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| As one of the most visible activities of business, advertising is both lauded and criticized for the role it plays in selling products and influencing society. Some controversy surrounds advertising's role in the economy. To debate advertising's economic effects, we employ the four basic assumptions of free enterprise economics: self-interest, many buyers and sellers, complete information, and absence of externalities. The economic impact of advertising can be likened to the opening shot in billiards—a chain reaction that affects the company as well as its competitors, customers, and the business community. On a broader scale, advertising is often considered the trigger on a country's mass distribution system, enabling manufacturers to produce the products people want in high volume, at low prices, with standardized quality. People may argue, though, about how advertising adds value to products, affects prices, encourages or discourages competition, promotes consumer demand, narrows or widens consumer choice, and affects business cycles. Although controversy surrounds some of these economic issues, few dispute the abundance principle: In an economy that produces more goods and services than can be consumed, advertising gives consumers more complete information about the choices available to them, encourages more sellers to compete more effectively, and thereby serves the self-interest of both consumers and marketers. Social criticisms of advertising may be short-term manipulative arguments or long-term macro arguments. While the economic aspect of advertising focuses on the free enterprise principles of self-interest and many buyers and sellers, the social aspect typically involves the concepts of complete information and externalities. Critics say advertising is deceptive; it manipulates people into buying unneeded products, it makes our society too materialistic, and there's just too much of it. Further, they say, advertising perpetuates stereotypes, and all too frequently, it is offensive and in bad taste. Proponents admit that advertising is sometimes misused. However, they point out that despite its problems, advertising offers many social benefits. It encourages the development of new products and speeds their acceptance. It fosters employment, gives consumers and businesses a wider variety of product choices, and helps keep prices down by encouraging mass production. It stimulates healthy competition among companies and raises the overall standard of living. Moreover, sophisticated marketers know the best way to sell their products is to appeal to genuine consumer needs and be honest in their advertising claims. In short, while advertising can be criticized for giving less than complete information and for creating some unwanted externalities, it also contributes to the free enterprise system by encouraging many buyers and sellers to participate in the process, thereby serving the self-interest of all. Under growing pressure from consumers, special-interest groups, and government regulation, advertisers have developed higher standards of ethical conduct and social responsibility. Advertisers confront three levels of ethical consideration: the primary rules of ethical behavior in society, their personal value systems, and their personal philosophies of singular ethical concepts. The federal and state courts are involved in several advertising issues, including First Amendment protection of commercial speech, and infringements on the right to privacy. Advertising is regulated by federal, state, and local government agencies, business monitoring organizations, the media, consumer groups, and the advertising industry itself. All of these groups encourage advertisers to give more complete information to consumers and eliminate any externalities in the process. The Federal Trade Commission, the major federal regulator of advertising in the United States, is responsible for protecting consumers and competitors from deceptive and unfair business practices. If the FTC finds an ad deceptive or unfair, it may issue a cease and-desist order or require corrective advertising. The Food and Drug Administration (FDA) monitors advertising for food and drugs and regulates product labels and packaging. The Federal Communications Commission (FCC) has jurisdiction over the radio and TV industries, although deregulation has severely limited its control over advertising in these media. The Patent and Trademark Office governs ownership of U.S. trademarks, trade names, house marks, and similar distinctive features of companies and brands. The Library of Congress registers and protects copyrighted materials. State and local governments also enact consumer protection laws that regulate advertising. Nongovernment regulators include the Council of Better Business Bureaus and its National Advertising Division. The NAD, the most effective U.S. nongovernment regulatory body, investigates complaints from consumers, brand competitors, or local Better Business Bureaus and suggests corrective measures. Advertisers that refuse to comply are referred to the National Advertising Review Board (NARB), which may uphold, modify, or reverse the NAD's findings. Other sources of regulation include the codes and policies of the print media and broadcast media. Consumer organizations and advocates also control advertising by investigating and filing complaints against advertisers and by providing information to consumers. Finally, advertisers and agencies regulate themselves. |