Evidence on the Effects of Mandatory Disclaimers in Advertising

Abstract

Disclaimers are widely used by firms to warn customers of dangers and limitations of their products, and are persuasive when the issue is important. We examine the effects of mandatory disclaimers.

Speech restrictions conflict with basic economic incentives. Sellers are motivated by profit to benefit consumers. Government officials lack this motive, and may be tempted by personal beliefs or by pressure from competing suppliers, or other lobbyists, to cause harm. We found that the imposition of mandatory disclaimers in the U.S. has been on the basis not of scientific studies that they would further important government interests but of opinions that they would do so.

Our review of 15 experimental studies found that mandatory disclaimers increased confusion in all cases. All of the 11 of the studies that examined decision making found that consumers made poorer decisions. We were unable to find evidence that consumers have benefited from mandatory disclaimers in any situation.

We conducted an experiment on the effects of a disclaimer for a Florida court case. Two advertisements for dentists offering implant dentistry were shown to 317 subjects. One advertiser had implant dentistry credentials. Subjects exposed to the disclaimer, especially women and the less educated, more often recommended the advertiser who lacked credentials. In addition, the subjects drew false and damaging inferences about the credentialed dentist.

Keywords: consumer protection, corrective advertising, decision making, government regulation, judgment

JEL Classification: D11, D12, D18, D21, D78, D8, K23, K32, L21, L51, M14, M31, M37, O31, P11