Codes of Ethics and Advertising Restrictions

• Pages: 123-140

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CHAPTER VII

CODES OF ETHICS AND ADVERTISING

RESTRICTIONS

A. Introduction

Many trade and professional assoc iations facilitate industry self-

regulation, which may include promulgating codes of ethics that regulate

the manner in which their members conduct business. Self-regulation

through codes of ethics “is a fundamental funct ion of associations

generally, and its benefits and many legitimate purposes are numerous.”

1

Proper self-regulation allows “those who know the industry best to help

set the rules of the game,”

2

and is “beneficial to businesses as well as

consumers.”

3

For businesses, examples of the benefits include the

enhanced reputation of the industry or profession for fair and honest

products and services, avoidance of ethically questionable business

practices, and increased loyalty and pride among those who participate

in the industry.

4

For consumers, self-regulation can be valuable where,

for example, it results in information about advertised product s or

services being truthful and accurate.

5

Self-regulation provides an important complement to government

regulation and enforcement. “Self-regulation can be the most

1. Consol. Metal P rods. v. Am. Petroleum Inst., 846 F.2d 284, 294 (5th Cir.

1988) (“[I]t has long been recognized that the establishment and

monitoring of trade standards is a legitimate and beneficial function of

trade associations.”).

2. Jon Leibowitz, Comm’r, Fed. Trade Comm’n, American Bar Ass’n

Antitrust Spring Meeting: The Good, the Bad and the Ugly: Trade

Associations and Antitrust, at 5 (Mar. 30, 2005), available at

http://www.ftc.gov/speeches/leibowitz/050510goodbadugly.pdf.

3. Pamela Jones Harbour, Comm’r, Fed. Trade Comm’n, Keynote Address:

Helping the FTC Help You: Effective Self- Regulation is Better Business,

at 1 (Sept. 26, 2005), available a t http://www.ftc.gov/speeches/

harbour/050926selfreg.pdf.

4. Id. at 13.

5. See, e.g., Robert Pitofsky, Chairman, Fed. Trade Comm’n, D.C. Bar

Ass’n Symposium: Self Regu lation and Antitrust (Feb. 18, 199 8),

available at http://www.ftc.gov/speeches/pitofsky/self4.shtm.

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Antitrust and Associations Handbook

appropriate or effective method of addressing issues that othe rwise

would be difficult for law enforcement to manage because of

constitutional, statutory or other political limitations.”

6

The FTC

encourages i ndustry sel f-regulation because “[ i]t relieves the FTC from

supervision of some issues, and frees up resources that can be used

in other areas.”

7

Self-regulation does not, however, imply absence

of government enforcement; indeed, it may facil itate the govern-

ment’s work by “allow[ing] the FTC to focus more efficiently on the

activities of those who don’t comply wit h t he self-regulatory regime.”

8

The FTC has long been s upportive of the work of the Council of Better

Business Bureaus’ National Advertising Division (NAD).

9

Another

prominent self-regulatory program, developed by the Electronic

Retailing Association, focuses on direct response advertising and is

administered by the National Advertisi ng Review Council.

10

Areas in

which the FTC encourages self-regulation include alcohol beverage

advertising,

11

marketing of food to children and adolescents,

12

weight

6. J. Thomas Rosch, Comm’r, Fed. T rade Comm’n, the NAD Conference

2008: Self-Regulation and Consumer Protection: A Complement to

Federal Law Enforcement, at 14 (Sept. 23, 2008), available at

http://www.ftc.gov/speeches/rosch/080923Rosch-NADSpeech.pdf.

7. Id. at 11.

8. Id.

9. See Deborah Platt Majoras, Chairman, Fed. Trade Comm’n, Address

before the Council o f Better Business Bureaus: Self Regulatory

Organizations and the FTC (Apr. 11, 20 05), available at

http://www.ftc.gov/speeches/majoras/050411selfregorgs.pdf.

10. See The E lectronic Retailing Self-Regulation Program Policy &

Procedures (Aug. 2004), available at http://www.narcpartners.org/ersp/

ERSPProcedures.pdf.

11. Harbor, supra no te 3, at 7-8; see also FTC Report, Self-Regulation in the

Alcohol Industry (June 2008), available at http://www.ftc.gov/opa/2008/

06/alcoholrpt.shtm.

12. See FTC Repo rt to Congress, Marketing Food to Children and

Adolescents: A Review o f Industry Expenditures, Activities, and Self-

Regulation (July 2008 ), a vailable at http://www.ftc.gov/os/2008/07/

P064504foodmktingreport.pdf.