Beyond Deception: Potential Unfair Consumer Injury from Various Types of Covert Marketing

• Published date: 01 December 2019
• Author: Jenifer Skiba,Ross D. Petty,Les Carlson
• Date: 01 December 2019
• DOI: http://doi.org/10.1111/joca.12284

WINTER 2019 VOLUME 53, NUMBER 4 1573

JENIFER SKIBA, ROSS D. PETTY, AND LES CARLSON

Beyond Deception: Potential Unfair Consumer Injury

from Various Types of Covert Marketing

Although there is little agreement over the best denition or evenname

for covert marketing, many policymakers and commentators agree

that covert marketing may deceive consumers to their detriment. This

study proposes that some forms of covert marketing also impose a

type of unavoidable consumer injury that we call marketer control of

consumer engagement. This injury, if aggregated to be substantial, can

violate legal prohibitions against unfair acts and practices. To reach

this conclusion, this study rst proposes a name mnemonic and then

develops a typology of covert marketing practices that may deceive

and also unfairly injure consumers. It concludes by discussing policy

implications of this two- rather than one-dimensional analysis of covert

marketing.

The world of marketing and advertising is rapidly changing with the

increased use of technology and other new forms of marketing communica-

tions. Experts suggest that consumers are bombarded daily with thousands

of communications in many different forms (Martin and Smith 2008; Petty

and Andrews 2008; Sprott 2008)—some are explicit marketing commu-

nications while others remain disguised as a means of cutting through

so-called “advertising clutter.” There has been some discussion regarding

the use of these types of disguised (covert or masked) marketing techniques

(most recently referred to as native advertising to avoid any negative con-

notation), the ethical and legal issues involved, and consumer responses to

these practices.

For example, Ashley and Leonard (2009) found that covert marketing

practices can lower trust and commitment to the brand, and have negative

impacts on the activation of persuasion knowledge(Wei, Fischer, and Main

2008). This may be the case even if the message is being brought through

a video news release or publicity (Nelson and Park 2015). Milne, Rohm,

and Bahl (2009) found that consumer learning about a covert marketing

Jenifer Skiba (jskiba@missouristate.edu) is an Assistant Professor of Marketing at Missouri State

University. Ross D. Petty (petty@babson.edu) is a Professor of Marketing Law and FacultyScholar

at Babson College. Les Carlson (lcarlson3@unl.edu) is the Nathan J. Gold Distinguished Professor of

Marketing at the University of Nebraska-Lincoln.

The Journal of Consumer Affairs, Winter 2019: 1573–1601

DOI: 10.1111/joca.12284

Copyright 2019 by The American Council on Consumer Interests

1574 THE JOURNAL OF CONSUMER AFFAIRS

strategy may decrease purchase likelihood, increase the skepticism felt by

consumers toward marketing practices, lower trust in the brand and the

company, and damage long-term relationships between the company and

the consumer.

On the other hand, Rotfeld (2008) argues that new and creative forms

of covert marketing (such as the use of posers) might cut through clutter

briey, butsince consumer skepticism is increasing, people will selectively

use or potentially ignore these new forms. He states, “the existence of a

hidden or unidentied sponsor is less important than whether the messages

are true” (p. 68). Similarly, Boyer et al. (2015) nd that consumers tend to

accept covert marketing when they have tried the product and like it, but

will have a lower intention of purchase when the experience with product

trial is neutral, despite the use of covert marketing strategies.

Regardless of this scholarly debate on the degree of possible harm to the

marketer from covert marketing, it seems clear that the use of these covert

marketing strategies is on the rise (Boyer et al. 2015). This increase is

occurring despite attempts by the U.S. Federal Trade Commission (FTC) to

control these strategies (Nekmat and Gower 2012) and to advise business to

avoid liability (FTC 2015b). For example,the FTC (2019) led a complaint

and settlement order in federal district court prohibiting the marketers of

a weight loss treatment from continuing to purchase fake 5-star reviews

that were posted on Amazon.com. Shoppers would think these were actual

independent reviews when they were in fact fraudulent. The order also

prohibited future weight loss claims without substantiation from human

clinical testing and the marketers agreed to pay $50,000 in order to suspend

a judgment of $12.8 million.

This FTC settlement was preceded by one with a public relations rm

and a publisher for falsely representing that paid endorsements and adver-

tising about a mosquito repellant were independent statements and opin-

ions from impartial sources (FTC 2018). Similarly, the FTC (2017b) chal-

lenged two online gamers and widely followed social media inuencers

who endorsed and promoted an online gambling service without disclos-

ing they owned the service. In addition, they paid other well-known social

media inuencers to promote the service without requiring them to disclose

the payments. Warner Bros. (FTC 2016c) and Lord & Taylor also settled

similar FTC charges regarding undisclosed paid social inuencers. Lord

& Taylor was charged with deceiving consumers by posting a seemingly

objective article in an online publication without disclosing the post was

actually paid promotion (FTC 2016a). Lastly, in a case that went to trial,

the appellate court afrmed a trial court order that operators of fake news

sites pay consumers $11.9 million and stop using sites that look like actual