Direct Marketing: Legal & Ethical Issues

Instructor: Savannah Samoszuk

Savannah has over eight years of hotel management experience and has a master's degree in leadership.

There are certain legal and ethical aspects on direct marketing that companies need to understand. This lesson will take a look at a few of the top issues like the right to be informed, the right to privacy, and legal restrictions on direct mailing.

What Is Direct Marketing?

Paul's Produce wants to increase their customer base. The manager suggests that they appeal directly to potential customers in the local area by telling each one what great products they have. The owner notes that this is a good idea, but they should be careful to respect the customers' rights and not break any laws.

Companies have different ways to market their products and services. One way that companies use is direct marketing. Direct marketing is when a company advertises their product or service directly to the public by mailing marketing material, sending emails, or by phone calls.

While this can be a great way for to get the word out about a product or service, associated legal and ethical issues should be kept in mind.

We will take a look at two ethical issues that deal with consumer

  • the right to be informed
  • the right to privacy.

Then we will look at some of the laws that companies need to be aware of that affect direct marketing.

The Right To Be Informed

The first ethical issue companies need to consider in direct marketing approach is the right to be informed. The right to be informed is the consumers' right to information of alternatives as well as the right to accurate information that is not misleading or false.

For example, if Paul's Produce sends out advertisements through the mail or email claiming that all of their food products are organic then this information needs to be true. Companies can find themselves in trouble with their consumers if they are not providing correct information.

Also, Paul cannot market one of their products as the only foods capable of decreasing anxiety if, in fact, other products from other companies do the same. Consumers need to be able to look at alternatives and make a decision. These are both ethical issues that companies want to take into account when they are sending out advertisement in the mail or telemarketing.

The Right to Privacy

Next, companies need to be aware of consumer's right to privacy, which is a broad concept, but in this case refers to a consumer's right to be left alone by marketers. In order to send out marketing material through the mail or call potential consumers, companies need to obtain consumer information. Sometimes companies buy consumer information from a third party. This means that the consumers they are targeting did not request information about their product or service.

For instance, have you ever received marketing material in the mail for a company that you had never purchased anything from? You were probably wondering how the company received your information. Many consumers do not appreciate receiving advertisements in the mail or telephone calls. The company needs to be aware they may face consumers that do not want unsolicited marketing and even consider it unethical. There are also legal issues with consumer privacy that we will discuss next.

Legal Restrictions on Direct Marketing

There are many laws that restrict direct marketing. Let's look at just a few.

Telemarketing Consumer Protection Act

The Telemarketing Consumer Protection Act of 1994 protects consumers by restricting companies using telemarketing. Under the Act, telemarketers can only call between 8am and 9pm and there are limits on how often one consumer can be called in a certain time frame.

Also, consumers are able to be put on a 'do not call' list and then telemarketers are not allowed to call consumers on this list. Have you ever received a telemarketing call and asked them to stop calling you? If you were to tell them you want to be placed on the 'do not call' list then they would have to respect that and not make future calls to you. Companies that do not follow this act can face severe fines.

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