countries
Answer: A page 386
Question 19
Test Bank t/a Consumer Behaviour by Karen Webb 13-5

The Direct Marketing Association has developed its own code of practice because: a) The normal advertising codes of practice don’t apply to it b) The industry is growing rapidly c) The industry has distinct characteristics that require additional codes of conduct d) Consumers don’t really trust direct marketers
Answer: C page 388
Question 20
SMS as a direct marketing tool is: a) Not happening b) Growing among businesses such as pubs and clubs c) Going to be as big a problem as spam e-mail d) Too expensive to use
Answer: B page 389
Question 21
The ‘freedom of speech’ argument suggesting advertisers should be able to say anything as long as it is legal: a) Is true b) Is not true c) Disregards social behaviour d) Disregards social responsibility
Answer: D page 393
Question 22
Codes of conduct preventing advertisers making any claim as long as it is legal: a) Prevent them making money b) Link social responsibility to the operation of a business c) Are just a pretence to persuade governments that they don’t need to interfere in the running of businesses d) Are just another step towards a totalitarian state
Answer: B page 393
Question 23
The Advertising Standards Bureau is seen as being _____________________ in relation to advertisements that some members of the community feel are inappropriate, for example the Windsor Smith and Chivas Regal billboard advertisements. a) Effective b) Ineffective c) Supportive of the community complaints
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d) Very strong
Answer: B page 394
Question 24
The ACA is the: a) Australian Competitor’s Association b)
Australian Consumer’s Association c) Australian Competition Authority d) Australian Consum er’s Authority
Answer: B page 395
Question 25
It would be wise for all businesses to adhere to their industry codes of conduct because: a) If they don’t, they may be regulated b) If they don’t, consumers will regard them as unprofessional c) Consumers will only buy from businesses that do d) It costs less
Answer: A page 396
Section C: Short Answers
Question 1
What is self-regulation?
Answer: page 380
Self-regulation means that an industry develops its own guidelines or code of conduct by which industry members must abide. It is seen as a way to protect consumers and enhance the ethical image of an industry. The resulting code of conduct is usually developed by the members of the industry association, with input from government and community groups, and administered by the industry association, or a body created to administer it, usually made up of industry members.
Question 2
What does the Advertising Standards Board do?
Answer: page 381
The Advertising Standards Bureau administers the advertising i ndustry’s system of self-regulation. It runs the Advertising Standards Board, which hears complaints about advertising from the general public and from other companies.
Question 3
Test Bank t/a Consumer Behaviour by Karen Webb 13-7

What are the seven points banned by the voluntary car advertising code of practice?
Answer: page 382
The voluntary seven-point code of practice bans ads showing:

menacing driving

unsafe driving

reckless driving

travelling faster than the speed limit

use of hand-held mobile phones

unbuckled seatbelts.
Question 4
What are the four most advertised product categories in Australia?
Answer: page 382
The four most advertised product categories in Australia are food, alcohol, clothing and motor vehicles.
Question 5
What is the Therapeutic Goods Administration and what does it do?
Answer: page 383
The Therapeutic Goods Administration (TGA) administers the pharmaceutical and therapeutic goods industry. It is governed by the Therapeutic Goods Act 1989 . This includes any products that are marketed as having any therapeutic or health benefits.
It covers products such as vitamins, herbal remedies, slimming products and pain relief products.
Question 6
In what areas has Commercial Television Australia been involved in determining regulations?
Answer: page 383
It has been involved in determining regulations relating to the following:
• program classifications
• accuracy, fairness and respect for privacy in news and current affairs
• advertising time on television
• the placement of commercials and program promotions
• complaints handling.
Question 7
What does the liquor industry’s code of conduct recommend in relation to liquor advertising?
Answer: page 384
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The code says television, radio and print ads for alcoholic beverages must ‘present a mature, balanced and responsib le approach to consumption’, not feature anyone younger than 25, and not suggest that drinking alcohol will lead to a ‘significant change in mood or environment’.
Question 8
What do the 10 National Privacy Principles cover?
Answer: page 386
The principles cover:

How personal information is collected

The purposes for collecting that information

How accurate and up-to-date that information is

How securely that information is kept

How Privacy Policy be documented and made available

The rights you have to retrieve your own information

How this information is classified

Your rights to remain partly identifiable in any transactions

How information flows from country to country

How sensitive information cannot be collected without consent.
CONTINUED
Question 9
What are the broad areas covered by the code of conduct governing the use of SMS for marketing purposes?
Answer: page 388
The ACA code covers the following broad areas:
• sending of marketing messages by carriers and carrier service providers (CSPs)
• carriers’ and CSPs’ arrangements with commercial message originators
• exemptions from marketing message rules for sending service-related messages and messages concerning health, safety and law enforcement issues.
Question 10
According to the MRSA code of professional behaviour, what are the professional responsibilities of a market researcher?
Answer page 391
RESEARCHERS’ PROFESSIONAL RESPONSIBILITIES

Researchers must not, whether knowingly or negligently, act in any way that could bring discredit on the market research profession or lead to loss of public confidence.

Researchers must always strive to design research which is cost-efficient and of adequate quality, and then to carry this out.

Researchers must not undertake non-research activities (for example, telemarketing, list building) and research activities simultaneously.
Section D: Essay Questions
Test Bank t/a Consumer Behaviour by Karen Webb 13-9

Question 1
The federal and state governments are considering introducing mandatory codes of advertising for the motor vehicle industry. Why are they proposing this? Can you find three advertisements that support their arguments? Why does the Advertising
Standards Board reject these arguments?
Answer: page 382
There are concerns about the relationship between advertising images showing unsafe driving practices - very fast speeds, dangerous or foolish use of off-road vehicles etc, and the high level of roads accidents and deaths. While the industry has adopted a voluntary seven point code of practice, there appears little change in advertising images used, or enforcement of the rule.
Students should be able to easily find and discuss three advertisements showing very fast driving in unrealistic conditions (no-one else is ever on the road) or unrealistic off-road driving capabilities.
The Advertising Standards Board rejects the claims because complaints about motor car safety in advertising form only about 8% of all complaints - the most safetyrelated complaints ever received regarding a single motor vehicle advertisement from
1998 to 2002 is six. The most complaints regarding a single motor vehicle ad involved not safety but language, concerning the “bugger” in the Toyota ads, and that was well over 100 complaints. The Boards representative further argues that community complaints about the graphic nature of many road safety television commercials regularly exceed complaints regarding ads for the actual car. Besides that, of all valid complaints received about car ads, about two thirds concerned vehicle safety or issues already broadly covered by the code, so no further regulation is needed.
Question 2
The liquor industry has developed codes of conduct in relation to advertising. What are the main reasons for this? What is the social and ethical focus of the code?
Select three advertisements for alcohol products and discuss whether they adhere to the code.
Answer: pages 384-385
Criticisms of images used in advertising which are seen as contributing to social alcohol-related problems, particularly teenage and binge drinking, are leading to increasing interest in the creation of compulsory regulations by governments.
Governments and community groups feel that the current voluntary codes are not working, are not adequately enforced, and do not even apply to many companies in the liquor industry, particularly companies making brands of ready-to-drink spirits, aimed at younger market segments.
The social and ethical focus of the code says television, radio and print ads for alcoholic beverages must ‘present a mature, balanced and responsible approach to consumption’, not feature anyone younger than 25, and not suggest that drinking alcohol will lead to a ‘significant change in mood or environment’.
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Discussions of the advertisements will depend on the advertisements selected, but should reflect the above issues.
Question 3
Privacy become an important issue in recent years. Why do you think this has happened? What is being done to prevent the problems? What does it mean for businesses?
Answer: pages 386-387
With the growth in the use of technology to collect information about individuals, there is concern among many individuals and organisations that their right to privacy is becoming endangered. The access to large amounts of data about consumers and organisations can also be made easier by technology - and may result in not just trying to market goods and services to these consumers, but also perhaps encroaching on their personal lives. Consumers feel they are losing control over information about their personal lives.
Students should discuss the Privacy Amendment (Public Sector) Act and the 10
National Privacy Principles.
Businesses should regard compliance with the privacy regulations as a marketing tool. It improves consumer confidence and that equates to sales, not only in Australia but also throughout the world. A good privacy policy is almost essential for any business wishing to obtain customers via the internet.
Question 4
Advertisers argue that, under the principles of ‘freedom of speech’, they should not be restricted from making any claims, or saying anything in advertising, provided it is not illegal. Discuss whether or not you agree with argument, using examples of advertising to support your arguments.
Answer pages 392-394
Answers should generally agree that freedom of speech is not always in line with social and ethical responsibilities of businesses. The right to make a profit does not outweigh the need for businesses to operate within the parameters of decent behaviour acceptable within the community.
Answers should discuss the differences between illegal and unethical statements and claims, and social and community concerns about the portrayal of groups such as women, and the impact of advertising on children.
Students should be able to find examples of advertising that oversteps social boundaries, but may also argue that different groups will react differently to the same thing. For example, the target market for products such as Chiko Roll and Chivas
Regal (young males) may not find the ads as offensive as other groups (women and conservative, older people).
Question 5
Test Bank t/a Consumer Behaviour by Karen Webb 13-11

Most industries that have voluntary codes of practice do so to prevent compulsory regulation. What are the dangers of allowing industries to self-regulate with no interference from government? Use examples to illustrate your answer.
Answer: whole chapter
This question assesses the student’s understanding of the ethical issues involved throughout the chapter. Answers should include aspects such as:

There is unlikely to be any objective assessment of a situation, especially where the application of guidelines developed for the industry are all that are used. For example, self-regulation in the advertising industry has led to comments that advertisers are protecting their own members rather than looking after the interests of consumers.

Most codes are voluntary, and can only be enforced with sanctions which may not mean much to the non-complier, for example some may not care if they are expelled from the association, or not all related businesses such as retailers may enforce the sanctions.

Not all businesses in an industry are members of the association, so are not even covered by the codes of conduct. This is particularly for multi-national or foreign owned businesses.
Answers should be illustrated with appropriate examples.
Test Bank t/a Consumer Behaviour by Karen Webb 13-12