Refining Advertising Regulation

Abstract

Why did the Federal Trade Commission (FTC) aggressively pursue Volkswagen’s claims about “clean-diesel” technology, while ignoring widespread practices like deceptive discount pricing? Why did the FTC offer formal guidance to industry about “native advertising,” but only casual guidance to consumers about widely-used, peer-review aggregators like Yelp! and Fandango? For decades, the FTC has only loosely employed a cost-benefit-analysis approach toward prioritizing enforcement of advertising regulation. I contend that federal regulators can best refine enforcement priorities by looking to the information economics literature for an established framework for classifying advertising claims. This Article shows that classifying advertising into search claims, experience claims, and credence claims offers a structure for more rigorous cost-benefit analysis of enforcement opportunities. Expressly incorporating this search-experience-credence claim framework into regulatory decision making and prioritization will lead to improved stewardship of FTC resources.