The Concealed Truth about Unethical Ads

Posted: January 4th, 2023

The Concealed Truth about Unethical Ads

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The Concealed Truth about Unethical Ads

Businesses in the modern era are operating in a highly competitive environment that is causing them to seek for ways of gaining a competitive advantage for their survival and success. However, as entities, businesses are increasingly in the limelight for their behavior. Stakeholders are concerned about and demanding ethical behavior in businesses, if the enterprises are to continue enjoying the social license to operate and being successful (Tuan, 2012). Therefore, business ethics is critical to the performance and success of organizations. As a specialized branch of ethics, business ethics is about the moral principles, values and standards that guide the behavior of organizations and the individuals therein in a business setting (Abend, 2016). Businesses use these principles to distinguish the right and acceptable individual and corporate behavior from what is not. Moreover, business ethics reconcile the legal behavior of organizations and the pursuance of competitive advantage.

Businesses with competitive advantage avail goods and services that are unique, desirable and useful to customers in the market, thus endearing the customers’ loyalty. Therefore, companies engage in aggressive marketing initiatives to appeal to their customers and position their goods or services favorably against those of their competitors. Advertising is one aspect of marketing that has an immediate and significant impact on the purchasing behavior of consumers, the reason why it is the most commonly applied marketing tool. Consumers expect that businesses conduct their advertising ethically and that the information presented is truthful, realistic and accurate (Ferrell, Crittenden, Ferrell, & Crittenden, 2013). However, with the rising cases of unethical advertisements, focus on marketing ethics has increased lately. The line between ethical and unethical ads is very thin, ill-defined and often blurred, which presents significant ethical dilemmas to businesses (LaMarco, 2018). Unethical advertisements hide, misrepresent, or overstretch the truth about their products and services to persuade consumers for the sake of profits. This marketing behavior distorts the competitive business environment while exposing firms to various risks that threaten their revenues, image and survival. This paper discusses the business ethics of advertising as a marketing activity by delving into the importance of truthful product information and the implications of unethical advertisements.   

Theoretical Framework and Topic Statement

Theoretical Framework

Marketing ethics can be viewed using various theoretical frameworks that inform ethical decision-making when confronted by moral dilemmas. Virtues, rights, utilitarianism, and deontology are four ethical schools of thought that can explain the different aspects of business ethics (Yazdani & Murad, 2015). These theoretical categories can explain the diverse circumstances and outcomes encountered in businesses that are related to marketing ethics. Moreover, they can be used to analyses the various falsified ads that have been encountered across the world.

Utilitarian ethical theories assert that an ethical act is one that delivers the greatest benefit to the most people. Act and rule utilitarianism explain the action-based and rule-based ethical considerations. In the business environment, ethical advertisers are those whose advertisements deliver the greatest benefit to most consumers of the products or services (Gustafson, 2013). Unfortunately, some consumers may be disadvantaged at the expense of the majority. Deontological ethical theories ascribe ethical correctness to the adherence of duty and principles. In business ethics, the righteousness of the business process overrides the results of the business. Therefore, advertisements that deceive consumers or take advantage of them for profits are unethical and therefore should be restricted (Tuan, 2012; Vitell & Hunt, 2015).

Virtue ethical theories emphasize the moral character of an individual rather than the action and the consequences of such activities. In a business setting, the focus is on the moral character of a manager or employee rather than their actions and the consequences of their actions (Ferrell, Crittenden, Ferrell, & Crittenden, 2013). Rights ethical theories focus on the protection of people as human beings against violations. Therefore, advertisers should exhibit self-regulation and self-control in their advertisements, which should be guided by the respect of the dignity of consumers as human beings.

Topic Statement

Falsified or exaggerated ads have several adverse effects on businesses and consumers, and therefore can be rectified by adhering to social responsibility and ethical standards. The following questions help identify the ramifications of falsified ads and the place of social responsibility and ethical standards in ensuring ethical ads.  

Research questions.

1. How can falsified or exaggerated Ads impact the business in the long run?
2. How can falsified or exaggerated Ads impact consumer behavior and selection?
3. Do Organizations have the right to edit or falsify some information on their Ads to increase sales? How much truth is required?
4. Do organizations have a social responsibility to advertise transparent and realistic information in their Ads?
5. What are the ethical standards that should be applied into any public Advertisement?

Results

A survey conducted by Rakuten Marketing involving 2,500 people from Australia, Germany, France, the United Kingdom and the United States, sought to determine the perceptions of consumers on the trustworthiness of advertisements. The study revealed that 75% associated advertisements with fake news compared to 54% in France and Germany, as summarized in figure 1 (Davies, 2017). 

Figure 1. Perceptions of advertisements as fake news

Source: Davies (2017)

In the same study, people mistrusted online pop-up advertisements the most, at 25%, while they trusted the advertisements on print media the most, at 82%, as illustrated in figure 2 (Davies, 2017). Advertisements place in online channels were least trusted while those in traditional media such as print, television, radio and outdoor were trusted the most (Davies, 2017).    

Table 2. Ad trust level in different advertising channels

Source: Davies (2017)

How can falsified or exaggerated Ads impact the business in the long run?

Falsified ads are costly to companies that are found guilty, in addition to damaging their reputation. For instance, the Federal Trade Commission sued Marketing Architects, Inc. for making unsubstantiated claims about the weight-loss capabilities of their products. The company was fined $2 million by the District Court in Maine and banned from making the erroneous claims (Federal Trade Commission, 2018). Protein World, a diet and nutrition firm, was fined £250,000 for misrepresenting its weight-loss supplements (Mulcahy, 2019). Similarly, the 2017 Pepsi ad, dubbed, Live for Now, illustrated how exaggerated advertisements can erode the reputation of a brand. According to Hobbs (2017), the vibrancy of the Pepsi brand dropped 9.5 points to pace it at the bottom of the 26 largest brands of carbonated drinks in the United Kingdom.

How can falsified or exaggerated Ads impact consumer behavior and selection?

Falsified ads can persuade consumers to select and buy products by misrepresenting, omitting, falsifying or exaggerating facts. For instance, Volkswagen, a German automaker, sold and leased over 550,000 diesel cars by claiming that they were ‘clean diesel’ vehicles (Heilpern, 2016). According to Heilpern (2016) consumers were duped into selecting and purchasing these vehicles based on the favorable emission test results that turned out to have been falsified for seven years.   

Do organizations have the right to edit or falsify some information on their Ads to increase sales? How much truth is required?

Although free speech is protected by many laws around the liberal world, conveying false information in ads is prohibited by law and marketing regulations. According to the Federal Trade Commission (2014), organizations can edit information to include association, games and activities, humor, discounts, special ingredients, endorsements and testimonials. However, the commission requires that the ads are truthful, provided the information is defensible by scientific evidence. Federal Trade Commission (2014) requires the truth is sufficient if it prevents avoidable injury and does not mislead the consumers.       

Do organizations have a social responsibility to advertise transparent and realistic information in their Ads?

Organizations should advertise in a socially responsible manner. However, some advertisements create public antagonism, while others persuade consumers to engage in socially unacceptable behaviors. For instance, The 2017 Pepsi ad, illustrated how advertisements can be socially irresponsible by deriding a section of the society. The advertisement depicted a protest similar to that of Black Lives Matter, from which Jenner Kendall emerges with a Pepsi can of to quell police brutality (Mulcahy, 2019). Hobbs (2017) noted that the ad was insensitive to diversity of the American society by taking advantage of the sensitive racial issue faced by the African Americans. Similarly, Ads of flavored alcoholic drinks target minors. For instance, Siegel, Ayers, DeJong, Naimi, and Jernigan (2015) revealed that ads caused 30.7%, 17.7%, and 14.3% of American underage youth to consume Bud Light, Heineken and Budweiser respectively. However, these ads do not reveal the risk of addiction presented by alcoholic beverages.

What are the ethical standards that should be applied into any public Advertisement?

The ethical advertising standards are outlined by Institute of Advertising Ethics. According to Snyder (2011), 8 principles and practices guide communications of all forms, including those used for advertising. This guide highlights ethical aspects such as, objective truth, personal ethics, using discretion and care, complying with laws and industry guidelines, declaring the sponsors of ads, and safeguarding customers’ freedom of choice.       

Discussion

Falsified or exaggerated advertisements are increasing in businesses as firms pursue profits aggressively. Technological advancements such as the internet, social media and mobile devices have not only revolutionized advertising but have also provided fertile ground for falsified or exaggerated advertisements to thrive (Davies, 2017). Falsified and exaggerated advertisements can be judged as being unethical is they i) do not benefit a majority of the people under utilitarian ethics, ii) harm vulnerable consumers under deontological ethics, iii) violate the rights consumers, and iv) are dishonest under value ethics (Ferrell, et al., 2013). As such, unethical advertisements that are falsified and exaggerated have ramifications on businesses and consumers.

Falsified and exaggerated advertisements erode consumer and public trust, which destroys the reputation of the brands and companies. In some instances where the advertisements harm consumers, the company may be sued and fined, if found to be guilty, further damaging the firm’s reputation due to the negative publicity while losing it money as well (Federal Trade Commission, 2014). This was the case with Pepsi and VW Ads (Heilpern, 2016; Hobbs, 2017) However, some firms have rebounded to repair their reputation and improve revenues. For instance, although Protein World received negative media coverage, it managed to generate £1 million in direct sales immediately (Mulcahy, 2019). Therefore, the long-term financial implications depended on how effectively the form responded to the reputation crisis.

The prevalence of unethical advertisements indicated that value ethics and egoism were commonplace in the marketing industry. The companies presenting falsified ads were condoned by their peers most of the time (Ramanathan & Swain, 2019). Moreover, although customers were often the cause of sanctioning of these advertisements, their patronage was restored after the crisis had lifted, as exhibited by Protein World and Pepsi (Mulcahy, 2019). In other cases, alcoholic drinks targeted minors indirectly by being combines with what they liked (Siegel, et al., 2015) As such, the ethical judgment of the advertisements was subjective and brief, reflecting the individualism and materialism and the lack of virtue ethics in the advertising fraternity (Audi, 2012). In other words, unethical advertisements could go unnoticed unless they caused a major public uproar. For that reason, Hartman, DesJardins, & MacDonald (2014) argued that social responsibility requires that the messages in advertising do not violate the moral principles of society, such as taking advantage of children, women and other vulnerable members, and no not damage the society.  

Organizations felt that they had a right to conduct their businesses freely and promote their products as they wished, in accordance with the free market and free speech principles. In this regard, the rights ethics was not sufficient in solving the dilemma, considering that every party claimed to have an unalienable right to hold his or her position in the advertisement ethics matter, as stipulated by Federal Trade Commission (2014). Although both parties have a right to edit and interpret the message in the advertisement as they wished, they had no right to falsify the information. According to Federal Trade Commission (2014), the ethical dilemmas were often resolved at the courts.

However, before involving the courts, deontological and utilitarian ethics may be used to resolve the ethical dilemma presented by the rights argument. Utilitarianism is used as the most common deterrent of exaggerated advertisements, because it focuses of the benefit to the consumers and public instead of on the gains of the producers and advertisers as minorities, as shown by the Marketing Architects, Protein World and VW cases (Federal Trade Commission, 2018; Heilpern, 2016; Mulcahy, 2019). Laws and regulation governing the business ethics of advertising are the most commonly used measure of deterring unethical marketing practices because they are based on well-defined guidelines, unlike virtues and dutiful obligations (Vitell & Hunt, 2015). The courts serve as the neutral arbiter of the ethical dilemmas and conflicts presented by falsified advertisements. However, the advertiser is restrained and punished when the harm to the consumer is demonstrated and the consumer’s rights are violated. 

Recommendations

Organizations can avoid falsifying their advertisements is they develop morals and a duty of care towards the wellbeing of their customers. It is not enough to present advertisements that please the masses and disadvantage the minorities who may either misconstrue the information or find it offensive. Self-regulation can supplement the external controls provided by laws and regulations. As such, investing in an ethical culture that is based on virtues is essential if the advertisers are to make ethical decisions on their own volition rather than being coerced by the courts (Audi, 2012; Leonidou, Leonidou, & Kvasova, 2013). Companies encountering unethical advice from marketing agents should be bold enough to decline authorizing falsified advertisements for profit purposes.   

Research Limitations

These findings are limited by the restricted sources of information, which was obtained from secondary sources. Most literature contains studies conducted in western and highly developed countries where the legal framework governing the ethical conduct of business is robust and well-developed. Therefore, these finding may not be generalized to other business settings where the marketing industry and its supporting legal structure is underdeveloped.

References

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