The Ftc's Need For Social Science Research

Citation:

Commissioner Mary Gardiner Jones (1971) ,"The Ftc's Need For Social Science Research", in SV - Proceedings of the Second Annual Conference of the Association for Consumer Research, eds. David M. Gardner, College Park, MD : Association for Consumer Research, Pages: 1-9.

Proceedings of the Second Annual Conference of the Association for Consumer Research, 1971     Pages 1-9

THE FTC'S NEED FOR SOCIAL SCIENCE RESEARCH

Commissioner Mary Gardiner Jones, Federal Trade Commission

[While this text forms the basis for Miss Jones' oral remarks, it should be used with the understanding that paragraphs of it may have been omitted in the oral presentation and, by the same token, other remarks may have been made orally which do not appear in the text.]

I am honored to have been invited to address your Second Annual Meeting of the Association for Consumer Research and to have this opportunity to explore with you some of the areas in which your research and expertise can, and hopefully will, be integrated into the work of the Federal Trade Commission.

You have long recognized the need for the interdisciplinary approach to the solution of problems. I am sure you are also very aware of the crucial importance to the success of the interdisciplinary approach to problem-solving for the participants in the various disciplines to understand each other's predispositions and approaches. Before going into some of the specifics of the Commission's need for the type of insight and data on consumer behavior which your association was formed to encourage, therefore, let me digress briefly to make a few generalized observations on the background and approach of the typical government administrator and lawyer to his law enforcement responsibilities.

Unlike academicians, most lawyers have not engaged in any extensive academic work since their graduation from law school. Furthermore, the formal education of many lawyers may lack a grounding in psychology or sociology and their associated research methodologies. The application and potential contribution of newer scientific methodologies which have been developing in the social sciences over the last two decades will in most cases be a relatively unfamiliar phenomenon to most lawyers and law enforcement administrators. Moreover, whatever their academic background and capabilities, lawyers tend in the first instance to think in terms of practices which are to be laid against the statute in order to determine whether the law is being complied with or violated. Thus, the lawyer engaged in law enforcement tends to regard his job from an individual practice or case point of view rather than from a broader, more problem-oriented perspective.

Government antitrust lawyers have had some experience in working with the disciplines of the economists versed in the dynamics of economic behavior, both to define the types of practices which restrain trade and to devise remedial measures designed to restore competition.

In the consumer protection field, [I recognize and essentially agree with those who have pointed out the many limitations and inadequacies of the term "consumer protection" when used to describe the work of the Commission or the general field of consumer welfare with which we are all basically concerned. Nevertheless, I shall use it in my remarks tonight as a simple shorthand for the over-all objectives which are encompassed by both the Commission's statutory responsibilities and your research.] this same concern with defining the illegal practices in terms of the dynamics of consumer behavior and with developing effective remedies once the dynamics have been defined has been a much more recent development. Consumer protection lawyers are just beginning to become aware of the need for obtaining a more thorough understanding of the behavior of the consumers they are attempting to protect. [The recognition of a need to integrate social science research into our activities was first emphasized to the Commission by Professors Dole and Wallace of the University of Iowa College of Law during the 1968 National Consumer Protection Hearings of the Federal Trade Commission. They recognized not only the need for pertinent research but also for sensitizing lawyers to the value of the social sciences. Proposal submitted by Professors Dole and Wallace, National Consumer Protection Hearings, Federal Trade Commission, 1968, p. 147.  More recently, the Commission's Assistant Director in the Office of Policy Planning and Evaluation, gave a speech as part of the Distinguished Lecture Series in Consumer Behavior at the Ohio State University, in which he addressed gaps in Commission programs where behavioral research would serve an important function. Fred L. Woodworth, "Policy Planning and Consumer Protection -- The Need for a Behavioral Perspective," February 22. 1971.] However, there is no established framework for operationalizing this interdisciplinary process and much work, therefore, must be done first in familiarizing the lawyer with the potentialities and capabilities of your discipline and second, in developing appropriate methodologies and research projects to help the public policy administrator to come to grips most effectively with problems which at this point he may not even recognize he has.

I do not mean to be pessimistic about the ultimate integration of your research and expertise into the thinking and actual work of the Federal Trade Commission. There is no doubt in my mind as to the essentiality of the meshing of the legal and consumer behavior disciplines in the field of consumer protection. Indeed, my major objective in addressing you tonight is to highlight the many areas in the Commission's work which I believe can only be effectively addressed by the application of your expertise and discipline. However, we must recognize at the outset that we will frequently start out with different premises, different approaches and, indeed, at times, different short- and long-range objectives.

I

Perhaps the most useful way for me to approach my subject with you tonight is to discuss the broadly-defined areas where your expertise is applicable, and then to focus my remarks more specifically on some of the more recent developments in the Commission's work which I believe are forcing it increasingly to search for new techniques and insights in order to maximize the effectiveness of its enforcement efforts.

I see two broad areas which continually confront the Commission where gaps may exist in our present approaches. The first is the allocation of our resources to problem areas and the second is the development of effective remedies within problem areas.

I strongly feel that our efforts in these two areas can be greatly enhanced by a systematic utilization of research on consumer behavior. The reasons for this should be obvious. Our past efforts have implicitly relied on models of the consumer, and to the extent that these models were lacking, our own efforts were less effective. Discussing each of these areas might be facilitated by focusing on some of the models on which our activities have been premised.

Legally, the model has been consciously articulated in terms of protecting the credulous, the trusting, and even the wayfaring fools. [FTC v. Standard Education Society, et. al., 302 U.S. 112 (1937).] On the other hand, in defining the practices which restrain trade and in its relief to eliminate practices which are deemed to mislead this type of consumer, the Commission has, in effect, switched models and assumed a wholly different type of consumer -- one who is rational, analytical, intelligent and wholly able and desirous once the deception or restrictive practice is eliminated or explained by some affirmative disclosure, to evaluate bargains, compare products and generally act as the economic theorists assume he must act in order for the competitive system to work effectively.

I do not mean to make judgments about the accuracy or serviceability of these consumer models. Indeed, in determining the impact of any given representation or practice on consumers, it is undoubtedly essential that the Commission look to the least sophisticated consumer if it is to carry out its statutory mandate effectively. Similarly, the rational economic man model may serve to focus attention on areas of need for Commission action such as in the information field, whether or not the information disclosed is capable of immediate assimilation by consumers without the further intervention by communication or educational intermediaries.

I do believe, however, that the generality of these consumer models and the Commission's failure in the past to rely on them in a more conscious, articulated fashion may indeed have prevented it from insuring that its always meager resources are used with maximum effectiveness, both in determining areas in which the Commission's resources should be applied and in insuring that the actions which it does decide to take will, in fact, achieve the end result sought to be obtained.

Let me give you a few examples to illustrate the point. In carrying out its competitive antitrust enforcement responsibilities, the Commission has recently been placing considerable emphasis on availability to consumers of information about product ingredients and performance as an essential element in promoting the effectiveness of competition. The Commission's efforts in this area rest essentially on the implicit assumption that once available, consumers will in fact make use of this type of information in their purchase decisions.

As another example, while the Commission is fully aware that the perceptions, needs and predispositions of the middle-income consumer show little commonality with those of the ghetto resident, their programs have not always reflected the differences between these groups. Similar perceptual, attitudinal and behavioral gaps abound between other population segments, the elderly, the young, the urban dweller, the rural consumer, etc. The decision processes for each of these different population segments, therefore, may have wide variations. Their perception and use of different types of information will have similar variation. Indeed, each of these different consumer groups will in many instances confront quite different problems in the marketplace and will be susceptible or vulnerable to quite different types of marketplace practices and representations. The requirement of full and complete credit term disclosures, for example, are of obvious assistance to the middle-income consumer who is able to choose among the various credit dispensers for the best bargain. They are of far less utility to a low-income consumer who has limited availability to credit sources. Similarly, representations made to the elderly or to the poor may impact quite differently from the same representations made to other consumer segments of the population.

It is also obvious that much more precise product segmentations could be made by the Commission, particularly in the area of information disclosure, in formulating enforcement programs which will have some reasonable likelihood of reaching real problems. If, in fact, purchases by some consumers of certain products are not made on the basis of price and product performance, then the Commission may be misallocating its resources in developing information programs designed to improve the rationality of consumer purchases in these particular product lines.

It is essential that the Commission's actions take realistic account of these various consumer and product differences in framing its enforcement programs. It is obvious that the Commission must tailor its programs so that its resources are not allocated solely to one segment of the consumer population. It is equally obvious that the Commission must not waste its resources by mandating industry action which is unlikely to have any significant impact on consumer behavior. Creative segmentation analysis would help us both to allocate our resources more effectively and significantly.

Thus, I am convinced that one important role which you can play in strengthening our activities lies in the development of more precise consumer models both to guide our selection of marketplace practices on which to focus our resources and to assist us in fashioning effective remedies which can be expected to have some likelihood of redressing the practices found to violate the laws as well as of freeing the consumer to act in his own interests and to seek his own welfare as he perceives it.

As I have already suggested above, the woeful inadequacy of our resources to even approach a minuscule proportion of the economic and deceptive conduct committed to our jurisdiction makes it imperative that we learn to allocate our resources to the most significant problems and the ones most susceptible to the effective remedial action. And if the Commission is to insist on various remedial steps to the point of making them a test case of its basic power, it must make certain that the remedy it is seeking will, in fact, significantly affect consumer behavior.

I should point out that at present, the Commission has a variety of techniques available to it to determine when and how its resources can and should be most effectively utilized. First and foremost, of course, is its selection of practices to investigate and challenge. At the present time its actions here are still largely unsystematized. Input at this stage is highly informal and can consist of individual complaints of violations, suggestions from members of the public as to areas of concern to consumers or in need of remedial action or more formal investigations by staff, leading to their determination that certain practices going on are in violation of the statute. In my judgment, there is great need for the Commission to systematize its activities in this area of case selection and to bring to bear all of the research and available skills on the part of consumer behavior specialists in order to determine in advance the relative importance and significance of the various practices claiming the attention of its resources.

Up to this point I have focused on the processes of allocating resources and developing remedies. The third essential ingredient in this sequence is the process of measuring the effectiveness of programs or actions after they have been instituted or taken. In the past, the Commission has done very little of such follow-up evaluation of its consumer protection activities. Again, your research could help us to formulate the standards by which such measurements could be made or could, in fact, make some of the empirical studies on which such evaluation must depend.

Finally, there are two other brief points I would like to make that relate to your expertise.

Traditionally, the FTC has looked upon its statutory responsibilities to promote the welfare of the consumer as most effectively achieved by focusing its attentions primarily on the conduct and behavior of the producers and sellers in the marketplace. Thus, while the ultimate object of the Commission's concern has always been the advancement and protection of the welfare of the consumer, this objective has been typically thought to be most effectively achieved by mandating changes in marketplace conduct and structure. The Commission in recent years has become increasingly aware of the fact that the goals of law enforcement can be achieved by a variety of tools which in no sense are or should be limited to formal individualized adjudicatory action. In this connection, the Commission has increasingly recognized that disseminating information directly to consumers about marketplace practices or product characteristics may be as effective in achieving the ultimate statutory objectives as its own investigations and adjudicatory proceedings. Similarly, the Commission's increasing concern with product information disclosures as a potential mechanism in promoting the competitiveness of markets has also brought into focus the significance of communication in its enforcement activities. Yet, any effective information program, if it is to serve effectively as an enforcement weapon, demands a much more precise knowledge of the actuality of consumer behavior than has ever been sought or at least been made available to the Commission. The Commission must have some certainty as to the way in which consumers utilize and react to the various available communication channels and messages in order to determine which channel to utilize and what format the disclosure should take.

It is, therefore, crucial in my judgment that we make a deliberate and concentrated effort to pool our skills and our resources in order to insure that government information programs in these areas are sensible, meaningful and realistic. Your research might aid in the development of such effective programs for communicating information to the consumer who might use it.

A final area of Commission concern which I believe could be substantially illuminated by the application of your discipline involves the definition of practices which should be encompassed within the operative sections of the Commission's statutory mandate to eliminate the unfair and deceptive act or practice in the marketplace. In today's marketplace with its greatly increased technical and legal complexities, consumers are correspondingly and increasingly less able to rely solely on their own efforts to achieve their purchasing goals whatever they may be. The imbalance of power and know-how between consumer and businessman has steadily widened. As a result, the Commission in recent years has been placing increasing attention on its mandate to eliminate the "unfair'@ as well as the "deceptive" practice. Yet, the concept of unfairness is a much more subjective and less verifiable term than deception or untruth. Here again, therefore, the Commission is in need of new insights into what constitutes unfairness in terms of consumer behavior in the marketplace.

II

Up to this point, I have tried to discuss the kinds of gaps that have tended to exist in our activities at the Commission. Let me turn now to a more specific discussion of how I see -- or would like to see -- your skills brought more directly to bear on the Commission's work. There are several potential interface points which I see from my point of view for your input, both directly and indirectly.

I would like to draw on three current Commission programs and concerns to illustrate the types of questions to which I believe consumer behavior research could provide important answers and make a significant contribution to the effectiveness of the Commission's work.

A substantial portion of the Commission's resources is devoted to monitoring the truthfulness and fairness of national advertising. An essential premise of this resource commitment is the assumption that advertising plays an important role in influencing consumer behavior in the marketplace.

As we began to give added attention to this area of advertising over the past year, we felt a need to acquire a more thorough understanding of the basic function and impact of advertising on consumer behavior. Accordingly, we have planned to hold a series of hearings to start this September to el_cit testimony and information on three basic areas:

(1) The role of the advertising agency, including its technical practices and research practices, in mass communications;

(2) The accumulated knowledge relating to the effects of advertising on consumers;

(3) The social and cultural impact of advertising.

These hearings are not designed to evaluate existing ads or their claims. Nor is any specific rule under consideration. Their purpose is essentially informational, designed to build a foundation for future policy planning in advertising regulation. In the course of the hearings, the Commission will focus on four areas of primary concern: (1) the impact of TV ads addressed to children; (2) the extent to which TV ads may unfairly exploit desires, fears, and anxieties; (3) the extent to which technical aspects of the preparation and production of TV commercials may facilitate deception; (4) the consumer's physical, emotional and psychological responses to advertising, as they may affect the standards by which advertising is judged. [Remarks of Miles W. Kirkpatrick, Chairman, Federal Trade Commission, Before the Grocery Manufacturers of America, The Greenbrier, White Sulphur Springs, West Virginia, June 22, 1971. See also FTC Press Release, August 24, 1971, announcing the hearings.]

Looking at the problem from the Commission's regulatory viewpoint, I can already identify now some of the questions which I, as an administrator, would like to see your research directed towards in order to provide us with a much needed perspective on the relative importance of television advertisements on consumer behavior. For example, it would be valuable -- indeed, essential -- for the Commission's program planning to secure data on questions such as the following:

(1) For which product categories does TV advertising play the most significant role in effecting primary or selective demand?

(2) What is the relative importance of TV advertising as compared with other media and with other personal influence sources?

(3) What is the relative importance of TV advertising as compared to variables such as price and other point-of-purchase variables?

(4) What is the relative importance of TV advertising as compared to information gained through usage experience?

In addition to these types of program planning inquiries, the Commission is, of course, even more directly concerned with determining which of the multitude of advertising messages are unfair or deceptive within the meaning of Section 5 of the Federal Trade Commission Act.

Communication researchers recognize that there are a multitude of controllable variables which determine the "effectiveness" of an ad. The question is at what point the manipulation of those variables constitutes an unfair or deceptive practice. The advertiser has within his control, factors associated with the message itself and the perceptual "surround" associated with the message. These would be the starting points in our search for sources of deception.

However, we must also consider factors outside the control of the advertiser in evaluating the need for protection. In particular the receiver's characteristics cannot be ignored. [See in this connection article by Richard W. Pollay, Deceptive Advertising and Consumer Behavior: A Case for Legislative and Judicial Reform," Kansas Law Review (June 1969) pp. 625-637.] The Commission's mandate has been defined in terms of an ad's "capacity to deceive." It must, therefore, concern itself both with the message and its perceptual environment, and with the way in which it is interpreted by the viewer or listener. Certainly here is an important area in which the Commission's findings on this aspect of advertisements could be made far more precise and authoritative if they could take account of available theory and empirical data rather than on unsystematic estimates or assumptions as to how advertising messages impact on different consumer audiences.

In determining whether the Commission's mandate to eliminate unfair representations is applicable to various advertising messages, it would be significant for the Commission to have more precise information on the use and impact of fear appeals, the use of non-informational advertising themes, and the inability of consumers to evaluate the effectiveness claims made for certain types of products. Research addressed to these areas within a policy-oriented methodology might help us in developing a protection framework rooted in an understanding of consumer behavior.

In addition to our need for a cumulative body of policy-oriented research addressed at the advertising area, there are some specified short-range research questions that are relevant to the Commission's current work.

One such area concerns the Commission's actions with respect to fictitious and other forms of deceptive pricing claims. These claims include preticketing, or former price comparisons, where a retailer indicates that a product which formerly sold for one price is now reduced to a second price. The problem in many cases is that very few or no products were sold at the first price. The questions of interest then are, how does the consumer perceive the second price? To what extent is his purchase based on the perceived savings as opposed to other considerations? Similar issues of concern in this general area are the extent to which price savings representations, offers of free goods and the like, act as significant incentives to consumer choices and purchases and whether these offers deflect consumers from making quality or brand comparisons and whether some product lines are more susceptible to these claims than others. In addition, the Commission's program planning in this general pricing claims area could benefit immeasurably from research into the question of the extent to which consumer behavior is, in fact, influenced by such common pricing practices as these free offers, savings representations or bait and switch appeals. Here, as you can see, the Commission's need for your research goes not only to the area of defining what types of conduct are deceptive but also lies in the area of assisting it in making priority assessments as to which of the many areas of deception its resources can be most effectively applied.

Another area of Commission actions which can benefit from your research relates to the development by the Commission of effective remedies by which to eliminate and dissipate the effects of the deceptive and unfair practices which have been found to exist in the marketplace. Let me give you two examples of remedies currently being proposed and considered by the Commission in order to illustrate the types of issues which must be addressed in this vitally significant aspect of the Commission's responsibilities.

Recently, the Commission staff has proposed -- and included in notice orders attached to complaints involving allegations of deceptive and unfair advertising representations -- requirements on advertisers to devote a portion of their future advertising budgets and space to a disclosure of their prior deceptive claims. It would seem reasonable in evaluating the need for and efficacy of such a remedy to have as much data as possible on its impact in terms of variables such as source credibility, repetition, and the placement associated with the "corrective" ad. In general, your research and insights should help clarify the issues involved in this approach to deceptive advertising.

In a somewhat different context, the Commission has recently proposed a trade regulation rule to govern the practices of door-to-door salesmen. One important provision of the proposed regulation is a requirement that door-to-door sellers provide their customers with a three-day cooling-off period within which they have an absolute right to cancel the transaction. Hearings were held on this proposed rule in March of this year. If the record supports the need for a cooling-off period, interesting behavioral implications arise both in terms of the length of time to be applied to such a cooling-off period in order to insure its effectiveness and in terms of the form of disclosures which will be most effective in informing consumers of their cancellation rights. It would seem relevant in finding answers to these questions to know whether distinctions in consumer behavior in utilizing such a right will exist as between product classes and consumer segments. On a broader level, your research could also reveal whether the cooling-off period, in fact, addresses all of the problems which may exist in door-to-door sales transactions or, indeed, put another way, whether significant problems do, in fact, exist with respect to these transactions relative to all of the other areas of potential deception and unfairness which are subject to the Commission's jurisdiction. Many people concerned with door-to-door sales transactions have suggested that these transactions require special regulation because they confront consumers with a purchase situation involving little or no planning and exclude the possibility of comparative shopping. It is also suggested that the stay-at-home customer of the door-to-door salesman has by that fact alone particular vulnerability to high-pressure sales techniques and outright misrepresentations. These areas of consumer behavior are largely untapped in your literature. [One recent study in this area is Marvin Jolson, Consumer Attitudes Toward Direct-To-Home Marketing Systems, New York: Dunellen, 1970.] Yet, research could throw substantial light on the actual decision and post-decision process of the home customer distinguished from the store customer which would be invaluable in evaluating and predicting the effectiveness of any regulatory action taken with respect to this class of sales transactions.

III

The major purpose of my discussion tonight has been to indicate our interest in the research possibilities in your area of expertise. I have tried to give you a feel for our priorities and our major problems in the consumer protection area. I know that many of you are seriously interested in addressing the public policy issues I have been discussing, and you must be wondering about specific ways in which your research can be effectively applied to Commission programs and, most important, where the funds for these research projects are to come from.

As I have indicated above, the Commission frequently holds public hearings on specific regulatory actions which it is proposing to take, or, as in the case of its advertising hearings, on more generalized topics on which it is seeking open-ended information. Notices of these hearings are made the subject of press releases and announcements in the Federal Register and members of the public are solicited to participate in the hearings either by way of written submission or at testimony or both. These hearings, therefore, constitute one existing channel through which the expertise of your members can be immediately brought to bear on matters which are of active concern to the Commission.

In addition to these proposed regulatory actions, the Commission is constantly concerned with program planning and with the study and investigation of marketplace practices which may engage its jurisdiction. It is constantly searching available literature for material bearing on matters of concern to it and it is receptive to any and all suggestions and data which would illustrate the necessity for action by it or bear on the effectiveness of action which it has already taken. Here, the communication channels with the Commission are essentially informal susceptible to development so that our exchange of ideas and data could be made more systematic.

Meetings, such as the kind in which I and members of the Commission's staff are participating here over the next couple of days can obviously contribute a great deal to our mutual interests.

Let me turn briefly now to the knottier question of funding. Funds for policy-oriented research have always been extremely limited. Unfortunately, I am not here to tell you that the Commission's already strained budget has been expanded to accommodate your research. However I believe the problem of funding can be attacked from a number of approaches. It is certainly clear that the issues at stake are too important to allow the existing funding. constraints to block off the application of your skills and expertise to a formulation of sounder and more effective public policy programs.

Of course, the first course of action would be to exhaust the existing channels for funds. A second course of action I would propose, which I believe may have potential, would be to explore the business community itself as a possible source of funds. Typically, a large part of the research in consumer behavior has been supported by firms interested in employing your findings in their marketing strategies. [This, no doubt, in large part accounts for the past direction of research in consumer behavior.] Since these firms have something to lose in cases where the Commission or other public bodies make decisions on the basis of analysis lacking in an understanding of the behavioral issues, there is an incentive to gain an unbiased viewpoint from researchers such as yourselves.

I am also increasingly coming to the viewpoint that many of the factual bases for Commission action could lend themselves to research projects jointly agreed upon in advance by the Commission and the industry segment concerned. Here again, the important element in any such joint action would be the quality and independence of the research bodies which will frame and carry out the research. Certainly at this point in time the Commission would need to retain consultants to assist it in working out any such joint research projects. Again, your organization could be of invaluable service in locating the properly qualified consultants.

My last line of thought concerns the possibility that the Commission may be asked by researchers or funders to evaluate proposals relating to our priorities. Depending on the extent to which this occurs, we probably would not have adequate manpower or expertise to perform this function alone. It might be worthwhile, however, to explore the possibility of establishing an advisory board to help us in this respect, and perhaps your organization could provide suggestions as to the creation and functioning of such a board.

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