Old Dominion University ODU Digital Commons Theses and Dissertations in Business College of Business (Strome) Administration Winter 2002 Deception in Advertising: A Content Analysis of the Legal Parameters of Deception E. Carla Mitchell Old Dominion University Follow this and additional works at: https://digitalcommons.odu.edu/businessadministration_etds Part of the Marketing Commons, Marketing Law Commons, and the Public Relations and Advertising Commons Recommended Citation Mitchell, E. C.. "Deception in Advertising: A Content Analysis of the Legal Parameters of Deception" (2002). Doctor of Philosophy (PhD), dissertation, , Old Dominion University, DOI: 10.25777/2ys7-mq28 https://digitalcommons.odu.edu/businessadministration_etds/37 This Dissertation is brought to you for free and open access by the College of Business (Strome) at ODU Digital Commons. It has been accepted for inclusion in Theses and Dissertations in Business Administration by an authorized administrator of ODU Digital Commons. For more information, please contact [email protected]. DECEPTION IN ADVERTISNG: A CONTENT ANALYSIS OF THE LEGAL PARAMETERS OF DECEPTION by E. Carla Mitchell B.S.B.A. May 1986, Old Dominion University M.B.A. December 1989, Old Dominion University A Dissertation submitted to the Faculty of Old Dominion University in Partial Fulfillment of the Requirements for the Degree of DOCTOR OF PHILOSOPHY BUSINESS ADMINISTRATION OLD DOMINION UNIVERSITY December 2002 Approved by: Earl D. Honeycutt, Jr (Director) Kiran Karande (Member) ^dEnglebrechrfMamber) Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ABSTRACT DECEPTION IN ADVERTISING: A CONTENT ANALYSIS OF THE LEGAL PARAMETERS OF DECEPTION E. Carla Mitchell Old Dominion University, 2002 Director, Earl D. Honeycutt, Jr. One of the primary attributes of a free market economy is the uninhibited flow of truthful information regarding the goods and services available in the marketplace (Azcuenaga 1995). This free flow of information, in the form of advertising, enhances market performance by informing consumers and enabling firms to compete equitably based on the attributes of their offerings. Studies reveal that, for the vast majority of marketing managers, the regulatory environment serves as the primary influence in advertising strategy development and decision­ making (Davis 1994). However, in their theory development, behavioral researchers often ignore the legal aspects promulgated by the FTC. Furthermore, ambiguity in the FTC’s guidelines regarding deception in advertising continues to impede advertisers in their ability to reduce the possibility of potentially deceptive advertising claims (Owen and Plyler 1991; Preston 1992; Davis 1994). Such ambiguity can cause potentially deceptive advertising claims to be presented by marketing mangers even though these managers believe that they are in full compliance with the law. A review of the marketing literature reveals two apparent gaps that this study seeks to fill. These two gaps are: (1) research regarding deceptive advertising has been narrowly focused and (2) no comprehensive case research detailing recent FTC decisions exists in the marketing literature. This study addresses the first gap in the literature by analyzing the legal parameters associated with multiple dimensions of deception in advertising. This research addresses the Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. second gap in the literature by conducting a comprehensive analysis of recent FTC decisions rendered. The complete set of 299 administrative decisions, recorded in published volumes of Federal Trade Commission Decisions from 1990 through 1998, was examined. Using content analysis methodology, a number of the legal parameters involved in FTC decisions were analyzed. The results of this analysis revealed: (1) that, when faced with FTC litigation, the vast majority of advertisers enter into consent agreements (choose not to defend themselves); (2) that certain types of implied claims (Preston 1977) vary (a) according to the type of internal evidence presented by the FTC, and (b) according to the industry category included; and (3) that the severity of FTC orders varies (a) according to the existence of multiple implied claims, and (b) according to the type of industry involved. This study has expanded the existing research by providing insight regarding the legal parameters associated with three dimensions of deception in advertising: (1) evidence of deception; (2) implied advertising claims; and (3) regulatory predictability. Based on the research findings, this study offers an updated typology of relevant implied claims. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. v ACKNOWLEDGEMENTS I consider the achievement of this goal to be more of a group effort than an individual accomplishment. Hence, there are several individuals to whom I would like to express my appreciation. First, I would like to express my sincerest thanks to my Dissertation Committee: Dr. Earl Honeycutt, Dr. Kiran Karande, and Dr. Ted Englebrecht. I am deeply indebted to each of these individuals. Dr. Englebrecht has been a wonderful mentor to me though the entire Ph.D. program regarding numerous aspects surrounding academia, and especially, in the arena of publishing. Dr. Karande has been ever so patient, providing much-needed assistance through the complete methodological process, from development of the research hypotheses to actual implementation of the research design. Dr. Honeycutt has been a guide and a mentor, as well as, a deeply valued friend to me through the entire Ph.D. program. Dr. Honeycutt’s own standard for excellence, set through example, was a key factor in my success. There are no words to express the depth of my gratitude to Dr. Honeycutt, for without his dedication and encouragement, I could not have accomplished this goal. I would also like to thank my family and friends for their support and prayers, and I would like to thank my coders for the numerous hours each devoted to the coding of data. I thank my Dad, Carlton Mitchell, for his mental and financial support through the entire Ph.D. program. I could never have pursued, much less completed, this goal without his support. Also, I thank Bob Phillips for his patience through the dissertation process. Bob shouldered numerous additional responsibilities at home, including my stressed-out, ill temperament, allowing me to have the focus necessary to complete this dissertation. Lastly, I dedicate this dissertation to the memory of my Mom, Maryann Rouse Mitchell. While I was unable to achieve this goal prior to her death, I was able to keep a promise. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. DECEPTION IN ADVERTISING: A CONTENT ANALYSIS OF THE LEGAL PARAMETERS OF DECEPTION TABLE OF CONTENTS Page CHAPTER ONE: INTRODUCTION AND PURPOSE OF STUDY........................................ 1 INTRODUCTION............................................................................................................ 1 THE REGULATORY ENVIRONMENT AND ADVERTISING.................................... 2 STATEMENT OF THE PROBLEM................................................................................ 4 PURPOSE AND OBJECTIVES OF THIS STUDY........................................................ 7 CONTRIBUTIONS TO MARKETING THEORY AND PRACTICE......................... 9 THE RELEVANCY OF THE TOPIC OF DECEPTION IN ADVERTISING.............. 9 ORGANIZATION OF THIS DISSERTATION........................................................... 12 CHAPTER TWO: LEGISLATIVE BACKGROUND AND LITERATURE REVIEW 13 LEGISLATIVE BACKGROUND.................................................................................. 13 REGULATORY DEFINITION: THE LEGAL PARAMETERS OF DECEPTION .... 16 Likely to Mislead ............................................................................................... 17 Reasonable Consumer ......................................................................................... 17 Materiality........................................................................................................... 18 The Unfairness Doctrine ..................................................................................... 19 REVIEW OF THE LITERATURE.................................................................................. 20 Federal Trade Commission Case Studies .......................................................... 21 Federal Trade Commission Policy Regarding Deception in Advertising 27 Assessing Deception in Advertising .................................................................. 30 Consumer Behavior and Deceptive Advertising ................................................ 34 Consequences of Deceptive Advertising .................................................. 37 Corrective Advertising ......................................................................................... 39 CONTRIBUTIONS TO THE LITERATURE................................................................. 40 HYPOTHESES DEVELOPMENT.................................................................................. 42 Evidence of Deception .......................................................................................... 43 Implied Advertising Claims .................................................................................