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Truth in Advertising

Truth in Advertising

Author: Jeff Carroll
Description:

Determine the type of false advertising used by businesses.

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Tutorial

Source: Image of potato chips, medicine, dollar sign, images by Video Scribe, License held by Jeff Carroll; Image of popcorn, Public Domain, http://bit.ly/1qgK61x.

Video Transcription

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Hi, I'm Jeff. And in this lesson, we'll talk about the concept of truth in advertising. So let's get started. Truth

In advertising is a requirement by the Federal Trade Commission that advertising does not make fraudulent or deceitful claims. For example, food products are strongly regulated, since dishonesty in the sale of food could harm a large number of people.

For example, a food product cannot claim to be low fat or fat free unless it only has a certain percentage of fat in it, or no fat at all. Medicine is another area that is regulated, which is why commercials for medical products always have disclaimers.

Some companies attempt to avoid this regulation by marketing their products as nutritional supplements to avoid both the food and the medical regulations. Now this is not always dishonest. But consumers should treat these products with greater suspicion if they make claims about health improvements.

Here's a few other examples of false advertising that you might encounter-- bait and switch, where one product is advertised but that product isn't available when the consumer attempts to purchase it, forcing them to choose an inferior product.

Food modifications. In order to make some food products more profitable, they are colored to appear fresher or more appealing. Or portion sizes are smaller than advertised.

Angel dusting. Now this is when a small amount of an active ingredient is placed in a product, only so the product can claim that it is included. But the amount is too small for any benefit.

Sales or going out of business. Sometimes companies will claim they are going out of business to encourage customers to visit, even when they are not. Or, sales are offered with deceptive language, such as sales up to 50%, where only one product is offered for 50%.

But the rest are either not on sale or on sale for a much smaller amount, which brings us to pricing. Now companies have many choices when it comes to pricing. And this can lead to unethical behavior.

Ethically, a company should be able to charge enough money for a product to make a profit for itself and for its investors. And if a company finds that it can charge a premium for its product, perhaps due to its strong branding, then that is still ethical to do so.

But there are unethical methods of pricing. For example, price gouging is an unethical method of pricing. This can occur when a consumer must buy the product, such as gasoline during a national disaster. And the company providing the product charges an amount that far exceeds the normal market price.

There are legal restrictions against some of this behavior, but it can still occur. There are also areas where prices seem extremely high for a product, which may or may not be a case of price gouging. For example, when you pay an extremely high amount for popcorn at a movie theater, when the popcorn is cheap to produce, are you being gouged?

Perhaps you are paying for an experience. Enjoying popcorn at the movies can be a tradition. This is a gray area, and currently it is up to the free market to decide if it should continue.

All right good job. In this lesson, we discussed truth in advertising, reviewed some examples of false advertising, and talked about ethics in pricing.

Thanks for your time, and have a great day.

Terms to Know
Truth in Advertising

A requirement by the Federal Trade Commission that advertising does not make fraudulent or deceitful claims.