Laws, regulations, and standards

Of all the criticisms leveled at manufacturers, those against their advertising probably have been the most vociferous. Advertising is generally vulnerable to these attacks, because it is experienced by everybody, its products are on show for a long time, and its purposes are materialistic. Although the major purpose of company advertising, which is to attract members of the public toward buying a particular product, is fairly straightforward, the methods employed in this process have become increasingly complex. As business has become more competitive, so has the advertising that sells its products. Coupled with this increased competition has been the development of more powerful media, including television and the Internet.

From the consumer’s point of view, the basic criticism of advertising is that it leads people to purchase goods that they have no wish to purchase by presenting misleading and untruthful statements or by creating wants, needs, and desires in their minds that might not otherwise exist. In the first instance it is accepted that consumers, of their own volition, have needs that are filled by the description of the advertised product but not necessarily by the product itself, whereas in the second the need is artificial and is stimulated entirely by the media.

From an economic viewpoint, critics of advertising point to its enormous cost, which does not benefit consumers, though they are compelled to pay it. A second criticism is that advertising restricts competition because only large companies can afford expensive nationwide campaigns, thus limiting freedom of entry of new firms into an established market.

A definitive response to these criticisms is obviously impossible. Regarding the first, it might be fair to say that economic growth and the creation of wealth might come about far more slowly without the aid of advertising. The development of national rather than regional brands—and the economies of scale implicit in this development—might be slowed. For all its drawbacks, advertising informs consumers and enables them to make not only a choice between products but also a choice between the vendors from which they can buy those products. For the manufacturer, it justifies a heavy investment in capital and labour in that it assures (to some degree at least) the quick development of sales.

Regarding the second major criticism—that advertising encourages the concentration of industry—there is no doubt that this is true. But not everyone agrees that industrial concentration necessarily acts against the interests of the consumer, particularly in the absence of outright monopolies or cartels. In some countries, such as the United States and Great Britain, antitrust or monopoly laws act to restrain the more flagrant abuses of industrial power. Other countries, especially some in western Europe, have established monopolies boards, which monitor or oversee activities of large corporations in the field of takeovers and mergers.

The advertising industry has for many years been aware of the various criticisms and has accepted the need for some control over advertising methods in addition to the provisions of statutory regulations that exist in many countries. The country with the most stringent advertising standards is usually thought to be Great Britain, where, for example, all advertising on private radio and television and on the Internet is regulated by the Advertising Standards Authority (ASA), an independent body. The ASA enforces an industry-written code on behalf of a statutory regulator, the Office of Communications (OFCOM). The ASA bans the use, for instance, of subliminal advertising (methods by which the listener or viewer might be influenced without becoming aware of it) and of advertising that plays on fear and on the minds of the superstitious.

The general character of governmental and private controls over the claims and methods of advertisers may be said to be one of considerable laxity. It seems likely that this situation will be changed not so much by the introduction of more stringent codes as by challenges to particular advertisers by consumer interest groups within the framework of existing legislation regarding truth in advertising.

Labeling can be used either to inform or to deceive the consumer, and manufacturers, in their sales efforts, are often tempted by the latter expedient. Minimum standards of labeling exist for some products, but, as with controls on manufacturing quality, legislation tends to concentrate on food and drugs. Usually, every container carries a statement of contents, but, apart from food and drugs, content identification is not usually required. If it is provided, however, it must not misrepresent. In general, this means that labeling, when it is present at all, tends to be accurate.

Generalizations cannot be made concerning statutory controls on sales methods because they vary from place to place. Sales practices have been controlled for over a century; early regulations were largely concerned with peddlers and hawkers. Legal progress has, in general, imposed a stricter control of selling methods to reduce the incidence of deception.

One deceptive technique used in direct, in-person sales is that of switch selling, or “bait and switch.” The company or salesperson attracts buyers by placing an advertisement offering a domestic article at a remarkably low price; this is known as the bait. Inquirers then encounter salespeople who, from the outset, make no attempt to sell the product advertised. Having convinced the inquirer that the model is not worth buying, a salesperson goes on to offer the customer another model (the switch) that happens to be available at, of course, a higher price. Although this and similar methods often are in violation of statutes governing the sale of goods, enforcement is difficult. Extra protection is provided by legislation in some countries, and in other countries nonstatutory regulations protect the consumer.