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CHAPTER 8 Marketing Basics 287

refrigerators ($2,000 prices) and Pepsico is marketing bite-sized Go Snack chips
that will command higher prices. 14
Distribution of income is of interest to marketers. A large percentage of high-
income households is good for the marketer of luxury products. A large percentage
of middle-income people means a sizable market for a wide range of products and
services. On the other hand, a high percentage of low-income households that will
have trouble affording even the basic necessities is a marketer’s nightmare.

The Legal and Political Environment
Marketers need to abide by the laws that are in existence, anticipate those that
might be passed, and be aware of how these laws are being administered. There are
two major sets of laws that affect marketing operations. One set protects con-
sumers. The Federal Trade Commission Act (1914) prohibits deceptive advertising
and labeling. The Pure Food and Drug Act (1906) prevents the distribution of adul-
terated or misbranded foods, drugs, and unsafe consumer products. The Consumer
Products Safety Act (1972) protects the consumer from unreasonable risk of injury
from products not covered by previous legislation. The Fair Packaging and Labeling
Act (1966) outlaws deceptive packaging or labeling of consumer products. The
Trademark Counterfeiting Act (1980) penalizes companies that deal in counterfeit
consumer goods that can threaten health or safety. The Nutritional Labeling and
Education Act (1990) prohibits exaggerated health claims and requires processed
foods to contain nutritional information on labels. The Telephone Consumer Pro-
tection Act (1991) places restrictions on unwanted telephone solicitations.
The second set of laws is concerned with unfair competitive practices. The most
important of these are
Sherman Antitrust Act (1890). Prohibits various activities that restrain trade.
Puts restrictions on attempts to monopolize.
Clayton Act (1914). An amendment to the Sherman Antitrust Act, it outlaws
such specific practices as price discrimination, exclusive dealer arrange-
ments, and tying arrangements where a customer has to buy a product
from a company related to the one already being purchased from that
company.
Federal Trade Commission Act (1914). Created the Federal Trade Commis-
sion and gave it power to prevent unfair methods of competition.
Robinson-Patman Act (1936). Prohibits price discrimination that lessens
competition among wholesalers and retailers.
Wheeler Lea Act (1938). Even if competition is not injured, acts and practices
deemed to be unfair or deceptive are prohibited.
Lanham Trademark Act (1946). Provides protection for companies’ brand
names, brand marks, trade names, and trademarks.
Regulatory agencies make decisions that interpret laws. Some of the major ones
are the Food and Drug Administration, the Federal Trade Commission, and the
Consumer Products Safety Commission. Many of the decisions by these agencies
have far-reaching consequences. For example, the Food and Drug Administration
did not approve a cancer-fighting drug developed by ImClone; that led to allega-
tions of illegal insider trading being made against the company’s CEO and Martha
Stewart. They were accused of selling ImClone stock in advance of the FDA’s ruling,
which caused a sharp decline in the stock’s price.
Individuals who head up regulatory agencies often bring a certain predisposition
that will influence the work of the agency. A case in point isTimothy J. Murris, President

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