DOCUMENT RESUME ED 074 777 EM 010 980 AUTHCR Howard, John A.; Pulbert, James TITLE Advertising and the Public Interest. A Staff Report to the Federal Trade Commission. INSTITUTION Federal Trade Commission, New York, N.Y. Bureau of Consumer Protection. PUB EATE Feb 73 NOTE 575p. EDRS PRICE MF-$0.65 HC-$19.74 DESCRIPTORS *Broadcast Industry; Commercial Television; Communication (Thought Transfer); Consumer Economics; Consumer Education; Federal Laws; Federal State Relationship; *Government Role; *Investigations; *Marketing; Media Research; Merchandise Information; *Publicize; Public Opinj.on; Public Relations; Radio; Television IDENTIFIERS Federal Communications Commission; *Federal Trade Commission; Food and Drug Administration ABSTRACT The advertising industry in the United States is thoroughly analyzed in this comprehensive, report. The report was prepared mostly from the transcripts of the Federal Trade Commission's (FTC) hearings on Modern Advertising Practices.' The basic structure of the industry as well as its role in marketing strategy is reviewed and*some interesting insights are exposed: The report is primarily concerned with investigating the current state of the art, being prompted mainly by the increased consumes: awareness of the nation and the FTC's own inability to set firm guidelines' for effectively and consistently dealing with the industry. The report points out how advertising does its job, and how it employs sophisticated motivational research and communications methods to reach the wide variety of audiences available. The case of self-regulation is presented with recommendationS that the FTC be particularly harsh in applying evaluation criteria tochildren's advertising. The report was prepared by an outside consulting firm. (MC) ADVERTISING AND THE PUBLIC INTEREST A Staff Report to the Federal Trade Commission by John A. Howard and James Hulbert U.S. DEPARTMENT OF HEALTH, EDUCATION & WELFARE OFFICE OF EDUCATION THIS DOCUMENT HAS BEEN REPRO- DUCED EXACTLY AS RECEIVED FROM THE PERSON OR ORGANIZATION ORIG- INATING IT. POINTS OF VIEW OR OPIN- IONS STATED DO NOT NECESSARILY REPRESENT OFFICIAL OFFICE OF EOU CATION POSITION OR POLICY. An analytical Report to the Federal Trade Commission of the testimony and the record of the 1.1C's Hearings on Modern Advertising Practices by John A. Howard and James Hulhert, consultants to the Commission. The analysis, interpretations, conclusions and recommendations expressed in the report are solely those of John A. Howard and James Hulbert who were responsible for the preparation of the report. PREFACE C. W. Cook, the lead-off speaker for the advertising industry, predicted that when the record of the Federal Trade Commission's hearings was complete, we would be closer to a definition of advertising and the public interest.We hope that this staff report to the Commission does, to some extent, confirm Mr. Cook's prediction; hence, the title of the report. The report itself is based mainly upon the transcript of the Commission's hearings on Modern Advertising Practices together with the written submissions and other documents submitted for the record. The report was written with the funding and assistance of the staff of the Bureau of Consumer Protection, but indicatesno approval or disapproval by the staff or (:ommission. The hearings-represented a very significant stage in the continuing evolution of the American marketing system. The Commissioners, increas- ingly concerned about the complexity of their statutory task ofregulating the advertising industry, called upon adVertising agencies, media, trade associations, researchers, consumers and consumerists, toprovide information which would facilitate their task. The result was an assembly of witnesses whose testimony during thecourse of t;-e hearings covered the issues of advertising and the public interestmore compre- hensively, and from a greater diversity of perspectives,than had ever before been the case. This report is designed to make the contents of those hearings available in useful form to all whose decisions are affected by the interplay of advertising and the public interest, be they consumers, advertisers or regulators. The hearings themselves were specifically designed to help ensure that regulation is conducted so as to benefit consumers and competitors, to determine more exactly what constitutes "unfair' and advertising, and to understand more clearly the mechanisms 1 by which advertising works. To be useful in meeting these ends the voluminous hearing data required considerable reorganization, distil- lation and interpretation. It is our hope that this effort has produced a report=-which will contribute to the purpose the Commission- ers envisioned in deciding to hold the hearings. Insofar as the report does prove useful, it is in large measure due to the help we have received from members of the Bureau staff and others. First we must express our gratitude to Robert Pitofsky for his imaginative understanding of our goals. He set the ground rules and "gage us our head." Second, the Chairman, Miles Kirkpatrick, with his remarkable perceptiveness and intellectual integrity, provided us with_ a sense of mission that made the preparation of the report an existing task. We owe an immense debt of gratitude to Joan Bernstein and . Nancy Buc, who were responsible for arranging the hearings. 1. Commissioner Kirkpatrick (T3). Throughout the report we have adhered to a simplified format for references to the transcript of the testimony, for which we have used "T" followed by, the page number, and the written submissions for which we have used "W" followed by the page number. They adhered to a philosophy of honest inquiry which permeated both the hearings and their relationship with us. Their knowledge was of immense help in analyzing and. evaluating the content (DI the hearings. in addition, they were splendid critics with a veritable passion for new concepts. Finally, we wish.to thank Stuart Block and Lawrence Fox for their assistance in various aspects of preparation and coordination of this report. Outside of the Bureau staff, Erma Angevine, Executive. Director,. (.1 Consumer Federation of America, offered counsel and observations that yielded very useful insights: We also wish to thank the follow- ing members of the Joint ANA-AAAA Committee who lent both their .personal and, organizational support: John Crichton, Peter Allport, Bart Cummings* Edward Bond, Thomas Dunker.ton andGilbert Weil. We mu5t reserve a special vote of thanks for Dr. Lawrence Reedy of the AAAA, he gave both moral and material support. But, more than this, he saw the hearings as an opportunity to clear away cobwebs that had long obScured views of the industry - from outside and within He quietly performed a role thatwe believe brings to the report a higher degree of objectivity than would have otherwise been possible.. Here at Columbia.University, a number of people contributed sterling service. Mrs. Bernice Schuddelkopf.did most of the typing' and many of the administrative chores. She devoted endless evening and week-end- hours to the many essential tasks involved in the venture. Hertrare good humor and tolerance made her a delight to work with. She was ably assisted by Mrs. Jill Hoffman, to whom we also extend our (iv) thanks. We owe a Considerable .deb-tto Francis Scricco. He:devoted himself wholeheartedly to the administration of the project,and his efforts eased many of the burdens which would.othewiSe have fallen on our shoulders. In addition, he played anliMportant role in the early stages of analyzing the hearings material, andwas primarily responsible for working with the written submissions. The bulk of the analysis of content, however, was performed by JohnBinkley and Carole Brandt. We are very grateful for the long hours they spent analyzing the transcripts of the testimony. Their work laid the foundation of -the report. We also wish to thank Morris Holbrook, who authored Appendix Two. While this is a subStantial contribution in its own.2ight, our discus- -sions with Morris on other parts of the report were always interesting and helped us refine a number of ideas. A further essential contribution was made by Professor Deanna Kuhn of the Psychology Department at Columbia. Her thoughtful and. detailed comments on the child development section of Chapter Six were invaluable. Sharon Cook'labored with great skill on a variety of documents submitted for the public record. The annotated bibliography is largely a result of her efforts. Her motivation and perseverance were a model for all of us. She also helped us with the unexciting but essential job of proof reading. In the final "rush to Andrea Madden provided timely assistance. She helped to summarize transcript. material for the (v) bibliography, read proofs and helped with a variety of: the other tasks that somehow remain at the last minute. We are very grateful for her willingness to' help us at such short notice.Karen Hochman and Claudia Ulbright provided similar help, and we also thank them for their efforts. Finally, we also extend our appreciation to our colleagues, friends and families who have endured our preoccupation over the last year. Their understanding and support eased our task considerably. New York City John. A. Howard February 1973 James Hulbert (vi) TABLE OF CONTENTS Chapter Page One THE CONSUMER AWAKES I - 1 Evidence for Awakened Consumer Interest - 1 What is Happening to the Consumer?' ',.. .4 Responding to the Consumer Challenge - 13 Scope of the Report - 16