Self-regulation

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In 1911, faced with declining trust in advertising and potential threats of restrictive actions by government, Printers' Ink, a major ad industry trade paper in the U.S., proposed a model statute for advertising regulation. The model was eventually adopted in some form by all but three states.

Over the years, various trade associations have written codes or guidelines for their members. Some closed-shop "guilds" that required members to be licensed had a legal mechanism for the enforcement of ad practices. Such rules restricted physicians, lawyers, optometrists, pharmacists and others from advertising. Starting in the mid-1970s, however, those bans on advertising were removed by courts under applications of free speech rights or other laws.

The American Association of Advertising Agencies was created in 1917 amid much talk of ethics and self-regulation. Because membership was required if an agency were to be recognized by the media for commission payments, the group's code had some influence on member practices. (Later, however, the Justice Department said that code violated antitrust laws, thus removing the association's ability to enforce its code by sanction.)

New Deal policies

With the New Deal government of the 1930s, President Franklin D. Roosevelt helped make the federal government an instrument of consumer interests. A bill to transfer advertising oversight from the powerless Federal Trade Commission to the more aggressive Food & Drug Administration stirred advertisers to reconsider self-regulation. In 1938, Congress chose to leave advertising oversight with the FTC, but it gave the agency broad new powers to seek court injunctions against deceptive ads.

World War II reduced the availability of consumer goods and therefore the need to advertise; subsequently, the threat of regulation declined. After the war, though, there were several high-profile FTC advertising cases. Carter's Little Liver Pills was compelled to admit that its product had no effect on the liver, and Geritol ended its claims to awaken "tired blood."

Two famous cases in the 1960s addressed rigged TV commercials. The first involved a demonstration for Rapid Shave that showed a razor shaving "sandpaper" that had supposedly been softened by a few minutes' contact with the shaving cream. The second concerned a commercial for Campbell's vegetable soup in which clear marbles were used in the bottom of a soup bowl to push the vegetables to the surface and make the soup appear thicker and more appetizing.

Enforceable regulation

In 1969, a handful of industry leaders led by Victor Etling, chairman of the American Advertising Federation and VP-advertising at Quaker Oats Co., and AAF President Howard Bell approached the recently formed Council of Better Business Bureaus in search of a partnership. In 1971, they formed the National Advertising Review Council to monitor false advertising.

For most of its history the NARC has had three ad review divisions. The National Advertising Division was established to receive complaints from consumers, local Better Business Bureaus and from other advertisers challenging the claims of particular ads. The accused advertiser is then asked to produce substantiation for the claims, at which point the advertiser could offer evidence, modify the campaign or withdraw it altogether.

If no agreement is reached, the defending advertiser can appeal to a second review unit, the National Advertising Review Board , which draws its membership from a pool of industry executives. (The organization achieved considerable prestige when Charles Yost, former U.S. ambassador to the United Nations, agreed to serve as NARB's first chairman.) The third leg of the NARC is the Children's Advertising Review Unit, which monitors advertising directed to young people.

Cooperation is important since the NAD/NARB has no enforcement powers. It does not attempt to set codes or go beyond the basic requirements of government.

Power of the media

Existing media might force a group of companies to follow certain practices in deciding how to efficiently reach target audiences. And a trade association might retroactively adopt those practices as part of a code, formally endorsing what has already been put into practice.

No TV station, cable or broadcast network, magazine, radio station or newspaper in the U.S. is required to accept commercial advertising material it does not wish to carry. There are some limited exceptions for political advertising in the broadcast media. Some media impose strong standards on the types of advertising content they will accept for broadcast or publication.

An example of media codes that influenced many business practices are the radio and TV codes administered by the National Association of Broadcasters. A considerable body of broadcast standards and practices was in place by the end of the 1930s in which the networks reserved for themselves the right to review (and reject) advertising and programming on the basis of taste, content and other matters.

Before 1982, the NAB's Radio Code and Television Code exerted significant influence over advertisers' practices. Fewer than two-thirds of TV stations and half of radio stations followed their respective voluntary codes, but NAB codes were the basis for acceptance decisions at all three networks and many major-market stations across the country, accounting for 80% of TV audiences.

The Justice Department sued the NAB under antitrust laws in 1979, claiming that parts of the codes violated antitrust laws by recommending limits on numbers of commercials per hour. After adverse pretrial rulings in 1982, the NAB suspended all code activities.

The "Big Three" broadcast networks-ABC, CBS and NBC-all follow written codes adopted when the NAB dropped its clearance procedures. While the three often do not agree with each other on actual acceptance decisions for individual spots, they sometimes influence advertising practices in a manner akin to that previously promoted by the NAB. (The Fox network did not exist when NAB dropped the code, and it makes decisions on an ad hoc, case-by-case basis, with no written guidelines.)

While the networks influence many advertisers' decisions, as network audience shares decline and the number of cable and independent options increase, there are many other outlets for commercials that never undergo review.

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