The SAGE Handbook of Advertising
The SAGE Handbook of Advertising
Advertising Regulation
Contributors: Jef I. Richards & Ross D. Petty
Edited by: Gerard J. Tellis & Tim Ambler
Book Title: The SAGE Handbook of Advertising
Chapter Title: "Advertising Regulation"
Pub. Date: 2007
Access Date: March 12, 2019
Publishing Company: SAGE Publications Ltd
City: London
Print ISBN: XXXXXXXXXX
Online ISBN: XXXXXXXXXX
DOI: http:
dx.doi.org/10.4135/ XXXXXXXXXXn24
Print pages: XXXXXXXXXX
© 2007 SAGE Publications Ltd All Rights Reserved.
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Advertising Regulation
Jef I.Richards, Ross D.Petty
Near the end of this past century, the Catholic Church's study of advertising and its role in society concluded:
“There is nothing intrinsically good or intrinsically evil about advertising. It is a tool, an instrument:
it can be used well, and it can be used badly. If it can have, and sometimes does have, beneficial
esults such as those just described, it also can, and often does, have a negative, harmful impact on
individuals and society.”
(Foley et al., 1997)
Shortly thereafter, the Court of Appeals for the District of Columbia Circuit affirmed the Federal Trade Com-
mission's (FTC) order for co
ective advertising, to cure lingering effects of harmful advertisements. The FTC
ordered the maker of Doan's Pills to include a disclosure in its advertising for one year, until it had expended
$8 million. This was the average amount it spent annually over an eight year period to persuade consumers
that Doan's Pills was a superior product for relief of back pain over other pain relief products. There was no
substantiation to support this superiority claim (Novartis Corp. v. FTC, 2000).
This sort of misleading and unsubstantiated claim in commercial advertising is the primary focus of advertising
egulation throughout the world and the main focus of this chapter. This regulation of commercial deceptive-
ness not only protects consumers from being misled, but also bolsters advertising's credibility. Greater adver-
tising credibility can lead to less resistance to ads and greater belief of their claims, resulting in more effective
marketing communications. In this way, both consumers and advertisers benefit from regulating advertising
deceptiveness.
However, advertising regulation includes much more than dealing with deceptiveness. The next section de-
scribes four domains of advertising regulation. It is followed by a discussion of freedom of speech concerns
and the regulation of political advertising. The third section examines regulation of deceptiveness in detail
followed by a discussion of fairness concerns in advertising regulation. We conclude with a summary of the
chapter. While this chapter focuses on advertising regulation in the United States, the European Community
(EC) approach also is discussed since Europe is evolving to become the largest single consumer market as
measured by worldwide sales.
Scope of Advertising Regulation
While most advertising regulation throughout the world addresses problems with deceptive advertising, ad-
vertising also can be the target of regulators when the advertisements are not the problem. Rather, the reg-
ulation is seen to hold promise as a solution for social ills like lung cancer (Petty, 1999; Richards, 1996),
obesity (Seiders and Petty, 2004) or even racial discrimination (Petty et al., XXXXXXXXXXThe forms and purposes
of regulation are numerous and varied. Municipalities, for example, have used local ordinances to beautify
communities through elimination or restriction of commercial signage (e.g., Ma
in and Journey, XXXXXXXXXXSimi-
larly, many laws seek to curtail unwanted telemarketing (Smolla, 2005) or unsolicited email or fax ads (Zitter,
2004). Laws, too, are used to protect children from ads that might injure or take advantage of them (Cu
an
and Richards, XXXXXXXXXXLaws even are used to force some companies to finance ads that are not in their own
est interests (Johanns v. Livestock Marketing Assn., 2005).
The domains of advertising regulation can be roughly categorized as entailing:
(1) Persuasive effects on purchase behaviour. Deceiving someone into buying a product or
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taking advantage of them at a moment of weakness, such as convincing a recently
mugged person to buy an alarm system, are examples of problems at which governmen-
tal intervention may be directed. Selling illegal products or services, such as cigarettes to
minors, also would fall under this heading.
(2) Persuasive effects beyond purchase behaviour. Advertising not only urges purchase, it
encourages consumption which may contribute to materialism, excess smoking or drink-
ing, racial or gender stereotyping, among other things. These effects potentially reach far
eyond the sales transaction. Regulations, then, are crafted to prevent advertising from
causing or encouraging some consequential behaviour.
(3) Intrusive effects. Many criticisms of advertising have nothing to do with the ad's message,
ut with the form or the location where it is placed. In these situations the effects are
“content-neutral,” because the message content is virtually i
elevant. Billboards frequent-
ly are banned or restricted, not because of their message, but because they are aesthet-
ically unpleasing. Unsolicited email, fax, too, are restricted because they are intrusive.
These regulations, including privacy laws, protect our personal environment.
(4) Effects on political behaviour. Advertising for political candidates, and concerning political
causes, also is subject to regulation. Some laws are designed to insure one party (or
cause) gains no unfair advantage over another by using advertising. Some ensure more
information to the electorate. Whatever the intent, however, it is the political – as opposed
to commercial – nature of the advertising that distinguishes these effects from those
above.
Advertisements can, of course, have effects in more than one category, but the stated purpose for a regulation
generally arises from just one of these types. Ultimately, the legitimacy of a regulation often is determined by
its purpose.
US First Amendment
In the United States, the principal limit on government's ability to regulate both political and commercial ad-
vertisingisthe guarantee of free speech written into the First Amendment of the US Constitution. Some other
countries have similar protections of free speech, but may apply them differently than the US. Still others have
no explicit guarantee of free speech at all.
For the first century and a half after the First Amendment was ratified, advertising never received serious
consideration for protection as “speech” under that provision. Courts recognized the Amendment as designed
to protect the expression of political ideas and protest against the government. Yet even such advertising for
political purposes, by a political candidate or by anyone supporting/ criticizing the government, is subject to
legal limitations. There are laws on the books to restrict everything from anonymously contributing money to
political ad campaigns to using an outdated photograph of a candidate in an ad, and more (Richman, 1998;
Richards and Caywood, XXXXXXXXXXBut because these laws affect the most highly valued speech, US courts look
very closely before enforcing them.
One recent attempt to fence in advertising by political candidates is the McCain-Feingold bill (Bipartisan Cam-
paign Reform Act, XXXXXXXXXXMost provisions of that law were declared Constitutional by the Supreme Court
(McConnell v. Federal Election Commission, 2003), ensuring its enforceability. It largely prohibits corporations
and unions from paying for “issue ads” immediately preceding an election. This illustrates that the Constitu-
tion does not entirely prohibit regulation of political speech, considered the “core” value of First Amendment
protection (FEC v. National Conservative PAC, 1985), but commercial ads always were subject to even more
egulation.
Not until 1976, in Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, did the Supreme
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Court finally declare commercial speech, defined as that which does no more than propose a commercial
transaction (Pittsburgh Press v. Pittsburgh Commission on Human Relations, 1973), to be constitutionally pro-
tected. But in the years that followed, the judiciary struggled with this new constitutional status, recognizing
the need to both protect advertising and prevent deception and other negative ad effects (Richards, XXXXXXXXXXTo
provide judges, and legislatures, some guidance as to when a regulation would be allowed and when it would
tread on free speech rights, Central Hudson Gas & Electric v. Public Service Commission of New York (1980)
established a four-part test:
• Step 1. Is the speech concerning a lawful activity and not misleading?
• Step 2. Does the government have a substantial interest in regulating it?
• Step 3. Does the regulation directly advance that interest?
• Step 4. Is the regulation more extensive than necessary?
If the speech is misleading or promotes illegal activity, clearly it can be regulated or even prohibited. Other-
wise, to be constitutional the regulation must meet all of steps 2–4. This same test is used today, except that
the fourth step was later refined to mean that the regulation must be “na
owly tailored” to be a reasonable fit
to the interest being protected (S.U.N.Y. v. Fox, 1989).
So, for example, if a city passed a law banning advertising signs in homeowners' yards, that law must pass
the four-step test. Unless the law targeted only deceptive ads, or ads for illegal products/services, the first
step would yield a “yes.” Consequently, the second step would ask the government's purpose. If the purpose
were simply that the mayor did not like the signs, it probably would fail the test as being “not substantial.” But
if the signs are distracting drivers, causing accidents, the purpose being to prevent those accidents is likely
a substantial interest, so it would pass that step. The third step, then, would ask whether banning the signs
will prevent accidents. If “yes,” it would pass again. If “no,” it would fail the test. Finally, if only certain types
of signs, such as those with naked models on them, are causing accidents, banning all signs would not be
“na
owly tailored,” causing the law to fail the test. All of these determinations, ultimately, would be made by
a court.
The Central Hudson test proved somewhat variable