EXPLOITING PRE-EXISTING BELIEFS.

• Author: Taha, Ahmed E.

ABSTRACT

Advertisements and product labels for a wide range of consumer and investment products have highlighted product characteristics that some people erroneously believe make them superior to competitor goods and services. This article argues that these advertisements and labels are deceptive because they imply that those erroneous beliefs are accurate even if they don't mention the erroneous beliefs. Moreover, these advertisements and labels can deceive even those individuals who have no pre-existing beliefs regarding the highlighted characteristics. This deception distorts purchasing and investing decisions, causing consumers and investors financial loss, reduced satisfaction, and sometimes even physical harm. Because these advertisements and labels are used for many different products, they are regulated by a number of federal agencies, whose regulatory approach often requires the advertisement or label to include a disclaimer of the erroneous belief. This article examines the effectiveness of such disclaimers and other possible regulatory approaches. It argues that often a stronger approach is justified: a prohibition against highlighting a product characteristic about which consumers or investors have an erroneous belief

TABLE OF CONTENTS INTRODUCTION I. ADVERTISEMENTS AND LABELS THAT EXPLOIT PRE-EXISTING BELIEFS ARE DECEPTIVE II. EXPLOITING PRE-EXISTING BELIEFS HARMS CONSUMERS, INVESTORS, AND COMPANIES III. HOW REGULATORY AGENCIES TREAT EXPLOITATION OF PRE EXISTING BELIEFS A. SEC Regulation of Mutual Fund Performance Advertisements B. FTC and FDA Standards for Advertisements and Labels of Additive-Free Cigarettes625 IV. POSSIBLE REGULATORY APPROACHES A. Highlighted Characteristic Relevant Only Because of Erroneous Belief B. Highlighted Characteristic Also Relevant for Legitimate Reason CONCLUSION INTRODUCTION

During the most recent Super Bowl, a humorous but controversial advertisement for Bud Light beer aired for the first time. (1) In the advertisement, a huge barrel of corn syrup is delivered to the fictional Bud Light castle where Bud Light is brewed. However, the delivery is in error because, as the Bud Light King states, "We don't brew Bud Light with corn syrup." (2) When informed that Miller Lite is brewed with corn syrup, the king leads a party on a long journey to take the corn syrup to the Miller Lite castle. Alas, upon arriving, the guard at the entrance of the castle tells them that the corn syrup is not Miller Lite's; the Miller Lite castle already received its corn syrup shipment that morning. The guard, however, directs the party to the Coors Light castle because Coors Light is also brewed with corn syrup. After another long (and perilous) journey, the party reaches the Coors Light castle where a guard happily accepts the corn syrup from them and says, "To be clear, we brew Coors Light with corn syrup." The advertisement finishes by showing a glass of Bud Light next to the words "Brewed with no Corn Syrup," while a voiceover states, "Bud Light. Brewed with no corn syrup."

The advertisement's message is not subtle: unlike its competitors, Bud Light is not brewed with corn syrup. Furthermore, the message is unquestionably true; Miller Lite and Coors Light are brewed with corn syrup, but Bud Light is not. (3) Yet, the advertisement is controversial because there is no apparent reason why that fact should be relevant to consumers. Beer brewed without corn syrup is no healthier than other beer. (4) Indeed, Anheuser-Busch, the maker of Bud Light, has been accused of using the advertisement to exploit an erroneous pre-existing belief possessed by some consumers that brewing beer without corn syrup is healthier. (5) These consumers might be confusing corn syrup with high-fructose corn syrup, (6) a sweetener that many consumers believe to be unhealthy. (7) Indeed, Anheuser-Busch's extensive focus-group testing of the advertisement found that "consumers generally don't differentiate between high fructose corn syrup and corn syrup, and that it is a major triggering point in choosing brands to purchase, particularly among women." (8) In addition, the advertisement is likely exploiting the fact that many consumers don't know that, even if com syrup is used in the fermenting process, it will not be present in the finished beer. (9)

The controversy over the Bud Light advertising campaign has received attention in the national news media, (10) and led to at least a postponement of a joint marketing campaign planned by four major beer makers aimed at increasing beer sales overall. (11) In addition, MillerCoors, LLC, the maker of Miller Lite and Coors Light beers has sued Anheuser-Busch for false advertising and for federal trademark dilution. (12) Part of the relief sought in the suit is a permanent injunction prohibiting Anheuser-Busch from disseminating any advertising, packaging, or other promotional materials that expressly claim or imply that Coors Light and/or Miller Light "contain corn syrup or high-fructose corn syrup; ... are 'made with' or 'brewed with corn syrup' unless also expressly stating that corn syrup is completely converted into alcohol during the brewing process and not present in the final products; and/or ... are inferior to, or taste worse than, Bud Light because they are brewed using corn syrup." (13)

Advertisements that take advantage of erroneous pre-existing beliefs are not new. For example, in the 1960s and 1970s, aluminum emerged as a suspected cause of Alzheimer's disease, resulting in concern about consumer products that contained aluminum, such as beverage cans, antiperspirants, and antacids. (14) Although later research showed such concerns were unfounded, the myth that aluminum in consumer products can cause Alzheimer's still exists. (15) In the 1990s, Smithkline--the manufacturer of Turns antacid--launched a television advertising campaign that highlighted that Turns is "aluminum-free" and that competitor products (such as Rolaids, Maalox, and Mylanta) contain aluminum. (16) The advertisement did not mention Alzheimer's disease nor state any other reason why being aluminum-free is desirable. Nevertheless, Smithkline's competitors complained to television networks that the advertisement falsely implied that their antacids were harmful. (17) In response to these complaints, Smithkline ultimately changed the advertisements to remove any reference to aluminum. (18)

The Bud Light and Turns advertisements are examples of a practice that the Federal Trade Commission has called "exploiting] preexisting beliefs." (19) The present article defines exploiting a pre-existing belief as advertising or labeling that highlights a product characteristic that some people erroneously believe makes a consumer or investment product superior to its competitors for a particular reason. Such advertising need not create or explicitly refer to the false belief. For example, the Bud Light advertisement did not state that corn syrup is healthier, and the Turns advertisements did not mention Alzheimer's disease or any other reason why aluminum in antacids is undesirable. Nevertheless, these advertisements were designed to take advantage of many consumers' erroneous pre-existing beliefs about corn syrup and aluminum.

Advertisements and labels that exploit pre-existing beliefs are not uncommon. For example, mutual fund companies routinely advertise the past returns of their highest-performing equity mutual funds because many investors falsely believe that strong past performance is a good predictor of strong future performance. The advertisements do not explicitly claim that this belief is true. In fact, the advertisements are required by the Securities and Exchange Commission to include disclaimers explicitly warning that past results do not guarantee future results and discouraging investors from focusing very heavily on past returns. And yet, these advertisements are effective because many investors still have this false belief. (20)

Similarly, until very recently, certain cigarette brands were promoted via labels and advertisements that exploited pre-existing beliefs by highlighting the fact that the cigarettes used tobacco that contained no chemical additives. These labels and advertisements did not explicitly claim that the lack of additives made the cigarettes safer than other cigarettes. In fact, they included a disclaimer mandated by the Federal Trade Commission stating that additive-free cigarettes are no safer than other cigarettes. Nevertheless, many smokers still erroneously believe that additive-free cigarettes are safer. (21)

This article argues that advertisements and labels that exploit preexisting false beliefs are deceptive. The article uses insights from pragmatics, a branch of the field of linguistics, to explain why advertisements and labels that highlight a product characteristic--such as an antacid being aluminum-free or a mutual fund having high past returns --inherently imply that the product is superior to competitor products that don't have the highlighted characteristic.

Importantly, even to people who lack a pre-existing belief, these advertisements and labels falsely imply that the highlighted characteristic makes the product superior. Thus, although these advertisements and labels are referred to as exploiting pre-existing beliefs, they are deceptive even to people who lack pre-existing beliefs.

These advertisements and labels harm consumers, investors, and companies. They cause people to falsely believe the product or investment is superior to that offered by competitors and distort people's purchasing and investing decisions. This causes financial loss, reduced satisfaction, and, in some cases, even physical harm. Moreover, the exploitation of preexisting beliefs causes companies to waste valuable marketing resources developing or combatting deceptive advertisements and labels.

Because this practice has been employed in advertisements and labels for...