Public Policy and Consumer Protection

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Public Policy and Consumer Protection
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What is public policy?

• Government intervention in the process or outcome
  of marketing exchanges which policymakers believe
  will benefit society as a whole.
• New policies usually result from
• Marketplace abuses
• Need for economic or social welfare

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The Public Trusts Who?
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Types of Government Interventions

• Regulation
• Consumer education
• Incentives

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Regulation

• Effectiveness of government regulation is
  inconsistent
• Consumers end up bearing costs of regulation
• Requires cost vs. benefit analysis
• Regulation does not always help the original
  intent
• Because not based on consumer research

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Regulatory Agencies

• FTC
• FDA
• EPA
• SEC
• Local governments

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Framework for Determining Regulation
DROP!
Is government intervention appropriate?
Stage 1
No
Yes
Apply 3 key principles Incentive
compatibility First Amendment protection Communica
tion effectiveness
Stage 2
Select the form of remedy from the remedies
continuum
Stage 3
Remove restraints
Enhance information flow
Restrict information flow
Least Restrictive Most
Restrictive
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Deceptive Advertising

• Unfair ad
• The advertiser witholds information which could
  result in injuries to consumers
• Deceptive ad
• Contains explicit or implied claims or omissions
  which are likely to mislead a consumer acting
  reasonably under the circumstances

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Three Categories of Deception

• Unconscionable lies
• Completely false claims made intentionally

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• Claim/fact discrepancies
• Some relevant qualifications of a claim are
  omitted, resulting in misrepresentation

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• Claim/belief discrepancies
• No deceptive claim is made, but a deceptive
  belief is created

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Whats done about deceptive advertising?

• Corrective ads

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Consumer Education

• Provide better product information to protect
  against market abuse
• labeling

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Incentives

• Encourage certain types of consumer behaviors by
  offering them incentives
• Rebates
• Tax deductions

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Socially Responsible Marketing

• Marketplace works best when its free and is
  being socially responsible.