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Belch: Advertising and
Promotion, Sixth Edition
VII. Special Topics and
Perspectives
21. Regulation of
Advertising and Promotion
ever, involving Listerine mouthwash, Warner-Lambert tested the FTC’s legal power to
order corrective messages. 55 For more than 50 years Warner-Lambert had advertised
that gargling with Listerine helped prevent colds and sore throats or lessened their
severity because it killed the germs that caused these illnesses. In 1975, the FTC ruled
these claims could not be substantiated and ordered Warner-Lambert to stop making
them. In addition, the FTC argued that corrective advertising was needed to rectify the
erroneous beliefs that had been created by Warner-Lambert as a result of the large
amount of advertising it had run for Listerine over the prior 50 years.
Warner-Lambert argued that the advertising was not misleading and, further, that the
FTC did not have the power to order corrective advertising. Warner-Lambert appealed
the FTC decision all the way to the Supreme Court, which rejected the argument that corrective
advertising violates advertisers’ First Amendment rights. The powers of the FTC
in the areas of both claim substantiation and corrective advertising were upheld. Warner-
Lambert was required to run $10 million worth of corrective ads over a 16-month period
stating, “Listerine does not help prevent colds or sore throats or lessen their severity.”
Since the Supreme Court ruling in the Listerine case, there have been several other
situations where the FTC has ordered corrective advertising on the basis of the
“Warner-Lambert test,” which considers whether consumers are left with a latent
impression that would continue to affect buying decisions and whether corrective ads
are needed to remedy the situation.
In a recent case involving Novartis Consumer Health Corp.’s Doan’s Pills, the FTC
sent a strong message to advertisers and agencies that it will require marketers to run
corrective ads to remedy any misleading impressions that were created through unsubstantiated
advertising claims. 56 In this case, Novartis was ordered to spend $8 million,
or the equivalent of the average annual ad budget for Doan’s Pills over an eight-year
period, on corrective ads to remedy any impressions that might exist from previous
advertising that the brand is more effective than other analgesics for relieving back
pain. Novartis is appealing the decision, and this may, like the landmark Listerine
mouthwash case, be a major test of the FTC’s legal power to order corrective advertising.
At issue in the appeal will be not only the FTC’s standard for determining whether
a latent impression exists but also the question of whether the commission has to
prove that advertising created a lingering false impression or whether it can assume
that years of advertising would have created the misapprehension.
The Doan’s case will have very important implications for the FTC as well as
advertisers. A win by the FTC would reaffirm the agency’s authority to order corrective
advertising and give it greater freedom to use the remedy, but a loss could limit its
ability to do so. The case will also have lasting repercussions for advertisers, who are
concerned over an FTC commissioner’s contention that “corrective advertising is not
a drastic remedy” and is an appropriate method for restoring the status quo. Advertisers
fear that this may indicate that the FTC will be more willing to apply the punishment
in future cases. There is obviously a lot at stake in this case for advertisers.
However, the case is also very important to the FTC in the ongoing battle over its
authority to require corrective advertising. 57
Current Status of Federal Regulation by the FTC
By the end of the 1970s, the FTC had become a very powerful and active regulator of
advertising. However, Congress was concerned about the FTC’s broad interpretation
of unfairness, which led to the restrictive legislation of the 1980 FTC Improvements
Act. During the 1980s, the FTC became less active and cut back its regulatory efforts,
due in large part to the Reagan administration’s laissez-faire attitude toward the regulation
of business in general. Some feared that the FTC had become too narrow in its
regulation of national advertising, forcing companies and consumer groups to seek
relief from other sources such as state and federal courts or through self-regulatory
groups such as the NAD/NARB. 58
In 1988–89, an 18-member panel chosen by the American Bar Association undertook
a study of the FTC as a 20-year follow-up to the 1969 report used by President
Richard Nixon to overhaul the commission. The panel’s report expressed strong concern
over the FTC’s lack of sufficient resources and staff to regulate national advertising
effectively and called for more funding.
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Chapter Twenty-one Regulation of Advertising and Promotion