Investigation of the Effects of Disclosure Statements in Rental Car Advertisements

Richards, Jef I. (1991), "FTC or NAAG: Who Will Win the Territorial Battle? " Journal of Public Policy and Marketing, 10: 118-132. Richards, Jef I. and Ivan L. Preston (1987), "Quantitative Research: A Dispute Resolution Process for FTC Advertising Regulation," Oklahoma Law Review, 40(Winter): 593-619. Roth v. United States, 354 U.S. 476 (1957). Russo, J. Edward (1974), "More Information is Better: A Reevaluation of Jacoby, Speller and Kohn," Journal of Consumer Tremendous controversy has surrounded increased activity by the attorneys general of several states in their attempts to regulate national advertising (Bishop 1988; Mattox and Stratton 1988). Representing their states, they were responding to a perceived lack of federal interest in defending consumer rights (Richards 1991). By taking action as a group, through the National Association of Attorneys General (NAAG), states have begun establishing their own national advertising standards, thereby entering an arena formerly the near exclusive domain of the Federal Trade Commission (FTC). The first national "guidelines," adopted by more than 40 states in 1987, dealt with airline advertising. Encouraged by airline compliance, NAAG members formed a task force to suggest possible guidelines for rental car advertising (Lawrence 1988). This article evaluates the effectiveness of these car rental guidelines. In 1988, NAAG released a preliminary report from its task force on rental car advertising (Pepper, Hamilton & Scheetz 1988). This report alleged industry-wide abuses regarding advertised rental prices, potentially resulting in consumer deception. It noted that actual rates charged were frequently twice the rate advertised, because the stated charge excluded fuel charges, airport access fees, and other frequently encountered costs. The report also charged those ads often failed to disclose other material restrictions, such as mileage costs and geographic locations where the offer applies. Later that year draft guidelines were completed, with emphasis on abuses in broadcast commercials. To rectify the alleged nondisclosures, certain mandatory disclosures were recommended. Where the broad range of typical qualifications applied to a rental offer, these guidelines provided that an appropriate disclosure would include substantially the following: Offer available through June 15 at participating locations, 30 cents mileage fee per mile after first 100 miles, collision damage waiver 12 dollars per day, other important restrictions apply. (National Association of Attorneys General 1988, section 2.2) The American Advertising Federation (AAF) filed comments with the NAAG, arguing that lengthy disclosures would be counterproductive (American Advertising Federation 1988b). While it did not dispute the benefits of providing consumers with more information, the AAF suggested that ads cannot serve as a replacement for the information available from a reservations agent and that lengthy disclosures discouraged price advertising and rendered broadcast advertising virtually impossible, because of the time required for the disclosure. The AAF proposed that a better approach would be to include a simple statement in ads referring consumers to the sales or reservations agent for restrictions and other information (American Advertising Federation 1988a). In particular, the AAF argued that "|t~oo much information in advertising can confuse consumers and render their retainment of the information less likely" (American Advertising Federation 1988c, 2). NAAG allegations of deceptiveness, their proposed solution, as well as the AAF alternative solution apparently were based upon experience, fears, and biases of their respective members rather than empirical behavioral tests of the ads and the recommended disclosure. While this is the conventional approach to advertising regulation, empirical research offers the potential of more equitable results (Richards and Preston 1987). …