Deck 21: Regulation of Advertising and Promotion

Question 1

The Better Business Bureau was formed by _______________ in 1916 to handle complaints about local business practices including advertising.

A)the Federal Trade Commission
B)the Federal Communications Commission
C)the business community
D)the World Trade Organization
E)the Chamber of Deputies

Answer 1

C

Question 2

Which of the following federal agencies is NOT directly involved in regulating advertising?

A)the Food and Drug Administration
B)the Federal Communications Commission
C)the U.S.Justice Department
D)the U.S.Postal Service
E)the Federal Trade Commission

Answer 2

C

Question 3

Restrictions on the advertising of hard liquor continue to loosen as DISCUS has made inroads into putting liquor advertising more on par with advertising for:

A)pharmaceuticals
B)tobacco
C)beer and wine.
D)sex
E)children's toys See IMC Perspective 21-1.

Answer 3

C

Question 4

Which of the following statements concerning advertising by attorneys is true?

A)Attorneys have strong opinions on whether the profession should be allowed to advertise.
B)Many in the legal community are concerned that advertising has a negative impact on the image of the legal profession.
C)Some states restrict the content of legal advertising to tombstone type ads that merely list the name,location,and objective qualifications.
D)Efforts by some states to limit the rights of attorneys to advertise are likely to face a challenge in the U.S.Supreme Court.
E)All of the above statements concerning advertising by attorneys are true.

Question 5

Supporters of the mail catalog industry argue Americans:

A)could save billions of miles of driving and gasoline usage by catalog shopping
B)should as government to ban all broadcast advertisements until 2010
C)are addicted to catalogs and that to ban them would cause undue harm
D)oppose socially responsible marketing and therefore catalogs should be sent to every home
E)prefer shopping over the Internet and therefore catalogs should only be displayed on retailer's web sites See opening vignette.

Question 6

Which of the following statements about the regulation of advertising is true?

A)Advertising is externally regulated by federal and state agencies.
B)Self-regulation is important because advertising is playing an increasingly important role in product liability litigation.
C)Internal regulation from various groups probably has more influence on advertisers' day-to-day operations and decision making than government rules and regulations.
D)In recent years,state attorneys general have become more active in the regulation of advertising.
E)All of the above statements about the regulation of advertising are true.

Question 7

Regulation and control of advertising by various groups such as individual advertisers and their agencies,trade associations,and the media is known as:

A)self-regulation
B)external regulation
C)trade regulation
D)industry-defined norms
E)advertising norms

Question 8

Which of the following groups has a strong role in the self-regulation of advertising?

A)advertising agencies
B)industry trade associations
C)the media
D)advertising clients
E)all of the above

Question 9

Which of the following statements concerning advertising by attorneys is true?

A)Advertising by attorneys is legal in the entire United States.
B)The U.S.Supreme Court does not permit lawyers to advertise if they earn more than $100,000 per year.
C)Attorneys are in agreement that advertising is an important part of their marketing mix.
D)The American Bar Association recently removed all restrictions on the type of advertising attorneys can use.
E)By its very nature,advertising can only have a positive impact on the legal profession.

Question 10

Advertising of hard liquor is:

A)overseen by numerous government agencies
B)often rejected by media associations
C)becoming a lot easier
D)supported by temperance groups
E)all of the above

Question 11

Which of the following statements describes how advertising agencies use internal controls for self-regulation?

A)They have standards regarding the type of products they are willing to produce ads for.
B)They require their clients to verify any claims that they want made in the advertising.
C)They have creative review boards that examine ads for to see if they could possibly be perceived as offensive.
D)They retain lawyers to review ads for potential legal problems.
E)All of the above describe controls that advertising agencies use for self-regulation.

Question 12

Which of the following statements about advertising by attorneys,dentists and physicians is true?

A)Attorneys are not allowed to advertise,but dentists and physicians are.
B)Dentists and physicians are not allowed to advertise,but attorneys are.
C)Most consumers are against the use of professional advertising.
D)The Supreme Court has ruled that professionals such as attorneys,dentists and physicians have the right to advertise.
E)Attorneys,dentists,and physicians do not advertise because they believe that advertising demeans their professions.

Question 13

Which of the following has some regulatory control over advertising?

A)the Federal Trade Commission
B)the Food and Drug Administration
C)the U.S.Postal Service
D)the Federal Communications Commission
E)all of the above

Question 14

Imagine if an advertiser accused the ad agency that developed its ad campaign of misrepresenting the advertiser as chauvinistic,sued the agency,and won its lawsuit.How might this impact the advertising industry?

A)Ad agencies could be more aware of creative limitations and would stick with more traditional ad campaigns.
B)There would no longer be any limitations on ad agencies' creative thinking.
C)The public relations that resulted from the lawsuit would more than compensate the advertiser for the losses it experienced as a result of the faulty ad.
D)The consequences would be in direct proportion to how long the ad was run and what media were used.
E)There would be no consequences because such lawsuits are illegal.

Question 15

DISCUS,the original ban on hard liquor advertising on radio and television:

A)was overseen by the Federal Communications Commission
B)was self-imposed by the liquor industry
C)has been completely removed by the federal government
D)was imposed by the broadcast industry in 1936
E)did not ban hard liquor advertising on local television affiliates See IMC Perspective 21-1.

Question 16

In 1977,the _____ ruled that restrictions on advertising by lawyers are unconstitutional and that they have a First Amendment right to advertise.

A)Federal Trade Commission
B)American Bar Association
C)U.S.Supreme Court
D)Better Business Bureau
E)U.S.Department of Justice

Question 17

Advertisers are often supportive of voluntary self-regulation because:

A)self-regulation is viewed as a way of limiting government interference of advertising
B)all clients and agencies are affected by voluntary self-regulation
C)self-regulation does not require interaction between agency and client
D)self-regulation results in even more stringent regulations than state and federal agencies want
E)of all of the above reasons

Question 18

Regulation of advertising by trade and industry associations:

A)shows that member firms and individuals are concerned with the impact and nature of their advertising
B)is an example of one type of self-regulation
C)has no legal basis for enforcement
D)must rely on peer pressure or other nonbinding sanctions to get advertisers to comply with standards since there is no legal basis for enforcing them
E)is accurately described by all of the above

Question 19

Advertising for distilled spirits was banned from television as a result of:

A)self-regulation
B)external regulation
C)trade regulation
D)industry-defined norms
E)advertising norms

Question 20

Critics of the mail catalog industry often argue catalogs are wasteful and:

A)create undue hardship on postal carriers
B)negatively impact the environment through use of paper
C)cause excess consumption
D)create questionable marketing benefits to catalog companies
E)increase television viewing See opening vignette.

Question 21

The _____ accepts cases dealing with product performance claims,superiority claims against competitive products,and all kinds of scientific and technical claims made in national advertising.

A)National Advertising Division (NAD)
B)U.S.Department of Justice
C)National Association of Attorneys General
D)American Association of Advertising Agencies
E)Federal Trade Commission

Question 22

of the Council of Better Business Bureaus?

A)The NAD may ask advertisers to supply appropriate substantiation for advertising claims in question.
B)If substantiation provided by advertisers is unsatisfactory,the NAD can negotiate with advertisers to modify or discontinue the advertising in question.
C)The NAD generally refers unsubstantiated advertising claims directly to the Federal Trade Commission.
D)The NAD's advertising monitoring program is the source of many of the cases it reviews.
E)All of the above statements about the National Advertising Division (NAD)of the Council of Better Business Bureaus are true.

Question 23

of the Council of Better Business Bureaus:

A)are eventually reviewed by the Federal Trade Commission
B)are eventually reviewed by the Food and Drug Administration
C)are modified or discontinued after investigation by the NAD
D)cannot be substantiated
E)are issued cease-and-desist orders

Question 24

The courts have extended First Amendment protection to:

A)commercial speech
B)allow advertisers to sue media that do not provide them with the promised reach and frequency
C)the findings of marketing research studies
D)advertisers who want to use misleading wording in their ads
E)advertisers who do not want to be self-regulated

Question 25

Which of the following statements describes the media's role in the self-regulation of advertising?

A)The media must accept all advertising they receive because of First Amendment guarantees of freedom of speech.
B)The media cannot refuse to accept advertising for an entire product class such as hard liquor.
C)The media can refuse to accept individual ads they find offensive or objectionable.
D)Most media accept any advertising they receive since advertising is their major source or revenue.
E)The three major networks have the least stringent advertising review process of any media.

Question 26

The _____ is a major trade association of the advertising business in the United States.It has its own standards of practice and creative code.

A)Council of Better Business Bureaus
B)National Advertising Review Board
C)American Association of Advertising Agencies
D)Federal Trade Commission
E)National Association of Broadcasters

Question 27

Television advertising:

A)has never been regulated by an industry trade association
B)is regulated through codes developed and enforced by the Better Business Bureau
C)is regulated by affiliates
D)is more stringently self-regulated than any other medium
E)is experiencing a tightening of the rules concerning the rating system used for commercials

Question 28

The advertising industry's most effective self-regulatory mechanism is the:

A)Association of National Advertisers
B)Federal Trade Commission
C)NAD/NARB
D)Distilled Spirits Council
E)National Association of Broadcasters

Question 29

Which of the following was NOT one of the groups involved in establishing the National Advertising Review Council?

A)the American Advertising Federation
B)the American Association of Advertising Agencies
C)the Association of National Advertisers
D)the Federal Trade Commission
E)the Council of Better Business Bureaus

Question 30

is true?

A)The NARB does not have the power to issue cease-and-desist orders.
B)If an advertiser refuses to comply with the NARB decision,the matter can be referred to the appropriate government agency.
C)Very few cases actually go before the NARB panel.
D)Most advertisers abide by the decisions of the NARB.
E)All of the above statements about the NARB are true.

Question 31

_____ level:

A)local;national
B)national;local
C)distributor;manufacturer
D)industry-wide;individual company
E)regional;local

Question 32

The _____ was formed by three advertising associations and the Council of Better Business Bureaus to sustain high standards of truth,accuracy,morality and social responsibility in national advertising.

A)National Advertising Board
B)National Advertising Review Council
C)American Association of Advertisers
D)Ad Council
E)Board of Advertising Ombudsmen

Question 33

Advertising on television and radio was regulated for many years through codes developed by the _____ until the courts found some of its regulations served to restrain trade.

A)National Advertising Review Board
B)Federal Trade Commission
C)Federal Communications Commission
D)National Association of Broadcasters
E)Standards and Practices Division

Question 34

Which of the following is a common complaint about the self-regulation of advertising?

A)The NAD/NARB has a limited budget and staff.
B)It often takes the National Advertising Division a long time to resolve a complaint.
C)Self-regulation is viewed as being self-serving to the advertising industry.
D)Self-regulation lacks the power and authority to be a viable alternative to government regulation.
E)All of the above are common complaints about the self-regulation of advertising.

Question 35

The reason a magazine such as Good Housekeeping magazine regularly tests products and offers a "seal of approval" is to:

A)enhance the credibility of the publication
B)encourage advertisers to buy more media space
C)avoid self-regulation
D)discourage comparative advertising
E)avoid questionable advocacy advertising

Question 36

The _____ is the largest and best known self-regulatory mechanism that has been established by the business community.

A)Federal Trade Commission
B)Federal Communications Commission
C)Better Business Bureau
D)National Advertising Review Council
E)Chamber of Commerce

Question 37

The _____ is the federal government agency having primary responsibility for the control and regulation of advertising.

A)Federal Communications Commission
B)NAD/NARB
C)Better Business Bureau
D)Food and Drug Administration
E)Federal Trade Commission

Question 38

Which of the following media has the most stringent review and approval process for advertising?

A)local radio
B)magazines
C)newspapers
D)cable television
E)the four major television networks

Question 39

,the NARB:

A)can order the company to stop running the ad
B)can refer the case to an industry trade association
C)will refer the matter to an appropriate government agency and indicate that fact in its public record
D)can impose a fine
E)will lodge a class action suit for customers who have been in some way negatively affected by the ad

Question 40

Which of the following statements describes the NAD/NARB review process?

A)If a case is not resolved to its satisfaction,the NARB has the power to order an advertiser to stop running its ads.
B)If the NAD and an advertiser fail to resolve an advertising controversy,either party can appeal the case to the NARB.
C)Advertisers who participate in the full process of an NAD investigation,and NARB appeal often do not abide by the panel's decision.
D)Most advertising cases investigated by the NAD are resolved without being sent to the NARB.
E)Advertisers who do not comply with the NAD/NARB review process will find themselves encumbered with a class action lawsuit.

Question 41

Which division of the Federal Trade Commission would deal with antitrust and consumer protection investigations?

A)Bureau of Economics
B)Bureau of Governances
C)NAD/NARB
D)Bureau of Consumer Protection
E)Trade Regulation Bureau

Question 42

The _____ empowered the Federal Trade Commission to regulate unfair or deceptive practices including advertising.

A)Lanham Act
B)Sherman Antitrust Act
C)Wheeler Lea Amendment to the FTC Act
D)FDA Act
E)Consumer Protection Act

Question 43

Federal Trade Commission policy regarding the interpretation of _____ has generated considerable controversy since the concept has never been clearly defined.

A)deception
B)unfairness
C)advertising substantiation
D)affirmative disclosure
E)puffery

Question 44

Commercial speech is most accurately defined as:

A)both an encoding and a decoding tool for communications
B)speech that promotes a commercial transaction
C)any type of comparative advertising
D)any advertising on a broadcast media
E)speech governed by the First Amendment to the U.S.Constitution

Question 45

The U.S.Supreme Court established the _____,a four-part test,to determine restrictions on commercial speech.

A)Virginia Consumer Council Test
B)Free Speech Matrix
C)First-Amendment Analysis
D)California Test of Affirmation
E)Central Hudson Test

Question 46

The Magnuson-Moss Act of 1975:

A)defined commercial speech
B)provides for the review and evaluation of all child-directed advertising
C)defined the requirements for advertising substantiation
D)is concerned with the misrepresentation of premiums when used in sales promotions
E)dealt with consumers' rights regarding product warranties

Question 47

In 1994,the Federal Trade Commission,the U.S.Congress and the advertising industry agreed on a definition of unfairness in advertising that:

A)allowed peer arbitration to be used before a final judgment is made
B)dropped the requirement for substantiation of advertising claims
C)required that the FTC have reason to believe that an unfair or deceptive act or practice is prevalent before initiating industry-wide rule
D)defined any type of deceptive or misleading ad as unfair
E)did all of the above

Question 48

The _____ is the division of the Federal Trade Commission that is responsible for investigating cases involving deceptive or misleading advertising.

A)Bureau of Economics
B)Bureau of Competition
C)NAD/NARB
D)Bureau of Consumer Protection
E)Trade Regulation Bureau

Question 49

Which of the following is the best example of the use of puffery in advertising?

A)Central Bank advertises free checking with a minimum balance of $1,000.
B)Michelin advertises a 50,000-mile guarantee for its tires.
C)Godiva claims that it makes the finest chocolates in the world.
D)Head & Shoulders shampoo advertises that it has been proven to be effective in preventing dandruff.
E)Federal Express advertises guaranteed overnight delivery service.

Question 50

A prepackaged milkshake sold in convenience stores advertises that it has more chocolate-taste than shakes purchased at restaurants.This is an example of:

A)an unfair claim
B)puffery
C)an illegal deception
D)an affirmative disclosure
E)an illegal comparative advertisement

Question 51

The Wheeler-Lea Amendment to the Federal Trade Commission Act is an important piece of advertising legislation because it:

A)empowered the Federal Trade Commission to regulate unfair or deceptive practices,including those in advertising
B)gave the Federal Trade Commission access to the injunctive power of the federal courts
C)gave the Federal Trade Commission the power to issue cease-and-desist orders and extended its jurisdiction over the false advertising of food and drugs
D)declared unfair methods of competition in commerce were illegal
E)did all of the above

Question 52

Under the original Federal Trade Commission Act of 1914,the FTC:

A)was given the power to issue cease-and-desist orders against firms engaging in deceptive practices
B)was given the power to pursue corrective advertising remedies to deceptive practices
C)could not prohibit false advertising unless there was evidence of injury to competition
D)was given the power to regulate all false and deceptive advertising practices that might injure competition or mislead consumers
E)was given the authority to establish a National Advertising Review Board

Question 53

______ form of advertising.

A)deception;legal
B)a superlative;illegal
C)puffery;illegal
D)puffery;legal
E)puffery,unethical

Question 54

_____ are industry-wide rules used by the Federal Trade Commission that define unfair or deceptive practices.

A)Trade regulation rules
B)Affirmative disclosure
C)Corrective advertising
D)Cease-and-desist orders
E)Advertising guidelines

Question 55

Which of the following statements about commercial speech is true?

A)The U.S.Congress is the only government body that has the authority to change the meaning of commercial speech.
B)False,misleading,and deceptive promotions are classified as commercial speech and are legal under the First Amendment.
C)Commercial speech is legal even if it prevents fair competition.
D)There have been no recent attempts to expand the coverage of commercial speech under the First Amendment.
E)None of the above statements about commercial speech is true.

Question 56

Which of the following is the best example of advertising puffery?

A)Lennox's claim that it manufactures the quietest home comfort system you can buy
B)Harrah's claim that it has group size exhilaration
C)the claim that Starbucks coffee has exceptional taste
D)the claim that Sonicare,the sonic toothbrush,can give users whiter teeth in 28 days
E)All of the above claims are using puffery.

Question 57

BMW's claims that is has astonishing agility and balance,near-intuitive response,and superior brakes are all examples of:

A)deceptive advertising
B)superiority advocacy
C)puffery
D)comparative advertising
E)noncompetitive advertising

Question 58

Three major divisions of the Federal Trade Commission are the Bureaus of:

A)Employment,National Security and Trade
B)Governances,Compliance and Cooperation
C)Regulation,Restriction and Reconstruction
D)Economics,Consumer Protection and Competition
E)Distribution,Distillation and Diversity

Question 59

The _____ gave the Federal Trade Commission the power to establish trade regulation rules.

A)Magnuson-Moss Act of 1975
B)FTC Act
C)Wheeler-Lea Amendment
D)Sherman Antitrust Act
E)Trade Regulation Act

Question 60

it must not be outweighed by countervailing benefits to consumers or competition.

A)unfairness
B)deception
C)puffery
D)affirmative disclosure
E)the impact of cease-and-desist orders

Question 61

Under which of the following FTC programs might a firm be required to have product information verifying the veracity of its advertising claims before making any advertising claims about the product?

A)corrective advertising
B)implied uniqueness
C)the Lanham Act
D)affirmative disclosure
E)advertising substantiation

Question 62

Which of the following statements about the use of puffery in advertising is true?

A)Puffery is illegal.
B)Puffery was recently banned in a 1996 revision of the Uniform Commercial Code.
C)It is easy for consumers to distinguish between puffery and factual claims.
D)Advertisers right to use puffery was supported in a 1996 revision of the Uniform Commercial Code.
E)Puffery is only illegal if it eliminates a competitive advantage.

Question 63

Which of the following statements about a consent order is true?

A)The signing of a consent order is an admission of guilt.
B)If an advertiser refuses to sign a consent order,the inquiry is handed to the U.S.Department of Justice.
C)Most FTC inquiries are settled by consent order.
D)A consent order prohibits an advertiser from making a specified advertising claim for 30 days.
E)All of the above statements about a consent order are true.

Question 64

According to the FTC's 1983 policy on advertising deception,an advertisement:

A)is deceptive if it has the tendency or capacity to deceive
B)is deceptive if it misleads the ignorant,the unthinking,and the unsophisticated
C)can be deceptive even if it causes no material injury
D)is deceptive if it is misleading and causes material injury to a reasonable consumer
E)is deceptive if it uses superlatives or exaggerations

Question 65

Many advertisers oppose the advertising substantiation program of the FTC because:

A)it is very expensive to document all of their claims
B)most consumers would not be interested in the technical information used for substantiation
C)most consumers do not have the knowledge or desire to understand substantiation
D)advertisers may resort to puffery to avoid substantiating claims,which would result in less information for consumers
E)of all of the above reasons

Question 66

Cease-and-desist orders:

A)are used to regulate public service announcements
B)are never violated
C)are issued by the Federal Trade Commission
D)were made legally binding by the Robinson-Patman Act
E)are issued by the National Association of Attorneys General

Question 67

The FTC program that requires an advertiser who is found guilty of false or misleading advertising claims to run ads to rectify the situation is known as:

A)the fairness doctrine
B)ad substantiation
C)an affirmative disclosure
D)corrective advertising
E)puffery

Question 68

According to the FTC's definition of deception,a representation,omission,or practice has materiality if it:

A)has been used in a one-sided advertising message
B)can be decoded to have several different meanings
C)is important to consumer and would likely have an effect on the purchase decision
D)uses any superlatives
E)can be substantiated

Question 69

In 1995,the Federal Trade Commission issued a complaint against the manufacturers of New Balance and Saucony athletic shoes based on their "Made in the USA" advertising claims.The FTC claimed the ads were misleading since imported soles and upper parts were used to make the shoes.These claims can be viewed as deceptive under the FTC's requirement of:

A)cease-and-desist
B)puffery
C)affirmative disclosure
D)unfairness
E)advertising substantiation

Question 70

The key elements in the FTC's definition of deception are that the representation,omission,or practice must be likely to mislead the reasonable consumer and that it have:

A)materiality
B)selective exposure
C)selective retention
D)multiple interpretations
E)peripheral importance

Question 71

The Federal Trade Commission requires advertising for any product that is sweetened with saccharin to contain a warning that saccharin may be hazardous to one's health.This requirement falls under the FTC's _____ requirement.

A)misleading omission
B)advertising substantiation
C)affirmative disclosure
D)cease-and-desist
E)materiality

Question 72

.Pizza Hut accused Papa John's of _____,and Papa John's replied that is was using _____.

A)false advertising;puffery
B)advertising substantiation;affirmative disclosure
C)illegal puffery;legal puffery
D)false advertising;advertising substantiation
E)misleading advertising;affirmative disclosure See IMC Perspective 21-3.

Question 73

Advertising or other sales presentations that praise the item to be sold with subjective opinions,superlatives or exaggerations and stating no specific facts is known as:

A)illegal deception
B)unfair advertising
C)puffery
D)an affirmative disclosure
E)advertising embellishment

Question 74

Critics of the FTC's ad substantiation program contend:

A)ad substantiation has been proven unnecessary as long as the advertising industry is self-regulating
B)ad substantiation is not needed because most advertisements make very legitimate claims
C)ad substantiation will result in advertisers resorting to puffery to avoid the need for claim verification
D)the burden of proof for advertising claims lies with the consumer,not the manufacturer
E)none of the above is true

Question 75

_____ is an agreement to stop engaging in a particular practice for settlement purposes only and does not constitute an admission of guilt by the advertiser.

A)cease-and-desist order
B)consent order
C)ad substantiation agreement
D)affirmative disclosure order
E)injunction

Question 76

The Federal Trade Commission may require affirmative disclosure if:

A)previous advertising has led to the formation of false beliefs about a product
B)consumers need to know information about consequences,conditions,and limitations associated with the use of the product
C)there has been material injury to reasonable consumers
D)an advertisement has the potential to mislead an unsophisticated consumer
E)the advertising relies on the use of puffery to make its point

Question 77

Research on the effects of puffery has shown that consumers:

A)can clearly distinguish between puffery and factual based claims
B)are as likely to believe puffery as factual-based claims
C)do not believe puffery claims
D)feel puffery claims are deceptive
E)have no clear-cut reaction to puffery

Question 78

Under the Wheeler-Lea Amendment,the Federal Trade Commission is empowered to stop an advertiser from making a specified claim within 30 days and refrain from doing so until a hearing is held.This is known as:

A)a consent order
B)injunctive power
C)a cease-and-desist order
D)corrective advertising
E)advertising substantiation

Question 79

The Federal Trade Commission's ______ program requires advertisers to have evidence in support of claims made with respect to safety,performance,efficacy or comparative prices.

A)unfair advertising
B)advertising substantiation
C)affirmative disclosure
D)self-regulation
E)deceptive advertising

Question 80

Assume a homeopathic flu medicine advertises that one dose prevents users from catching the flu.However,the FTC has argued that the ads are deceptive since they fail to disclose that the product's directions indicate one dose must be taken daily throughout the flu season.This situation:

A)is a clear example of deregulated advertising
B)is an example of how advertising can be misleading or deceptive because of what is omitted rather than what is said in an ad
C)is likely to lead to prosecution of this drug company under the Lanham Act
D)could not be remedied by an affirmative disclosure requirement
E)is a clear violation of the Robinson-Patman Act