‘How about a law on ‘Truth in Advertising’?’

Q: WE’RE a partnership of lawyers.  Almost all our clients are medium-sized companies and most of these are pharma companies.  We enjoy reading your Marketing Rx column every Friday and thought we’d ask you something related to your concern about marketing accountability.

On several occasions, we had cases where a client sought our legal advice regarding exaggerated or even false advertising claims of a competitor’s product.  If the case happens to be within the power of the AdBoard of the  4A’s to pass judgment, we represent the client there.  But if the AdBoard, for example, still allows airing of the competitor’s TV commercial, many clients come back to us and have asked: “Shouldn’t there be a law against false advertising?  How about a law on ‘Truth in Advertising’?  Shouldn’t  consumers be protected against such airwave and broadcast pollution?”

Your column has always been a consumer advocate.  May we please have your thoughts and stand on this?

A:  We’d like to answer from the standpoints of the two sides of the issue: the advertiser-ad-industry side and the side of the consumers, or the dependant side and the plaintiff side, so to speak.  What about the government?  On this issue, let’s think of the government as representing the consumers.  So taking up the consumer side is taking up the government side.

Overall, advertisers have been and continue to be generally contented with the self-regulating ad industry.  All TV commercials have to get the “approval” for airing by the AdBoard, the ad industry’s implementing entity.  There was one time in the  ’90s when the “threat” of government regulation came but the ad industry lobbied.  One of its arguments proudly said and pointed to the fact that in the Asean region, the Philippines stands out as “truly democratic” because it is the only country where the ad industry regulates itself.

In other Asean countries, advertising, especially TV commercials, were under strict government regulations.  At that time, in Thailand and Indonesia for example, a TV commercial had to pass the scrutiny of two to three  government agencies.  The approval process often included even what is allowed for the ad to say.  In Thailand, for example, a pharma advertisement cannot talk about or refer to the product’s health benefits even when those were real and backed up by valid medical studies.  So when the issue faded and died, everyone simply assumed that the legislators were persuaded that a self-regulating ad industry was important enough to add to the country’s many first’s.

You asked: “Shouldn’t consumers be protected against” exaggerated or worse, misleading and false advertising?  We agree if (and this is an important if) consumers can’t protect themselves.  But in the case of misleading and false advertising, consumers can protect themselves because they have the last say.

Suppose an ad persuaded its viewing consumers to try the product driven by  exaggerated or untruthful claims.  Let’s say some or even many consumers did try.  But remember that trial purchase is not the key to eventual and sustained market success.  It’s repeat purchases that’s the key.  Sure, trial purchase is the gate to repeat purchase.  But it’s not the gate to repeat purchase.  For repeat purchase to happen, the bought product must deliver on its promises.  So if the buying consumer is disappointed with the bought product, no repeat will follow.  That’s the disappointed consumer’s first and last purchase, and that signals the death of the falsely advertised product.

There’s a second adverse consequence that may accompany this purchase cessation.  Some or many of those disappointed consumers may get angry enough that they may decide to tell others about their sad experience.  That negative word-of-mouth or the more viral word-of-mouse (via the Internet) will hasten the falsified advertised product’s death sentence.

There’s a third downside here especially for false advertising claims.  Competitors who may have felt threatened about possible and likely market share loss may decide to bring to court the company behind the falsely advertised product.  That will drive and hammer down the nails on the coffin.

We tend to conclude then that there is yet no solid ground and a good case in favor of a law that your clients want and for government to intervene and regulate the ad industry.  There are in fact emerging signs that many and more and more company advertisers are learning the lessons.  More and more are turning to become good and responsible ad-using corporate citizens.

Keep your questions coming.  Send them to us at [email protected] or [email protected]. God bless!