Consumer advocates and government leaders criticize a booming industry, blaming innovative companies for abusing the public trust and misusing technology to deceive consumers on a massive scale and causing deep distrust in the marketplace. Calls for increased oversight or additional regulation come from every direction.
This scenario rings a bell as today this criticism is directed at Big Tech in Silicon Valley, but these are familiar chimes.
After backlash to the growth spurred by so-called “consumerism” of the late 1950s and 1960s, the advertising industry was the target of mounting criticism for perceived widespread practices of dishonesty and consumer deception.
Although leaders in advertising initially rejected the sweeping indictments, they ultimately agreed in 1971 that misleading practices warranted action.
It was the era of “Big Government,” but it was not government that helped Madison Avenue solve their misinformation and trust issues in the 70s. It was the advertising industry itself.
Fierce competitors collaborated to develop the U.S. system of advertising industry self-regulation, the National Advertising Division, now part of independent non-profit organization, BBB National Programs. The concept is that advertisers hold each other to agreed-upon truth in advertising standards in line with guidance set by the Federal Trade Commission (FTC).
Notwithstanding early skepticism and valid concern that advertising industry self-regulation would be like letting the fox guard the henhouse, the system has worked for 50 years.
Whether a company is claiming to sell the “#1 dermatologist recommended skincare brand,” or to provide a pain reliever that is “proven better on pain,” or to offer an “unlimited” data plan, advertising can be vetted using the system of self-regulation to support fair competition and protect consumers.
A National Advertising Division case from a few years ago provides a good example of how the system works. The first commercially viable robot vacuum truthfully advertised that it cleans while you sleep. The vacuum delivered on the “Space Age” promise, foreshadowed by the Jetsons, that robots would take over mundane household chores.
Copycats soon followed. While competition can often drive down prices or accelerate innovation as competitors scramble to increase market share, in this case the leading brand was concerned that its competitors were not innovating their products but overstating their advertising claims.
Competitors touted that their robot vacuums were powerful enough at eliminating dust to reduce asthma. One competitor added UV lights to its robot vacuums and claimed they sterilized and sanitized surfaces.
While robot vacuums are almost magical in their convenience, they have not been shown to impact asthma. And UV lights on the vacuums did not remain on surfaces long enough to kill viruses or bacteria.
A series of challenges, played out at the National Advertising Division, successfully removed the misleading claims of several competitors from the marketplace.
Robot vacuums today compete for consumers on suction power, convenience, battery life, and noise level. Viruses and asthma continue to be serious health concerns, but robot vacuums are not advertised to treat dangerous or chronic illnesses or to minimize their symptoms.
This example shows how challenging competitors that gain an unfair edge by overstating product benefits can stop practices that trick consumers and warp the competitive marketplace.
Advertising self-regulation today can address new misleading practices that are gaining the attention of advocates and regulators. In particular, the FTC’s recent actions, sending letters to 1,800 major brands that misusing endorsements, testimonials, and product reviews to deceive consumers may lead to civil penalties, is a warning call for the advertising industry and an opportunity to embrace its 50-year-old system of independent industry self-regulation.
If a new product amasses a suspiciously huge volume of user reviews in a short amount of time, diluting the value of the ratings of companies with real five-star reviews, competitors can and should challenge the authenticity of those reviews.
When a known vegetarian influencer promotes bacon cheeseburgers, companies can and should challenge whether the paid endorsement is misleading. The fast pace of digital marketing and ecommerce requires this renewed commitment to maintaining a fair marketplace.
The FTC’s notice that it can seek monetary penalties in the millions of dollars for misleading use of influencer marketing or consumer reviews should be met with renewed commitment to advertising self-regulation.
In the May Honest Ads webinar, Marla Kaplowitz, President and CEO of the 4As (American Association of Advertising Agencies) explained that “self-regulation is about a community coming together… It’s not about how you do right by business. It’s about how business does right by the consumer.”
In that same webinar, Bob Liodice, CEO, Association of National Advertisers, added, “the foundation of advertising success is trust and this system of self-regulation allowed us to elevate trust.”
Perhaps today’s new crises such as the spread of misinformation on social media, the market power of large companies, and the resultant impact on consumer choice, warrant a renewed look at industry self-regulatory solutions.
As the advertising industry collectively decided in 1971, waiting for Congress to act does not necessarily solve problems today, and may lead to further problems tomorrow.