The Obsolescence of Advertising in the Information Age.

Author:Woodcock, Ramsi A.


In an age in which two of the five largest tech firms in the United States both earn about ninety percent of their revenues by selling advertising space, it is hard to believe that as late as the 1970s the Federal Trade Commission (FTC) viewed non-false, non-misleading advertising as anticompetitive conduct capable of violating the antitrust laws. (1) But the FTC did, believing that advertising has the power, through repetition and brand image creation, to induce consumers to buy things that they do not really want, to the disadvantage of competitors selling the things that consumers would otherwise buy. (2) From the 1950s to the 1970s, the FTC brought a series of antitrust cases against some of the nation's largest advertisers, including Procter & Gamble and Kellogg, in which the power of advertising to create an illegitimate competitive advantage through the manipulation of consumer preferences played an important role. (3) Buoyed perhaps by the consumer movement, which peaked during this period, the FTC won the agreement of the federal courts that heavy advertising of S.O.S. scrub pads, the ReaLemon brand of concentrated lemon juice, and Clorox bleach were anticompetitive because, as Justice William O. Douglas put it in the Clorox case, advertising "imprint[s]" a brand "in the mind of the consumer." (4)

The view of advertising as fundamentally manipulative succumbed in the 1970s to the view that prevails today: that advertising does no more than convey useful product information to consumers. (5) According to this view, the power of advertising to attract demand to a product arises only because advertising shows consumers that advertised products are better, not because advertising seduces with images, or overpowers through repetition. (6) The Supreme Court embraced this informative view of advertising in 1976, extending First Amendment protection to advertising on the explicit ground that the "free enterprise economy" requires "informed" consumers. (7) The FTC followed suit, terminating its remaining antitrust cases against advertising in the early 1980s and continuing only to regulate false or misleading advertising, the only forms of advertising that can harm markets when advertising functions only to convey information. (8)

The irony of the rise of the informative view is that its timing corresponded almost exactly with the dawn of the information age, that era of huge reductions in the cost of communication and data analysis, that has rendered almost completely unnecessary the provision of product information to consumers through advertising. (9) Today, consumers can get more product information by reading "add to cart" pages on Amazon, or online product reviews on any number of platforms, than they can get from viewing advertisements on billboards or television, or through the advertising links placed by Facebook in its feeds and Google at points all across the web. (10) Beyond the basic provision of product descriptions and specifications to online retailers, and display of this information on a seller's own website, advertising is now obsolete as a useful source of product information. Consumers can get all the information that advertising provides, and much more, when and where they actually want it, on their own online. (11)

The persistence of advertising as a business despite its information obsolescence shows how far from the mark the informative view really is. The information age has ravaged newspaper advertising, the form of advertising that functioned most as a genuine provider of useful product information, replacing newspaper classifieds, for example, with free services like Craigslist. (12) But the information age has otherwise failed to diminish the amount firms spend on advertising, even as it has shifted much advertising online, because advertising never was primarily about disseminating product information, but about raanipulation, changing preferences rather than just informing them. (13) The information obsolescence of advertising has laid this characteristic bare and in so doing undermined the foundation for the entire edifice of the contemporary legal treatment of advertising, from antitrust's current unwillingness to condemn advertising, to First Amendment protection for commercial speech.

With the demise of the information function of advertising, the manipulative character of advertising must once again take center stage in the law, and the FTC must accordingly renew its antitrust campaign against advertising, with the goal of stamping out the practice except in those limited areas in which it provides information that cannot be had anywhere else. (14) The best way for the FTC to do that is by challenging advertising as illegal monopolization in violation of section 2 of the Sherman Act, as the FTC once did in an earlier era. (15)

Critics of advertising often attack advertising's effect on culture, particularly the way advertising crowds public-spirited speech, like the arts and political debate, out of public fora, replacing them with speech aimed solely at serving the narrow pecuniary interests of private speakers. (16) The virtue of an antitrust challenge to manipulative advertising is that it would focus not on what advertising does to culture but on what it does to the market, the very object that the pursuit of narrow pecuniary interests is supposed to nourish. (17) Advertising in its manipulative guise, so far from smoothing the flow of commerce, threatens technological advance, by giving consumers a reason--image--to purchase a product that is distinct from the only reason for which a consumer should buy a product in a well-functioning market: that the product is actually better at doing what it purports to do. (18) Tinkering with the decision-making processes of consumers prevents consumers from rewarding, through their purchase decisions, the innovators who best meet their needs, and thereby threatens the foundation of technological progress in a free market system. (19) A firm that can win with advertising wins in the mind, and not in the market, delivering the firm from the discipline of competition on the merits. Shorn of its information function, advertising threatens not only culture, but commerce.

The notion that advertising blinds the consumer to genuine differences in product quality smacks of paternalism, because it suggests that consumers do not always know what is best for them. (20) The power of manipulative advertising to make consumers buy products they do not really prefer cannot, however, be denied, either as a matter of common sense, or, increasingly, of neuroscience. (21) Moreover, the paternalism of intervening to stop manipulative advertising is only the long-established, judicially-approved, congressionally-mandated paternalism of the antitrust laws, which have the rather libertarian goal of ensuring a level playing field for all products, so that the best rise to the top on their own, through the discerning choices of consumers. (22)

The notion that advertising manipulates also appears puritanical, because it suggests that seduction is not a good in itself for which consumers might be willing to pay. (23) There can be no question, however, that whatever pleasure consumers might take in being seduced is not sufficient compensation for the harmful effects of buying products they do not really prefer. Antitrust has long accepted the teaching of economists that technological innovation, not image, is the single most important driver of consumer welfare, to be protected at all costs. (24) For this reason, antitrust almost always exempts the monopoly built on technological innovation from censure, and must, a fortiori, reject anticompetitive conduct that threatens innovation, no matter how incidentally pleasurable to consumers that conduct might be. (25) The assumption of the courts and the FTC in the mid-century cases, that uninformative advertising must be anticompetitive and consumer-harmful advertising, was right. (26)

The Article proceeds as follows. Part I describes the three faces of advertising as manipulation, pleasure, and information, and argues that advertising's threat to innovation is more important than any pleasure advertising provides. Part II details the FTC's attack on advertising. The legacy of the mid-century campaign against advertising is a set of federal court precedents treating advertising as anticompetitive. The apotheosis of the informative view of advertising ultimately prevented the FTC from using these holdings to expand its attack on advertising. Nevertheless, these precedents have never been repudiated by the courts and could be reinvoked today. (27) Part III makes the case that the information function of advertising has become obsolete. Without this justification for advertising, the door is open to revive the antitrust case against advertising.

Part IV lays out how enforcers today could challenge advertising as illegal monopolization under section 2 of the Sherman Act. In particular, the denial of any value to persuasive advertising under the mid-century precedents permits antitrust to treat advertising as exclusionary conduct. Because advertising threatens innovation in all cases, advertising should count as a per se violation of the antitrust laws, saving enforcers the trouble of proving in each case that advertisers have monopoly power. Part V responds to constitutional counterarguments by showing that the obsolescence of the information function disqualifies...

To continue reading