Question 1

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?

Accepted Answer

The program that requires firms to have product information verifying the truthfulness of their advertising claims is advertising substantiation. This program requires firms to have adequate and reliable evidence to support their advertising claims before making them.

Question 2

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

Accepted Answer

Puffery refers to exaggerated or subjective claims that cannot be proven or objectively measured. Advertisers' right to use puffery was supported in a 1996 revision of the Uniform Commercial Code. However, it is important for advertisers to avoid making false or deceptive claims. It may not always be easy for consumers to distinguish between puffery and factual claims, but the use of puffery is not illegal.

Question 3

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

Accepted Answer

Most FTC inquiries are settled by consent order, which is an agreement between the FTC and the accused party to resolve the dispute without admitting guilt. Signing a consent order does not necessarily equal an admission of guilt. Refusal to sign a consent order may result in further legal action, but not necessarily involving the Department of Justice. A consent order may include provisions that prohibit certain advertising claims, but there is no set time limit for such restrictions.

Question 4

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

Accepted Answer

The FTC's 1983 policy states that an advertisement is considered deceptive if it is misleading and causes material injury to a reasonable consumer.

Question 5

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

Accepted Answer

All of the reasons provided could be possible reasons for advertisers to oppose the advertising substantiation program of the FTC. It can be expensive for advertisers to document all claims and consumers may not be interested or knowledgeable enough to understand the technical information used for substantiation. Additionally, if advertisers feel that substantiating claims is too burdensome, they may resort to puffery, which results in less information for consumers.

Question 6

Cease-and-desist orders:

Accepted Answer

Cease-and-desist orders are typically issued by government regulatory agencies, such as the Federal Trade Commission, to stop individuals or companies from engaging in activities that are deemed illegal or harmful to consumers.

Question 7

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:

Accepted Answer

The program described in the question is specifically known as "corrective advertising." The other choices are not accurately described as a program requiring advertisers to rectify false or misleading claims.

Question 8

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

Accepted Answer

Materiality is defined as being important to the consumer and having an effect on their purchase decision. Choices A, B, D, and E do not specifically relate to materiality.

Question 9

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:

Accepted Answer

The FTC's requirement of affirmative disclosure requires advertisers to disclose any limitations or qualifications that could affect consumers' understanding of a product's attributes or benefits. In this case, the "Made in the USA" claim was misleading since imported parts were used in the manufacturing process, and this fact should have been disclosed in the advertising. Therefore, the claims were deceptive under the FTC's affirmative disclosure requirement.

Question 10

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:

Accepted Answer

Materiality is a key element in the definition of deception because the representation or omission must be important enough to affect a consumer's decision-making process. This means that the misrepresentation must be material, or have a significant impact on the consumer's choice. Selective exposure, selective retention, multiple interpretations, and peripheral importance are not key elements in the FTC's definition of deception.

Question 11

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.

Accepted Answer

The answer of The Federal Trade Commission requires advertising for...

Question 12

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

Accepted Answer

False advertising is an accusation that a company is making claims that are not truthful or accurate, while puffery is a legal marketing technique that exaggerates or uses subjective language to make a product seem better. Pizza Hut is accusing Papa John's of making false claims, while Papa John's is defending itself by saying it is using puffery.

Question 13

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:

Accepted Answer

Puffery is a legal form of advertising that exaggerates the merits or features of a product or service in a subjective way without making any factual claims. It is not considered deceitful or misleading as consumers are expected to understand that these claims are subjective opinions of the advertiser.

Question 14

Critics of the FTC's ad substantiation program contend:

Accepted Answer

Critics argue that if ad substantiation becomes mandatory, advertisers may resort to using vague or exaggerated statements (puffery) to avoid the need for claim verification. They do not necessarily argue that self-regulation is sufficient or that most advertisements make legitimate claims. Additionally, the burden of proof for advertising claims generally lies with the manufacturer, not the consumer.

Question 15

_____ 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.

Accepted Answer

A consent order is an agreement between the advertiser and the FTC that the advertiser will stop engaging in a particular practice, but it does not admit guilt. A cease-and-desist order is a formal injunction from a court or government agency to stop engaging in a particular activity. Ad substantiation agreement and affirmative disclosure order are not commonly used terms in relation to FTC enforcement. An injunction is a court order to stop engaging in a particular activity.

Question 16

The Federal Trade Commission may require affirmative disclosure if:

Accepted Answer

The answer of The Federal Trade Commission may require affirmative...

Question 17

Research on the effects of puffery has shown that consumers:

Accepted Answer

Research indicates that consumers often believe puffery claims as much as factual-based claims, as they may not always distinguish between exaggerated and factual statements.

Question 18

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:

Accepted Answer

The described power is the ability of the FTC to issue a cease-and-desist order, which directs an advertiser to stop making a specified claim until a hearing can be held to determine if the claim is misleading.

Question 19

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.

Accepted Answer

The program described in the statement is the Advertising Substantiation Program, which requires advertisers to have evidence to back up their claims concerning safety, performance, efficacy, or comparative prices.

Question 20

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:

Accepted Answer

The situation is an example of how advertising can be misleading or deceptive because of what is omitted rather than what is said in an ad. The ad claims that one dose prevents the flu but fails to disclose that the product's directions indicate one dose must be taken daily throughout the flu season. This information is material to consumers and the omission of this information is likely to mislead them.

Quiz 21: Regulation of Advertising and Promotion