ETHICS LOST IN

FALSE ADVERTISING

An Ethics at Work Project presented by

Andie Gonzales and Alex Jones
Business Ethics 1040-401

TABLE OF CONTENTS
Introduction

Findings

Conclusions

Resolutions/Recommendations

Sources

INTRODUCTION

As one of our textbooks questions asked, how many lies or half-truths can
you find in your favorite commercials? We believe that whether it is an ad on
a billboard on the side of the freeway, a commercial on TV or the radio,
telemarketing, or distributed through social media, false advertising is
unethical, misleading and wrong no matter what the business. Yet, we are
bombarded by these types of ads thousands of times in a day. Even when
there are rules and regulations against these types of ads? Why would a
company go this route? Our theory is: Because its worth the risk. It
happens way more often than we think and as the purchasing public, we
better be aware of this fact.
In our findings, we will be providing you with unethical advertising by
companies, some well-known (which may shock you) and some others, more
fly-by-night types (which wont). We will be looking into some of the
governments agencies, specifically the FTC the Federal Trade Commission
created to keep Americas marketplace fair and our businesses honest. We
will be covering much of their rules and regulations. Also, we will be
providing you with some information that may help you avoid some of this
nastiness. Then we will present our conclusions that we have drawn from
our findings. Lastly we will provide our recommendations, of which we are
confident you will agree.
FINDINGS

Advertising is one of the most important aspects of a businesss

success or failure. When you see that it is recommended that our businesses
spend between 20 and 30 percent of their total annual budgets to
advertising and marketing in their first and second years and 7 to 10 percent
after that (Jeffrey Joyner, 2015), its obvious how important.
As a side note here, we should mention that the term marketing covers
everything that a company might use in determining the sale of the product.
The pricing, how they are going to get it out there, what their competition is,
etc. Advertising falls under the category of marketing. (McCall, 2002)
Companies have to decide what to say and what not to say, what to
show and what to leave out, and how to get their message across. Should
they use a sexy model to tout their product or an actor who appears to have
an academic air? Do they want to go with a wholesome, all-American image
or a more sophisticated, worldly look? Should they be honest about that fact
that their razor is not going to turn the consumer into a Greek god, but
rather just give a nice, close shave? Should they be upfront about the fact
that once they pay the great low price of $28 for the razor, its going to cost
the consumer twice that to replace the blade in the thing? Maybe the razor
manufacturers took their cue from the printer industry who like to sell their
printers for an extremely low price so they can make their money off of the
ink cartridges that will work only in their printers.

What if theyre selling a product to a kid? Wouldnt it be great if they

could sell a replica of Harry Potters invisibility cloak and give the kid the
impression that he could actually disappear? Just think how many parents
will be driven crazy until they plop their hard earned $50 down, just to see it
only played with for all of two minutes (the amount of time it will take for
their child to realize the invisibility was not really going to happen.) Too bad
there parent wasnt around when the kid first saw the commercial to explain
that it was only a ploy to get the childs attention.
Not having the parent around while the cartoons are on or invested in
what advertising messages are being directed at their children can be very
beneficial to manufacturers of childrens products. Have a nutritionally
worthless food product for children, for example, old-school McDonalds
Happy Meals? Throw in a cheap toy. I remember begging to go to
McDonalds for the toys. How ingenious it was for them to create whole sets
of toys to guarantee returns visits to collect them all. Get a little older and
you find yourself returning to collect the game pieces for the Monopoly
million dollar give away. Do you think it was hard for them to come up with
the million dollars to give away?
As our textbook contends, the art of seduction is used everywhere in
advertising. Use nothing but beautiful, sexy people for those that appear to
use your product and haggard, unintelligent people as those that dont.
Know your market. If it is families that you are after, be sure to use
delighted children and skinny adults. Never forget the option of special-

effects. Add some sparkles, fireworks, make it look magical. If its a food
product, be sure to get the best food photographer around and be prepared
to spend the money to get the product manipulated to look its absolute best,
even if it has no resemblance to the average item that comes out of the box.
Adding dried fruit to the cereal? Hey, make sure those bits look like fresh
fruit in the commercial. Shoot! Throw some luscious fresh fruit on the bowl
regardless, even if it doesnt come with it. When you claim that your cereal
provides the necessary nutrition for a balanced meal, you can always refer to
the commercial that included fresh fruit.
If you know your cereal could be downright bad, throw in a new
cartoon character that you marketing department has determined 95% of
the population will absolutely adore. Then bombard the public with your ad.
If that doesnt work, it may cost you a lot more money, but see if you can get
Taylor Swift to be your spokesperson.
There are so many ploys out there, so many spins from manipulating
the data to creating a sense of urgency to creating the peer pressure to
creating the need to creating the demand. As John Kenneth Galbraith is
quoted in our textbook, What a better world we could live in if demand was
for the public good. What does it really hurt? Sometimes not much.
Sometimes a lot.

But who is protecting us from all of this unethical advertising? Are we

honestly supposed to just get by on our own common sense?!? The answer
is . Ta dah! Our government, in general, and the FTC specifically.
Way back in 1914, the US created a new governmental agency. It was
named the Federal Trade Commission or the FTC for short. It was promoted
by Teddy Roosevelt and originally tasked with busting the trusts. Back in
the day, men like Vanderbilt, Carnagie, and Rockefeller amassed great
fortunes because they were able to monopolize their sectors of industry. Of
course, this created a great deal of hardship on the poor souls that worked
for these men, the American public for the prices they were forced to pay for
these monopolies services and goods, and the unfortunate saps there were
trying to compete. The FTC was assigned the task to break these monopolies
up. Unfortunately, after they were finished with that task, they found that a
lot of the other American businesses werent exactly treading on the straight
and narrow path so they just kept up the fight of keeping American
businesses honest. (Trethan, 2005)
But lets be clear. This is America, a free-market society, after all. The
FTC is not solely about protecting the poor, little consumer. No. Let us read
you the FTCs mission statement, just to be clear.
To prevent business practices that are anticompetitive or deceptive or
unfair to consumers; to enhance informed consumer choice and public
understanding of the competitive process; and to accomplish this without

unduly burdening legitimate business activity. (Commission, 2015) The FTC

tries to keep us honest with both rules and guidelines. The rules are for
prohibiting specific acts and the guidelines are to help businesses to comply.
Although the FTC has many divisions overseeing many aspects of
American businesses, we were specifically interested in its overseeing of
advertising. Impressively, the FTC covers it all, from television, radio,
telemarketing and online smartphones, computers and tablets. In the
early days of the internet, people were getting scammed quite often. There
were big debates on whether the government should even be involved in
internet commerce. But in May of 2000, the FTC came up with some badly
needed rules and regulations. They are called the DotCom Disclosures. The
FTCs stance is, . . . deception is unlawful no matter what the medium.
(Commission, 2015)
According to the FTC, when a business describes its product or service,
it had better be truthful to the consumer so that they will have a good
understanding of exactly what theyre paying for. This means there had
better be the notice right up front that the product does not include, say,
batteries or lightbulbs, for example. If the picture of the product, say a lamp,
shows that it is on with a warm glow, it should be openly disclosed that the
lightbulb that is creating that glow is not included if the business does not
intent to include it. These disclosures cannot be tucked away, buried on the
last page of a website or written in some tiny, illegible print. If, because of
some space constraint, there has to be some disclosure put into a hyperlink,

the hyperlink has to be obvious so the consumer can read it easily and
quickly. In addition, it has to be displayed before you can even add it to a
shopping. If a business can come up with any excuse that its not possible
to add the disclosure, guess what, they FTC says then not to use that
platform. The FTC is serious about wanting the consumer to know exactly
what they are getting. This is not only to protect the consumer, but the
market as well. Clear, Conspicuous and meaningful disclosures benefit
advertisers and consumers. Negative consumer experiences can result in
lost consumer goodwill and erode consumer confidence. (Commission,
2015)
Simply put, the FTC wants us to play fair. Some quick examples of
how a companys advertisement can get them into trouble with the FTC
rulings:
If a company claims its product can do something, its claim better be
based on hard evidence. Not just a one-time fluke or based on some cloudy
experiment.
If a company claims its product has a money back guarantee, it had
better be prepared to give that money back no matter what the reason.
If a company hires an endorser for its product, that person or expert
(and even the advertising company, the website designers, and catalog
marketers that are creating the ads) had better be familiar with the product,
be a bona fide user and be willing to back up their claims. Endorsements

must reflect the honest opinions, findings, beliefs, or experience of the

endorser. Furthermore, an endorsement may not convey any express or
implied representation that would be deceptive if made directly by the
advertiser. (Legal Information Institute, 2015) As long as that ad is running,
the endorser must be willing to back up that claim. By the way, this ruling
applies to blogger too.
If a company is offering the buy one, get one free gimmick then it
better truly be giving the second one for free. Not just jacking up the price
on the first one to recoup the cost.
If a company claims its product is made in the USA, the product has to
be all or virtually all made in the US.
The FTC wants to educate the consumer on some items too:
Just because it says $0 down doesnt mean anything if there are
significant and undisclosed charges due at lease signing.
Simply do not trust extravagant performance claims like incredible
weight loss promises or guarantees of earnings, etc. If it sounds too good to
be true, it probably is.
MLMs have to disclose upfront the number and percentage of existing
franchises who have actually achieved the claimed results and pyramid
schemes are illegal in most states for the obvious reason that when they

collapse (and they always do) it is only those on top that will make any
money.
How many times a day does your phone ring with an unwanted
telemarketing call? Do you know how you can get rid of those? Get on the
federal Do Not Call Registry. The FTC and the FCC (the Federal
Communications Commission) work jointly on this. It only takes a minute to
register by phone at 1-888-382-1222 or online at www.donotcall.gov. Call
from the phone you want registered, enter its 10 digit number. Theyll put it
in right away but telemarketers are allowed 31 days to get the message that
you are off limits. Should you get another call after those 31 days, chances
are really good that it is a scam. Hang up the phone and file a complaint
with the FTC. They have had a significant amount of success in stopping
telemarketing scams.
According to the FTC, Under the law, claims in advertisements must
be truthful, cannot be deceptive or unfair, and must be evidence-based.
The following are some examples of ads that the FTC, consumers, and others
have filed and won back in 2011 (Bhasin, 2011):
Dannons Activia Yogurt, class action settlement for $45 million for
claiming it had better nutritional value than the other yogurts. Wonder if
they had Jaimie Lee Curtis snowed too.

Taco Bell for claiming it was using seasoned beef when actually it was
oat filler. The company was smart and took out a full page newspaper ad
thanking complainants for suing. The suit was dropped.
Hyundai and KIA for $75 million and $125 million for claiming their
vehicles has as much as 9.6 percent more horsepower than they actually
had.
Groupon has had a number of lawsuits filed against them. Unethical
practices such as for bogusly triggering ads and for not honoring coupons.
One was for as much as 85 million.
Kellogg had to quit claiming the Rice Krispies boosted immunity
because the FTC stated the claim was dubious and Frosted Mini-Wheats did
not improve a kids attentiveness. Kellogg tried to say that clinical studies
proved attentiveness improved by nearly 20%, and was shot down when the
FTC found out that the clinical studies showed that only 1-in-9 kids had that
kind of improvement and half the kids werent affected at all.
Extenze, $6 million, for not extending as they stated.
Airbourne, over $30 million, for claiming it could prevent colds and flus
with no scientific data to back it up.
Splenda, confidential settlements, for claiming it was made from sugar
when really it is a chemical compound.

Pennzoil got a cease and desist for claiming their oil protected engines
better than other oils without and scientific proof.

CONCLUSIONS

We cannot assume an advertisement is honest. We cannot assume a

business is advertising ethically, even if it is a nationally recognized brand.
We, as a nation, have put in place some barriers for ads that we find
unethical via the FTC and other agencies monitoring advertising practices.
We try to be especially careful concerning ads directed towards our children
and people of lesser mental capacity. When possible, we do prosecute
business owners that violate our advertising standards/regulations. We do
not allow the open advertisement of products that we consider unhealthy.
We inherently understand the need for advertisement and do not want to
restrict free speech.
RECOMMENDATION

How does the saying go? Trust none of what you hear and only half of
what you see? Given our findings and conclusions, we advocate taking the
personal responsibility of researching your purchases. Check with the FTC
and other governmental agencies sites to better your chances of dealing

with unethical business concerns. Do a simple internet search for any

possible concerns regarding the item you are considering purchasing.

Works Cited
Bhasin, K. W. (2011, Sep 16). 14 False Advertising Scandals That Cost Brands
Millions. Retrieved from Business Insider Inc:
http://www.businessinsider.com/false-advertising-scandals-20119#ixzz3i5E15nn7
Commission, F. T. (2015, August 2). About the FTC. Retrieved from FTC Protecting
America's Consumers: https://www.ftc.gov/about-ftc

Jeffrey Joyner, D. M. (2015, Aug 1). Hearst Media. Retrieved from Houston Chronicle:
http://smallbusiness.chron.com/average-marketing-advertising-budgetcompany-30993.html
Joanne B. Ciulla, C. M. (2014). The Art of Seduction. In C. M. Joanne B. Ciulla, Honest
Work: A Business Ethics Reader (pp. 327-28). New York: Oxford University
Press.
Legal Information Institute. (2015, Jan 1). Retrieved from Legal Information Institute,
Cornell University: www.law.cornell.edu/cfr/text/16/255.1
McCall, K. (2002, Jun 25). The REAL Difference between Marketing and Advertising.
Retrieved from MarketingProfs: http://www.marketingprofs.com/2/mccall5.asp
Trethan, P. (2005, Feb). The Federal Trade Commission: Keeping An Eye On
Commerce. Retrieved from aboutnews:
http://usgovinfo.about.com/od/moneymatters/a/aboutftc.htm