Businesses use advertising to tell consumers about the goods and services they are selling. Businesses hope that their advertisements will convince people to buy their products. In this lesson, students examine the ground rules for advertisements of goods and services, why we need rules, who sets them, and who enforces them. They research cases in which, deceptive advertising has been charged and analyze whether the negative incentives for this illegal practice are sufficient to deter future violations.
Show the students two ads in a current magazine or newspaper for a product that they might purchase. Use one ad that focuses on price –for example:
Use a second ad that is more subjective –for example:
Display the ads one at a time and ask:
[Note to teacher: Tell the students it is good to be skeptical of advertising. There are rules that govern what can and cannot be claimed in advertising, but some ads slip over the line and are deceptive. In this lesson, the students will examine cases in which advertising crossed the line. Explain that in this lesson the students will examine the ground rules for the advertising of goods and services, who sets the rules and who enforces them. They will research cases in which deceptive advertising has been charged and analyze whether the present penalties for this illegal practice are sufficient to deter future violations.]
Divide the students into teams of 2-3 persons. A total of 12 teams works well as it corresponds with the 12 suggested case studies in Activity 1, but you can use any number. If you decide to use the 12 cases, assign each team a number from 1 to 12.
Working in their teams at the computer, the students should read and follow the instructions in the student version. When they get to Activity 1, the case study they will research will correspond with their team number.
What Is a Deceptive Ad?
In this first section of the lesson, it is explained that advertisers want to make what they are selling look as good as possible. This can involve the use of puffery and weasel words. Definitions and examples are provided for both techniques. The students are warned that puffing and weasel words are generally not considered deceptive in the eyes of the law. It is assumed that most “reasonable consumers” know a seller will exaggerate a bit.
Over time, government regulations and court cases have established rules to determine when advertising claims cross over the line and become to illegal deception. Advertising is generally considered deceptive under federal law if it involves these elements:
Examples are provided of what does and does not constitute deception. Children and other groups that receive special protection because they are considered especially vulnerable to deceptive ads are identified.
ADDITIONAL INFORMATION FOR THE TEACHER: Claims for false advertising can be brought by a competitor under the Federal Trademark Act, 15 USCA § 1125 (also known as the Lanham Act). The law says that: ‘Any person who, on or in connection with any goods or services … uses in commerce any … false or misleading description of fact, or false or misleading representation of fact, which … in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.’
The Lanham Act was enacted in 1946 and amended in 1988. Neither the original act nor the amendment provides much guidance on interpretation. As a result, court decisions over time have resulted in the three elements identified above and provided to the students in this lesson.
In 1983, FTC Chairman James Miller prepared a https://www.ftc.gov/public-statements/1983/10/ftc-policy-statement-deception for Congress that summarized the agency’s views on deception based on previous court decisions. The purpose of the letter was to provide some guidance to the public as to when practices were crossing the line into illegal practice.
Consumers cannot bring suit under the Lanham Act because its stated purpose is to ‘protect persons engaged in … commerce against unfair competition,’ as opposed to protecting consumers. State law has traditionally provided consumers with remedies for losses incurred from misrepresentation.
Why would firms engage in false advertising? Profit-maximizing firms may be willing to incur fines when the fine is less than the profit gained from false advertising. Also, many firms still take the risk of engaging in false advertising, regardless of the potential customer loss, because the benefits outweigh the risks for them. For example, in 2001 Sony ran an advertising campaign for several of its upcoming movies creating a ‘fake’ critic that made comments about the movies. By the time consumers and regulation agencies found out about the deceptive advertising, Sony’s ticket sales looked pretty good.
Who Are the Regulators?
Two general types of advertising regulation in the Unites States are described. The first is government regulation through federal and state laws. The main government regulatory agency for advertising is the Federal Trade Commission. But state regulations are often more ‘consumer friendly’ and have more ‘teeth’ in court.
The second type of regulation is self-imposed through standards set by advertisers themselves. The National Advertising Division (NAD) has established a National Advertising Review Board comprised of advertisers, advertising agencies, and the general public to deal with advertising complaints. A Children’s Advertising Review Unit (CARU), as the name implies, reviews advertising in all media directed to children 12 years old and younger.
Governmental and self-imposed regulations use negative incentives to discourage deceptive advertising. A negative incentive is a penalty that people receive for a specific behavior.
Activity 1: Research Ads That May Have Crossed the Line
The students are told it is often difficult to draw a line between advertising that is deceptive and that which is not. They are directed to research one of the following cases, using the web links provided as a starting point. Using the information they gather, they are to fill in the block on their worksheet that corresponds with their worksheet number.
For your reference, summaries of the cases are provided below as well on a completed Teacher version with answers.
Activity 2: Report Your Findings
The students are told to share their case findings with their classmates so that everyone has a summary of the cases studied.
To make this an orderly process and make sure all students participate, have each team divide equally the number of cases the class has researched. For example, a team of two would divide the 12 cases in half with each student having responsibility for 6. Students on teams comprised of 3 people would each have responsibility for 4 cases.
Instruct the teams to position themselves at different locations around the classroom with a sign in front of their desks indicating the name and number of the case they researched.
One student from each team should remain at the desk to share information with classmates while other team members move around to the other stations to collect information. When a team member has finished collecting data on her assigned cases, she should switch with their teammate who is sharing information.
[Note to teacher: An alternative approach for sharing information is to have each team report their findings to the class as a whole. The first five questions in the Conclusion section of this lesson offer a format to this approach.]
THINK ABOUT IT
The students are also challenged to do some critical thinking. They are instructed to prepare and print out responses to these questions which will be used in class discussion. Answers are provided below.
The complaints in the cases you researched were filed by consumers, businesses and other interested parties.
Conclusion:
When the students have completed their research and worksheets, ask these questions (which include the THINK ABOUT IT questions in the student version).
If time is limited, you may want to start with question 5. Questions 1 through 4 offer a framework for having students make oral reports to the class as a whole.
Dishonest or deceptive ads hurt both consumers and businesses. Both government and industry have taken steps to make sure advertising is truthful and accurate. Regulations and negative incentives are the primary tools used to discourage deceptive ads in the marketplace. Through these cases, it becomes apparent that there are limits to their effectiveness. There is no guarantee that all ads are honest and true. Consumers must be constantly on guard and have a healthy skepticism for what is claimed by sellers in the marketplace.
Have the students:
1. Watch television, listen to the radio, surf the Internet, or look at a magazine to find an advertising claim that they consider deceptive. Write a letter asking for evidence that supports the claim. To find the address for the business, students can:
As they do their search, keep in mind the name of the manufacturer or parent company is often different from the brand name. The Thomas Register of American Manufacturers—a book available at many public libraries—lists the manufacturers of thousands of products.
2. Research and prepare a report on one of these organizations that attempts to curb deceptive advertising in the marketplace.
It might also be interesting to have the students compare the number of cases handled by each organization.
Assessment is based on students’ completion of the worksheet and their answers to discussion questions. These are the answers for the worksheet. Responses to the THINK ABOUT questions are provided as part of the conclusion.
These assessment rubrics will assist you in establishing evaluation criteria.
Grades 9-12
Grades 6-8, 9-12
Grades 9-12
SIFMA Foundation
Grades 3-5, 6-8, 9-12
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