Federal Trade Commission Begins to Endorse Comparative Advertising Summary

  • Last updated on November 10, 2022

By encouraging marketers to name competitors in comparative advertisements, officials of the Federal Trade Commission hoped to promote the idea that advertising should provide consumers with product-related information.

Summary of Event

During the 1970’s, several important officials of the U.S. Federal Trade Commission (FTC) suggested that marketers should directly name their competitors in media advertising instead of referring to them as “Brand X.” Although the series of letters and speeches delivered by FTC personnel on this topic in the early 1970’s did not convey the regulatory agency’s official position, endorsing comparative advertising was consistent with the FTC goal of enhancing the consumer decision-making process through more complete information. The logic supporting such a stance by members of the FTC was essentially that comparative advertising would allow consumers to weigh the benefits of identified products. This stance received widespread support from consumer advocates, but many advertising executives worried that the negative aspects of the technique would damage the credibility of all advertising. Advertising;comparative Comparative advertising Marketing;comparative advertising Federal Trade Commission;advertising Consumer protection [kw]Federal Trade Commission Begins to Endorse Comparative Advertising (1971) [kw]Trade Commission Begins to Endorse Comparative Advertising, Federal (1971) [kw]Commission Begins to Endorse Comparative Advertising, Federal Trade (1971) [kw]Comparative Advertising, Federal Trade Commission Begins to Endorse (1971) [kw]Advertising, Federal Trade Commission Begins to Endorse Comparative (1971) Advertising;comparative Comparative advertising Marketing;comparative advertising Federal Trade Commission;advertising Consumer protection [g]North America;1971: Federal Trade Commission Begins to Endorse Comparative Advertising[00090] [g]United States;1971: Federal Trade Commission Begins to Endorse Comparative Advertising[00090] [c]Marketing and advertising;1971: Federal Trade Commission Begins to Endorse Comparative Advertising[00090] Pitofsky, Robert Kershaw, Andrew Tannenbaum, Stanley

Salespersons have incorporated product comparisons in their presentations for years. Prior to the 1970’s, however, the use of comparative advertising by marketers was relatively rare, for a number of reasons. Governmental regulatory agencies, advertising industry associations, and the media—particularly network television—strongly discouraged its use. In addition, many advertisers thought that naming a competing brand would provide that brand with “free” publicity or that consumers would perceive the named brand as a victim of sorts and purchase it instead of the advertised product out of sympathy. To circumvent this reluctance to use comparative advertising, marketers who valued the format were forced to rely on “Brand X” comparisons or “beep” sounds to replace brand names in spoken ads.

Comparative advertising is by no means a recent phenomenon. The famous British writer and poet Joseph Addison Addison, Joseph published an article in the September 14, 1710, issue of The Tatler in which he claimed that half of the advertisements at that time were comparative in nature. In the United States, advertisements for Plymouth automobiles in the early 1930’s advised consumers to “look at all three” of the major manufacturers’ products before buying an automobile. Many such advertisements existed prior to the 1970’s.

Robert Pitofsky.

(AP/Wide World Photos)

One of the most memorable indirect comparison campaigns (in which the competitor was not actually named but instead was implied) was run in the car rental industry during the 1960’s by “Number 2” Avis Avis Rent A Car against “Number 1” Hertz. Hertz Corporation Some innovative market entrants, such as Penthouse magazine, also managed to use implied comparisons during this period. Penthouse left no doubt who was being challenged, using the headline “We’re going rabbit hunting” and a picture of a rabbit as viewed through a rifle sight in a full-page newspaper advertisement placed in The New York Times.

Perhaps encouraged by some of these examples, Robert Pitofsky, director of the FTC’s Bureau of Consumer Protection, issued a series of letters in 1971 in support of the proposition that the nebulous “Brand X” comparisons required by the American Broadcasting Company American Broadcasting Company (ABC) and Columbia Broadcasting System Columbia Broadcasting System (CBS) television networks actually helped advertisers mislead and deceive consumers. For example, Shell Oil Company Shell Oil Company claimed that Shell with “platformate” outperformed “Brand X” without platformate in terms of gas mileage. The problem was that “Brand X” turned out to be Shell without platformate, and most other gasoline brands included a similar additive. Advertisers were able to make exaggerated claims about their products, claims they could substantiate if challenged by claiming that “Brand X” was some unknown product that was obviously inferior.

Such loopholes, combined with mounting pressure by consumer advocates, prompted Pitofsky to ask ABC and CBS to follow the lead of the National Broadcasting Company National Broadcasting Company (NBC) and allow sponsors to name competing brands directly in product-related comparisons. Both networks agreed to allow the direct naming of competitors in commercials for a one-year trial period, which was eventually extended. By the end of 1973, all three networks had agreed that direct comparisons were acceptable. NBC published its comparative advertising guidelines early in 1974.

The American Association of Advertising Agencies American Association of Advertising Agencies (AAAA) released its Policy Statement and Guidelines for Comparative Advertising in April, 1974; the guidelines appeared to be based on those laid out by NBC. The AAAA had consistently discouraged the use of direct comparison statements in advertising over the preceding years, but the organization bowed to pressures of the time and recognized the format by establishing a set of rules.

Joan Bernstein, Bernstein, Joan deputy director of the Bureau of Consumer Protection, elaborated at an AAAA meeting in November, 1973, on the commission’s reasoning behind backing overt comparisons between competing brands in advertisements. According to Bernstein, advertisers and their agencies were more skilled in delivering information to target audiences than was the government. With marketers allowed to use direct comparisons in persuasive messages, consumers would obtain information not previously available to them. In addition, advertising that directly named competing brands was likely to result in careful policing of advertisers by other advertisers. Finally, although Bernstein is not on record as mentioning it at this particular meeting, FTC officials were known to believe that direct comparisons in advertisements would result in lower prices as well as quality improvements.

Various FTC officials continued to encourage the use of comparative advertising throughout the 1970’s. In November of 1977, for example, Tracy Weston, Weston, Tracy a deputy director of the Bureau of Consumer Protection, staunchly defended the strategy during a speech at the annual meeting of the National Advertising Review Board (NARB). With William Tankersley Tankersley, William (president of the Council of Better Business Bureaus, who one month before had blasted comparative advertising for eroding advertising’s credibility) seated before him, Weston said that the strategy was no more of a problem than was traditional advertising. Weston asserted that comparative advertisements were providing consumers with information more effectively than did their noncomparative counterparts, were heightening competition, and were prompting consumers to ask marketers tough questions about their brands. Comparative claims tended to warn consumers that they should be careful about accepting the results of product tests because the tests may have been manipulated, according to Weston. He concluded that the ads probably resulted in lowered need for FTC action because shoppers had a more balanced understanding of the market.

The FTC formally endorsed comparative advertising in 1979 and stated that even advertisements that disparage competitors are legal as long as the comparisons are not false or deceptive. In addition, the commission established a standard for substantiating comparative claims that was no more strict than standards used to validate noncomparative claims. The definition for comparative advertising formally set forth stated that the strategy should compare competing brands on the basis of features that can be measured objectively and that brands involved in the advertisement must be distinctly identified by verbal or visual means or by both.

Significance

The major impact of the FTC’s backing of comparative advertising during the 1970’s was the increased frequency of the use of this form of advertising. Firms across a widening array of industries employed brand comparisons as a major marketing tactic. For some mature product categories, such as automobiles and soft drinks, comparative advertising became a mainstay. The increasing use of the comparison format remained controversial, however, and sometimes resulted in litigation. Studies analyzing the effectiveness of comparative advertising became an important segment of research on advertising methods.

Opposition to comparative advertising came from a variety of sources in the advertising industry. The print media had little to say concerning the topic, but industry associations, regulatory entities, advertisers, and their agencies all expressed concern about using the format at one time or another. Doubts concerning comparative advertising lingered, and it is unlikely that disdain for the tactic will ever completely disappear.

One advertising agency, Ogilvy & Mather, Ogilvy & Mather[Ogilvy and Mather] was particularly outspoken against the use of comparative advertisements during the 1970’s. Andrew Kershaw, the agency’s chairman, became one of the most vocal opponents of comparative advertising, warning managers in 1976 that its use would intensify consumers’ distrust of corporations. Kershaw also strongly believed that the use of comparative advertisements would erode the effectiveness of advertising by damaging sponsors’ credibility. Although the agency had amassed data to support its position against comparative advertising, an Ogilvy & Mather executive vice president, Graham Phillips, Phillips, Graham cautiously admitted at a 1980 AAAA conference that the strategy could work when employed under certain conditions.

Other industry executives took exception to Ogilvy & Mather’s attack on comparative advertising. In a widely publicized debate before the annual meeting of the AAAA in 1976, Stanley Tannenbaum, then chairman of the Kenyon & Eckhardt Kenyon & Eckhardt[Kenyon and Eckhardt] advertising agency, took a stance in favor of comparative advertising, against Andrew Kershaw. Tannenbaum hailed comparative advertising as the industry’s own brand of consumerism when executed properly, because it stimulates consumers to compare before making purchase decisions. He asserted that comparative advertising also serves as an incentive for marketers to produce better products.

Analysts have found general agreement across the advertising industry that comparative advertising results in significantly more legal problems than does noncomparative advertising. Comparative advertising campaigns that are challenged can be resolved through a number of channels, including the National Advertising Division of the Council of Better Business Bureaus Council of Better Business Bureaus (NAD), the National Advertising Review Board National Advertising Review Board on appeal from the NAD, the Federal Trade Commission, and federal court, under section 43(a) of the Lanham Trademark Act. The likelihood of litigation arising from comparative advertising claims increased when President Ronald Reagan signed into law the Trademark Law Revision Act Trademark Law Revision Act (1988) of 1988, which closed a loophole in the Lanham Trademark Act Lanham Trademark Act (1946) of 1946. The original Lanham Act prohibited only false claims about a marketer’s own brands, whereas the Trademark Revision Act specifically prohibited false claims concerning competing brands as well.

An early example of problematic comparative advertising (from a legal standpoint) that has been widely cited was Schick’s controversial Fleximatic electric razor campaign. Schick’s print and television advertisements claimed that the Fleximatic shaved closer than Norelco, Remington, and Sunbeam brands. Lawsuits and countersuits were initiated, and complaints were filed with the NARB. Ronson, one competitor not named in Schick’s campaign, quickly attacked Schick in national magazine advertisements, claiming that it was not named in the Schick campaign because the Ronson shaver was superior. Based on issues related to the shaving test’s validity, the NAD—which is the NARB’s investigative unit—challenged Schick’s comparisons with the competitors named in the campaign. On appeal, the NARB disagreed with eleven of the thirteen NAD findings concerning the test procedures but agreed that, overall, Schick’s comparative advertisements were false and deceptive because they implied more than the limited testing procedures could determine. The Schick campaign was halted.

The results of research studies focused on the effectiveness of comparison advertising are inconclusive. This is perhaps a fitting finale for any discussion of this controversial topic. The only closing statement that can be made with any degree of certainty is that the practice of comparative advertising will continue because many marketers have achieved increased sales by using it, but they will do so at the risk of being counterattacked from a number of different directions. Advertising;comparative Comparative advertising Marketing;comparative advertising Federal Trade Commission;advertising Consumer protection

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Applegate, Edd. Personalities and Products: A Historical Perspective on Advertising in America. Westport, Conn.: Greenwood Press, 1998. Brief examination of the contributions of individuals and companies to the ways products are marketed in the United States. Includes bibliography and index.
  • citation-type="booksimple"

    xlink:type="simple">Buchanan, Bruce, and Doron Goldman. “Us Versus Them: The Minefield of Comparative Ads.” Harvard Business Review 67 (May/June, 1989): 38-50. A “how-to” discussion for marketers who want to avoid lawsuits charging false and deceptive claims. Provides good examples from legal case history.
  • citation-type="booksimple"

    xlink:type="simple">Howard, Niles. “Battle over Comparative Ads.” Dun’s Review 110 (November, 1977): 60-62. Discusses several legal conflicts between marketers using comparative advertising campaigns. Includes the opinions of various industry officials.
  • citation-type="booksimple"

    xlink:type="simple">Lane, W. Ronald, Karen Whitehill King, and J. Thomas Russell. Kleppner’s Advertising Procedure. 16th ed. Upper Saddle River, N.J.: Prentice Hall, 2005. Well-established advertising textbook designed for undergraduate classes in the principles of advertising. Contains updated information concerning all aspects of advertising, including excellent coverage of issues related to federal law.
  • citation-type="booksimple"

    xlink:type="simple">Meyerowitz, Steven A. “Brand X Strikes Back! The Developing Law of Comparative Advertising.” Business Marketing 70 (August, 1985): 81-86. Presents a good discussion of the legal and regulatory aspects of comparative advertising. Includes cases.
  • citation-type="booksimple"

    xlink:type="simple">Muehling, Darrel D., and Norman Kangun. “The Multi-dimensionality of Comparative Advertising: Implications for the Federal Trade Commission.” Journal of Public Policy and Marketing 4 (1985): 112-128. Presents a thorough description of comparative advertising and explains the many varieties of comparative advertisements in use.
  • citation-type="booksimple"

    xlink:type="simple">Muehling, Darrel D., Donald E. Stem, Jr., and Peter Raven. “Comparative Advertising: Views from Advertisers, Agencies, Media, and Policy Makers.” Journal of Advertising Research 29 (October/November, 1989): 38-48. Explores perceptions of comparative advertising held by advertisers, agencies, mass-media professionals, and regulators.
  • citation-type="booksimple"

    xlink:type="simple">Tannenbaum, Stanley I., and Andrew G. Kershaw. “For and Against Comparative Advertising.” Advertising Age 47 (July 5, 1976): 25-26, 28. Presents an interesting “pro/con” discussion between two top advertising executives concerning the use of comparative advertising.
  • citation-type="booksimple"

    xlink:type="simple">Wilkie, William L., and Paul W. Farris. “Comparison Advertising: Problems and Potential.” Journal of Marketing 39 (October, 1975): 7-15. This article has been the primary reference point for almost all research on comparative advertising since it was published.

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