Truthiness in Advertising

Question: How much hype is permissible when promoting a special offer or “sale” price?

by Fil Fraser

The Case: As sure as dreams of Hawaii or Arizona, the post-Christmas sales are upon us. Most consumers take advertised discounts with a large grain of salt. We know that the so-called full retail price is often inflated. With the exception of the auto industry (where dealers are really in distress, trying to get any amount of cash out of inventory that buyers don’t want), we’ve developed a certain cynicism about the meaning of the term “sale.” The Canadian Code of Advertising Standards has rules against deceptive claims about price or quality. There are specific prohibitions against bait-and-switch practices, phony testimonials and scientific claims. Terms like “regular price,” “suggested retail price,” “manufacturer’s list price” and “fair market value” are flagged as potentially deceptive terms. But the attempted deception goes on.

We don’t, as often as we used to, see perpetual “going out of business” or clearance sales, with new merchandise coming in the back door and going out the front at “fire sale” prices. But there always seems to be a “Last chance – this will never happen again” silk carpet sale. More often we see ads selling everything from electronics to fashion offering $20 off, or Save $50. Or, “Buy one, get one free.” Does anybody believe this stuff, that anything is ever free? Are today’s consumers so savvy about this slippery selling that we shouldn’t worry about it? Or should we try to raise the standards?

The Panel: KEN CHAPMAN: a lawyer and president of the Sheldon Chumir Foundation for Ethics in Leadership | JANET KEEPING: a lawyer, a principal in Cambridge Strategies Inc., a public policy consulting firm, and a blogger | ERIC P. NEWELL: former chancellor of the University of Alberta and former CEO of Syncrude Canada Ltd

Janet Keeping: This is a tricky one. On the one hand, it is deeply wrong to try to mislead, which is of course exactly what businesses are doing when they don’t really “tell it like it is.” It’s called lying, and lying is bad. On the other, one might say that because this type of lying is so pervasive – is it not what marketing is all about? – it is harmless because we all know it is untruthful. Its practitioners can’t be trusted further than we can throw them, but no harm is done by their perfidious work because we know what they propagate is rubbish.

Eric Newell: The old maxim of caveat emptor – let the buyer beware – is quickly becoming outdated. The world is changing. The principle of caveat emptor expected people to be knowledgeable enough to make decisions. With the globalization of commerce that is becoming more and more difficult today…. [In the wake of the financial collapse and the increasing visibility of white-collar crime,] there will be higher expectations [for corporate conduct and the regulation of commerce]. The public is going to demand that both the business and the political communities do a better job of protecting their interests. There’s going to be a growing requirement for vendors to assure proper fair value to their customers. Those that follow that practice will, in the long run, be the successful ones, not the ones who are trying to make the fast sale.

The United States’ mortgage meltdown is a terrible example. Some investment brokers were packaging up these worthless, senseless business deals that had no collateral backing, marketing them as sound investments with low risk ratings, and collecting big bonuses. This put the livelihood, pensions and savings of unsuspecting individuals unduly at risk. Even sophisticated investors were misled, and that left large investment and pension funds – even our U of A endowment fund – with significant loss exposures.

Ken Chapman: The esoteric world of ethical advertising standards always makes me smile. I am not smiling cynically about the risk-taking people who are trying to attract business and concerned about doing so in a clear and ethical manner. I smile because the legislators and politicians who make the laws for advertisers to follow to those ethical ends are amongst the worst examples of such abuse. The disappointing irony is that so many of these politicians-cum-legislators are intentionally deceiving, misleadiwng and downright dishonest in their political advertising and campaign communications tactics.

There is abuse of advertising claims in the marketplace. That is a fact. There is good legislation and ethical industry organizations that are on the job and on the ball to deal with such matters. As a result, I don’t think there is as much advertising abuse as one might think. There are clear and well-known examples of misleading and fraudulent advertising claims. There are other businesses that have a bad reputation and are not to be trusted. It is not hard to find out who they are by calls to the Better Business Bureau, industry associations and government agencies. Those who are caught by government and industry regulators are dealt with effectively and [their cases] are often well publicized in the mainstream media.

Keeping: [I am] in no way the deepest of cynics, [but I] never believe anything evaluative I see in advertising. Best in Calgary? Probably not. Most sought-after in the New West? One, who cares? And two, again, probably not. Specific statements, such as “This loaf of bread was made in Millarville,” I tend to put some credence in. Why? Because they make factual claims that I or anyone else could confirm, if we were so motivated. But superlatives – best, biggest, cheapest – forget it.

And although I would prefer a more straightforward and honest world, I am not sure as to how much harm is being done by marketing falsehoods. Years ago when my children, now in their 20s, were in elementary school, they were instructed in how to read advertising, i.e., how to discount the claims made therein. Shortly after this time, I remember driving west on Crowchild Trail, passing the signs to Tuscany. My son, then about 11, sardonically observed, “I think Tuscany is in Italy.” I try to reconcile myself to advertising with the idea that it employs a different language, one in which – like Alice’s Wonderland – truthful communication has no role to play. It is all about manipulation and hence worthy of our contempt, certainly, but not our belief.

Aren’t there vital ethical issues surrounding advertising? Sure. But what I am really concerned about isn’t so much what advertising says – its content – but the sheer amount of it, and where and when it appears. It is one thing to realize it is nonsense, but protecting yourself from the constant onslaught can be wearing and I fear that sometimes, when my guard is down, it just might get through.

Newell: Whether it is good ethics or good business, it would be wrong-headed if people tried to use too much poetic licence and misrepresent their product. People are going to become more demanding. I think that, with the Internet and the globalization of markets, the consumer is going to start feeling more vulnerable. It’s so easy to deceive people on the Internet; much of it requires a leap of faith. But customers aren’t going to stand for fast ones being pulled on them for too long.

Chapman: [Takes a very different view of the role of the Internet with respect to truth in advertising.] We also have the power of the Internet, word of mouth and the blogs. The quick and easy way for almost any disgruntled customers [to counter misleading claims] is to set up a website, get online, find like-minded folks and form virtual communities which provide more effective ways for people to get up to speed on bad actors in the marketplace. There is a definite and growing trend towards some vicious and effective vigilante justice in the marketplace too.

Raising the standards will not achieve much. Raising consumer awareness of how to check out advertising claims, the reputation of the advertisers about how to complain or get even may be more effective. Not everything in the marketplace can be solved by more laws or higher standards, especially if the goal is to protect people from themselves. Einstein said there were only two things that were infinite: the universe and human stupidity. He then said he was not sure about the universe. Enough said?

The Final Word
The economic meltdown which is changing most of our lives has challenged many citizens’ faith in business as usual. Few people now believe that unfettered marketplaces can or will self-regulate effectively. The worldwide top-of-mind question is not “to regulate or not to regulate?” It is about how much regulation we need to keep our economies afloat.

You can read both the Canadian election, with the lowest percentage turnout ever, and the American election, with the highest in recent decades, as expressions of profound dissatisfaction with the status quo. We Canadians, with no inspiring options, either stayed home or held our noses and perhaps naively sent them back for another try to get it right. The Americans, by contrast, bought a dream. It remains to be seen whether president-elect Barack Obama will be able to raise the bar as high as everyone would like him to, but it’s clear that people are demanding more from their leaders. If politics becomes more ethical (granted, a long shot), can business and advertising be far behind?

Still, greater regulation does not ensure ethical conduct. Sometime panelist Alex McPherson, former CEO of Biomira, offered the following: “I believe we have enough regulation in our lives with respect to this minor annoyance. The Better Business Bureau can protect us satisfactorily. My belief is in the old adage caveat emptor. If we don’t stop regulating everything in our lives there will be no emptor left to worry about!”

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