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Ethical Analysis December 2009
Implications of Ethics in Advertising
Standard clauses that read, “all information is deemed reliable but is not guaranteed,” doesn’t exactly lead people to trust advertised information. Is an industry’s blanket statement for accepting inaccurate advertising acceptable? It would seem the documenting process for millions of listed properties must accept some errors due to the sheer volume of data. We can’t allow the errors of a few impede the vast majority of professionals who properly document information for public advertisement.
A buyer Barrack finds a home online and shares the details with his loving wife. He prints the downloaded information that details the home’s features, price, available financing, and area demographics. Small print is displayed at the bottom of the website’s home page that reads: “our information is retrieved from the multiple listing services of the National Association of Realtors although data is not guaranteed.” Barrack has a growing family and his wife has always wanted a home in the country with a pool and barn for horses. As a loving husband and father of two girls, he is driven to provide a happy and prosperous lifestyle. For fear of the home selling, Barrack makes arrangements via phone to sign a contract for purchase without a visual inspection of the property. In the excitement of selling the home, the Realtor told Barrack the property was getting a lot of traffic with buyers and he should send an escrow check for $25,000. This remark triggers our buyer to take the advice of the Realtor, but first he asks the Realtor about the area’s schools, that are listed on the Realtor’s website. The question of schools is circumvented by the agents, stating it is against company policy to offer opinions of the area schools and crime, but that he considers the area to have the best schools.
Due to a busy lifestyle Barrack is ready to close on the property that he still has not physically inspected. What is the implication of not visiting the subject property when Barrack sees after closing that the images advertised are not at all an accurate representation of what he had agreed to purchase? Is this a valid area of contention for potential deceptive advertising or does this fall within acceptable limits of caveat emptor “let the buyer beware?” Photographs and graphic images may or may not be backed by words that advertise a product with grandeur, often a mere avenue for salesmanship and should not be relied on.
A further in-depth discussion with actual accounts from international arguments and legal cases should bring light to how the ethics for advertising and promoting goods and services has not set precedence for competitive markets. A hook or eluding catch phrase is used in every advertisement because it is the central point to grab the attention to ultimately generate revenue.
Arguments Against the Behavior
There is an enthralling view to what should be deemed acceptable when advertising grandeur through photography and localized geography which influences values due to proximity worth. The following examples raise serious ethical implication to how misleading advertising causes punitive damages. Not only should the instances be ratified but the long-term effects create distrust from consumers.
The New York Times reports in June of 2009 concerning the prestigious, Plaza Hotel located in Manhattan on Central Park South Ave and Fifth Ave. The report headlines “The Plaza Stirs,” and boasts the legal actions to take place due to a, “bait and switch”. As a result of the real estate downturn, the values of Manhattan high-rise living has put a halt to aggressive buyers. The project from the beginning was guilt ridden with poor publicity, because it was the most expensive apartment to condominium conversion. An overseas investor who agreed to purchase a $53.5 million dollar penthouse is claiming his discontent with the final product he contracted to purchase. The problem is the Buyer’s lack of satisfaction with the image he was sold, because the finished building did not display itself as luxurious (Barbanel, 2009). The overseas investor had committed to the property sight unseen, because the developers used “high-tech interactive models” to sell the dream of what they planned for the building. Without any grounds for comparisons, the buyer of two penthouses sued the developer for breach of contract, negligence, deception and fraud. The suit was for a full refund and damages incurred because of the faulty advertising, which mislead the buyer to believe the apartments, were more than “attic-like spaces,” which had blocked views and unacceptably low ceilings. The buyer’s legal counsel reportedly stated the sale was a deceptive event to defraud his client out of his 10.7 million dollar deposit and claims additional damages in the amount of 20 million dollars. The defense attorneys for the developers publicly remarked that the allegation was a ploy to evade the purchasers ability to follow through with his commitment for purchase. Furthermore, the defense stated that it is unreasonable for a buyer to back out due to buyer’s change of heart. The developer filed suit for breach of contract and refused to return the $10.7 million deposit (Reuters & Bloomberg, 2008).
A parallel to this presumed “bait and switch” is the case between Miguel Gallego and Situated Plaintiffs, v. Walmart Stores Inc. in 2005, where the plaintiff alleged that salmon was being artificially colored to enhance it look. This case would have favored the plaintiff under Wis Stat. 100.18 dealing with misrepresentations involved with the sale of real estate, securities, services, or employment and non-food merchandise. Although proper disclosure of additives would be ethically appropriate there are no legal grounds for injured parties who purchase fish at Walmart (Miguel Gallego v. Walmart).
In 2005 the Supreme Court ruled that the use of “lights” and “low tar and nicotine” appearing on the packaging of two cigarette brands controlled by Philip Morris were fraudulent. The Federal Trade Commission, who previously approved the use of terms to regulate the tobacco industry, stated that Philip Morris was exempt from liability. Although the words used were a misrepresentation of the product which deceives the public, the use of the words was approved for use and could not be considered fraud (Sharon A. Price v. Philip Morris Inc.).
“Law will benefit the buyer, is reported in Thailand.” An amendment to the Thailand Condominium Act will change how developers are marketing and advertising their land projects. The act will require developers to submit plans for advertising projects with plans for construction. The documenting of pre-planned advertising will allow the local governing land department to fine for discrepancies. The transfer of property will not commence if the advertised promise is not met by the developers. The result of this modification will hold the developers accountable and the unethical practices will be flushed out. This addition to the Condominium Act would be the result of 2000 recorded cases of buyer’s complaints resulting from developers not fulfilling their promise ("Firms will now," 2008). The unpleasant actions requiring governance found in Thailand are similar to the misrepresentation of a boat purchase in Nassau County NY. A comparison could be made with a judge who deliberated that Kenneth W. MacDonald was misleading by the advertised contents of his boat purchase in 1987. The defendant indicated that “specifications where subject to change,” in this case the courts concluded that the plaintiff was not the only injured party. The advertisement had in fact adversely affected the transaction, and North Shore Yacht Sales, Inc. was held liable pursuant to N.Y. Gen. Bus. Law 350 and 350-a. (Kenneth W. McDonald, Plaintiff, v. North Shore Yacht Sales, Inc.).
Disregards for accuracy in a photograph used by a Dunedin, Ireland real estate agency. The picture used was taken from a nearby property rather than the subject. Appearing with the deceptive image was some illusive text, “only a hop, skip … and a jump … into the surf, or cruise along the esplanade enjoying this wonderful part of the world called St Clair,” ("Property ad misleading," 2007) the text truly had nothing to be said about the property or the dishonest photo. Not only was this a blatant premeditated error to advertise the subject property for sale but the caption used did not disclose industry norms to convey property. Such norms would include bedroom and bathroom counts and age of structure.
A supreme court case between The Coca-Cola Company and The Koke Company of America shows us the protective interests in public trade names. Infringement on the name Coke with similar name Koke was clearly used for the purpose of capitalizing on the goodwill of the name Coke (Coca-Cola Company v. The Koke Company of America et al. 1920). It is through this court’s finding that proper representation is necessary to protect proprietor interests. Protecting the use of misleading advertisers is a clear case of deception to the public because of the name association.
In the United States, enforcing new regulation on professional associations comes because of a dentist excessively advertising his services, free examinations, pricing and terms. In this case the appellant defied the Board of Dental Examiners and their claim that the advertisements violated the fourth amendment for due process (A.H. Goe v. Chester B. Gifford). In this instance an attempt to circumvent governing boards might not have injured the public but caused harm to dentist operating within the constructs of the Board. Advertising in competitive marketplace is free trade and civil liberty protecting the public from price fixing.
Catchy ad from a voice over “just 90 minutes from Dublin,” was describing the Waterways property development in Keshcarrigan. The Advertising Standards Authority for Ireland received a complaint that explained the actual time to be 2 hours and 53 minutes ("Estate Agent Took," 2008). This is another reported incident for the importance of ASAI to be the leading watchdog for misleading advertising, which is the only authority for stopping advertised deception.
As we have seen from the preceding incidents reported globally there is unmistakably a concern for ethical advertising. The problem should not be taken lightly for the long-term effects which cause a disruption of trust and security to what is widely seen in all forms of mass media advertising.
Argument in Support of Behavior
Not in every society are we free to express ourselves because of tyranny. A position to avoid over governance is the answer to protecting civil liberty for the freedom of speech. Advertising is meant to be catchy, whimsical, goofy, and sometimes a stretch, it would not be an ad if it required a sworn oath to claim pure truth. Most instances for blaming inappropriate ad jargon and images as isolated incidence that should not invade the freedom to transact goods and services through mass media advertisements.
Poor judgment is the simple reason for buyer’s remorse, and the redundant response to those individuals who purchased homes during the recent real estate boom between 2004 and 2006. Most often buyers and sellers look at a Realtor involved in a transaction because their interests were not protected. A consistent refinement of the processes that go into grievances is a part of the National Association of Realtors. The localized members in Sarasota, Fl claim less than an average of 3-4 complaints might be filed annually within an association containing 3500 people. Each complaint see’s a panel to determine if the complaint has merit and further investigation; the informal process rarely produces more than a rapped wrist. The majority of complaints are between Realtors but cases with the public due to misleading advertising and improper disclosure statements is covered by mandatory ethics classes that all members must participate in every fourth year. How much harm is being done is just not enough to make the masses do more than continuing education regarding ethics. An ends based approach to handle detrimental advertising requires less effort that rules based. Although professional associations have a system to address ethical issues, what is the measurement for justice (Bayles, 2009)?
The slanderous advertisements entitles “Too bad Judges Can’t Read This to a Jury” was uses in publications and included “And Now, The Big Winners in Today’s Lawsuits” as a way to stir the public. The tampering and distorting of a trial is a violation of NY State law although it was not clear what subsequent malice applied (Dorothy Quinn v. Aetna Life and Casualty Co.).
As for measuring the number of complaints in a professional association and the proper repercussions for misleading practices it is hard to place a value on the hardship that was committed to an injured party. Similar to the case between Dorothy and Aetna the plaintiff did not clearly state a right to relief because of the difficulty in measuring malice, therefore the case was dismissed. Due to the inability to measure or judge the impact and detrimental effects on the public many resolutions end with penalties of little significance.
The habit of getting creative is one aspect to marketing campaigns trying to attract buyers. By advertising rumors that neighboring properties are slated for new transportation, authorities drive public interest and values for residential condominiums. The ploy has generated 7000 sales to exceed 4264 units sold the previous year (The Straits Times, Singapore, 2009). This creates jobs and area improvement to parallel the developer’s vision of tall buildings, schools, shopping malls, restaurants, and utilities all in close proximity for the growing urban community. The conjunction of other market conditions including low interest rates and fear of missed opportunity play a bigger role in the buyers’ multi-dimensional interest to purchase, not the vast claims of misleading schematics, or diagrams depicting a future street from advanced renderings. “The onus is on buyers to do their homework,” ("Condo ads -," 2009) regarding proximity to public transit. A buyer’s mode of apprehension should retreat to the philosophy of caveat emptor.
Name associations, similarities of verbiage used in marketing goods and services became a point of contention between the people at MasterCard and Arbel Corp. Arbel Corporation d/b/a Travel Possibilities is defending their position of using the words “master the travel possibilities”. Many of the MasterCard advertisements included master the possibilities which made MasterCard believe they were entitled to ownership of the word “master”. In many ways the word “master” is associated with MasterCard although there has to be some responsibility put on consumers to know the difference between a travel company and a credit card conglomerate. The case was dismissed and for good measure to protect the freedoms of a single word (MasterCard International, Inc. v. Arbel Corp., d/b/a Travel Possibilities).
Article suggests the numbers are in, and complaints are more than doubling due to misleading advertising, but can this be an accurate representation of the bigger picture? From May 2008, to April 2009 there were 154 complaints which are compared to 66 reported incidences the preceding 12 months ("Real Estate Complaints," 2009). The Office of Consumer and Business Affairs tracks this data but compared to the number of transaction taking place during these time periods a leading authority claims the percentage of claims is lower in a true comparison. The importance of accuracy is similar to reporting bold journalistic titles, an effective comparison to the effects printed media or advertisements have on the public.
Issues with mass mailing in 1972. A Maryland broker sent out 130,000 postcards to solicit business. The Maryland Real Estate Commission considered this act a breach of their code to control misleading and fraudulent advertising. This claim did not define the failure of the broker to inform the public of laws, public policies and affected the interest of individuals with in his care. The case resulted in the Real Estate Commission reversing that action taken on the broker (Grosman v. Real Estate Commission).
Advertising scams over 4000 people through the use of craigslist. A corporate front called Innovative Apartments uses the Craiglist website as a porthole to attract apartment hunters. The database services offered from Innovative Apartments was gathered by local listing which may or may not have been vacant but should serve as credible information for apartment hunters. The ad requested a modest $200 fee for all gathered data that could have been gathered by anyone using the free internet, but the $200 service charge delivered a time savings. New York’s attorney general Andrew Cuomo makes two bold statements regarding the alleged scam, “Craigslist.org can be a terrific asset for New Yorkers trying to navigate a difficult real estate market,” and “bait and switch schemes can turn hunting for an apartment into a nightmare” (Ross, & Goldiner, 2008). When condoning the vague legalities for enforcing internet based information, Cuomo encourages people to use the international website of Craigslist.org. Furthermore, Cuomo’s general statement regarding apartment nightmares does not address the issue of misrepresentation and deceptive advertising on the internet. It’s a jungle out there and Manhattan is no exception, people should be smarter about where they choose to do business.
Television advertisements that depict fantasy and dreams come true when consuming beer are a large step outside of reality. The Anheuser-Busch Co was brought to the Michigan courts because Richard Overton felt that images of tropical settings, beautiful women and men engaged in unrestrictive behavior was fraudulent advertisement. The courts granted a summary judgment in favor of Anheuser-Busch because the truth was already a well known truth to the public (Richard Overton v. Anheuser-Busch). Much the same for many of the questionable ad’s use is the standpoint of the courts to decide whether the public was harmed or aware of realities.
The issue of misleading advertisements has become a blanket statement that doesn’t address the underlining issues. A malicious business tactic for miss-representation of known financial information which spills over into a public ad is not a problem with fraudulent advertising; it is a breach of the Fair Trade Act. In the case of Tim Whitehead who was deliberately undercutting property values to quickly close sales was what earned him the title of highest grossing commission in his region for two years. It wasn’t the information regarding pricing in “three out of nine advertisement,” (Chalmers, 2007) that destroyed credibility of advertising. Market values are determined at the closing table after real estate contracts are negotiated not when property is still available for sale. In this isolated incident the ethical short fall should have been justified in the fiduciary relationship that Mr. Whitehead owed his client. The public should know better than to work with sell-them quick agents and be more educated about the importance of representation. The result was a small fine of $7,500 (Sharpe, 2007).
The undercutting of value for volume sales can also be seen in New York’s Supreme Court. An appellant James Beslity seeks to recover damages because of his purchase of a new Honda. Part of Mr. Beslity’s purchase was to include a $1000.00 discount that was advertised although he only received a $750.00 discount. Manhattan Honda claims that their advertising agency used improper information and there was a mistake. Ultimately Honda was responsible for their freedom to advertise and monitor their published ads, therefore the court ruled in favor of Mr. Beslity. Monetary damage was not proven in excess of $50.00 and there was no action to investigate or retract the deceptive ads. Was it necessary to prove fault or more important to adjust the advertising practices because ultimately business have the right to advertise and to use advertising agencies (James M. Beslity v. Manhattan Honda). Is the proof of who was at fault important when the financial reward is $50.00?
Mediation
A resolution for the claim that our buyer Barrack was mislead because of assumptions in the purchase of a residential home is not all that easy to conclude. In many ways it was Barrack’s responsibility to educate himself and verify the details of his transactions. The dilemma for what is ethically appropriate is whether the photographs of the property were an accurate display of what the buyer expected. A buyer with heightened expectation would ultimately prove dissatisfaction and lower expectation of the advertised photos would result in a pleasant experience. What is appropriate? Photography that is taken within a five years time frame, a two year time frame or less than twelve months. It is logical to think that up to date images are a general requirement for representing a place within a given period of time. Were older photo’s used to circumvent the deteriorating process of the property as a deceptive practice or were they used with innocence or convenience?
A conclusive process to this ethical problem can be arrived at by using the deontological and teleological approaches. Regardless of a buyer understanding the importance of “let the buyer beware” and the agent relying on blanket disclosures “information deemed reliable but not guaranteed” it is imperative to mediate the confusion. In the earlier account of the Manhattan “bait and switch” we can see the views of both buyer and seller and with a teleological approach, it is apparent that the value of what was being represented was not true of the actual or final product. This would conclude that no reasonable person would over pay for anything and that some concession is necessary to make the transaction equally beneficial. Evidence from the Anheuser-Busch case show that images are in many instances imaginary, and do not truly representing a product. The issue of what is fair or right and wrong according to many courtroom cases is how to measure the extent of damages. This deontological view would prove that with larger liability equals larger responsibility. But should the dollar difference play a role in what is ethical? It just is Right or Wrong, from a deontological standpoint regardless of attaching a dollar figure. A mathematical calculation can be figured with levels of complexity and carry on and on to an ends based or teleological approach. Will the added cost of repair and maintenance hurt the family’s budget for private school tuitions? Looking into the future of Barrack’s property interest will eventually be his time to liquidate the property. How will the potential overpayment hinder him and his family’s livelihood? Understanding that the Realtor must sell property to earn a wage carries some mode of concern because of the financial impact that stems from necessary income. Could the pictures been used to puff up the properties desirability similar to the case of Tim Whitehead who undervalued property to generate fast sales. Was this fair to produce an effective advertisement or just a ploy to swindle a buyer for a sale? Bouncing back to a teleological account shows us that allowing deceptive images for one ad’s could allude to allowing deceptive images for all ad’s and this would hurt the good-faith reputations of advertisers. If no one can trust what they see, added costs to inspect and prove value would be necessary for buyers. Although without generating traffic from glorifying images is important to entice prospective buyers in a free marketplace.
What was the truth and reason behind this ethical dilemma? In order to rectify the issue an ethical process requires a five step process. First, identify if the issue is an ethical issue? Second, gather all data? Third, evaluate all potential actions? Fourth, test the decisions from evaluated information? Fifth, set a date and act on the conclusions (mftrou.com/ethical-decision-making.html).
Does it seem fair that Philip Morris advertised their product with untrue adjectives because they had consent from a governing body? In comparison was it untrue to use a photograph that did not accurately represent the property because the Realtor had consent from a governing body to disclose not all information is guaranteed. If the two parties can agree on this point and for this discussion we will assume they agree. We can move on to the next point. Was the picture used to entice a buyer? In the case of the Craigslist apartment list scam was the information provided beneficial to the public for the cost of said services? Although the information was out of date and gathered from unreliable sources it was information for renters to explore the geographical area. What is the meter for accepting old or outdated information before it is construed as deceptive and in error.
It’s imperative that Barrack understands the Realtors view for using said photography to make the product look good. If the two parties can measure what it reasonable it will require a calculation of the detrimental cost involved with the use of the photo. The Realtor must have an understanding of how a photo can distort the truth and damage deals inhibiting closing but also effects future business. The buyer must understand that the lack of visiting the property has left him with a disadvantage because of his legal commitment.
Finding common ground and estimating potential damages are what a court will require to make summary judgments accordingly. It may be easier for the Realtor to break the contract but this would involve the seller accepting the fault of the Realtor and maintaining the property’s carrying costs. With a teleological view of the problems that stems from improper photography both sides must recognize the discrepancy. Once the evaluations are tested to prove the photography could be misleading then the parties should agree and act on a course for complete resolution. In conclusion the added level of trust a buyer should require is using a professional to avoid ethical issues.
References
Barbanel, J. (2009, June 21). The Plaza Stirs. The New York Times, RE Pg. 2.
Reuters & Bloomberg, . (2008, September 10). $53.5-Million 'attics'. The Globe and Mail (Canada), A 2.
(2008, May 29). Firms will now be as good as their word. The National (Thailand),
Bayles, T. (2009, July 13). What if you. Sarasota Herald Tribune, D12.
(2009, May 21). Real Estate Complaints more than double. The Advertiser (Australia), Pg.9.
Ross, B., & Goldiner, D. (2008, July 18). Two Busted in 1M Craiglist Apartment Swindle. Daily News (New YorK), Pg. 7.
(2009, August 15). Condo ads - caveat emptor. The Straits Times (Singapore)
(2007, December 18). Property ad misleading. The New Zealand Herald,
Chalmers, A. (2007, November 24). Top estate agent misled customers. The Dominion Post (Wellington, New Zealand), Pg. 3.
Sharpe, M. (2007, December 12). Estate agent fined $7500. The Dominion Post (Wellington, New Zealand), Pg. 4.
(2008, July 20). Estate Agent Took A 'Short Cut' In Advert. The Sunday Independent (Ireland)
Burke, K. (2008, May 30). Watchdog loosens newspaper’s grip on city real estate market. Sydney Morning Herald (Australia), Pg. 7.
Miguel Gallego v. Walmart Stores, Inc., Wis, 2d 299 (2005). Retrieved Nov. 2nd 2009, from LexisNexis database.
A.H. Goe v. Chester B. Gillford, et al, Va. 497 (1937). Retrieved Nov. 2nd 2009, from LexisNexis database.
Kenneth W. MacDonald v. North Shore Yacht, Sales Inc., et al., NYS 2d 590 (1987). Retrieved Nov. 2nd 2009, from LexisNexis database.
Dorothy Quinn et al., v. Aetna Life and Casualty Co. et al., NYS 2d 473 (1978). Retrieved Nov. 2nd 2009, from LexisNexis database.
MasterCard International, Inc., v. Arbel Corp., d/b/a Travel Possibilities, USPQ 2d (1989). Retrieved Nov. 2nd 2009, from LexisNexis database.
Grossman v. Real Estate Commission, Md 2d 257 (1972). Retrieved Nov. 14nd 2009, from LexisNexis database.
Richard Overton v. Anheuser-Busch Co., Mich 2d 308 (1994). Retrieved Nov. 14nd 2009, from LexisNexis database.
James M. Beslity v. Manhattan Honda, NYS 2d 471 (1983). Retrieved Nov. 14nd 2009, from LexisNexis database.
Sharon A. Price et al., v. Philip Morris, Inc., Ill Lexis 2071 (2005). Retrieved Nov. 14nd 2009, from LexisNexis database.
The Coca-Cola Company v. The Koke Company of America er al., 254 US 143 (1920). Retrieved Nov. 29, 2009, from LexisNexis database.
Swinton, L. (2007, Feb. 21). How to make ethical decisions in five steps. Management for the rest of us. Retrieved from http://www.mftrou.com/ethical-decision-making.html.
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