The Role of Keyword Advertising in Competition among Rival Brands

15 Pages Posted: 7 Sep 2012 Last revised: 9 Nov 2012

David S. Evans

Global Economics Group; University College London

Elisa V. Mariscal

Centro de Investigación y Docencia Economica (CIDE); Global Economics Group

Date Written: September 5, 2012

Abstract

This paper considers recent proposals for restricting keyword advertising using competitor brand names. Keyword advertising is similar to many other widely used and valuable methods of marketing to the customers of rivals that increase competition and facilitate entry. Queries for products or services using search engines help inform consumers about other competitive alternatives and may enable them to compare different product offerings. Economists have found overwhelmingly that this type of informative and comparative advertising benefits consumers and, conversely, that restricting such advertising harms consumers. Complainants in some recent keyword advertising cases have sought to forbid search engines from using trademarked names as keywords, claiming that this may cause confusion. We argue that most consumers are likely to benefit from keyword advertising and are unlikely to be confused by the practice. Moreover, without a careful weighing of the likely costs and benefits of this type of regulation, consumers might bear significant costs by eliminating an easy reference with which to compare existing or new products, resulting in important reductions in consumer benefits. In fact, even more narrow remedies such as case-specific penalties for causing consumer confusion could discourage search engines from offering this service to advertisers, decreasing their value to consumers as a search tool and resulting in significant harm.

Keywords: trademark, copyright, keyword advertising, informative advertising, advertising restrictions

JEL Classification: L15, L40, L51, K21, K23, L15

Suggested Citation

Evans, David S. and Mariscal, Elisa V., The Role of Keyword Advertising in Competition among Rival Brands (September 5, 2012). University of Chicago Institute for Law & Economics Olin Research Paper No. 619. Available at SSRN: https://ssrn.com/abstract=2142692 or http://dx.doi.org/10.2139/ssrn.2142692

David S. Evans (Contact Author)

Global Economics Group ( email )

111 Devonshire St.
Suite 900
Boston, MA 02108
United States

University College London ( email )

Gower St
London WC1E OEG, WC1E 6BT
United Kingdom

Elisa V. Mariscal

Centro de Investigación y Docencia Economica (CIDE) ( email )

Mexico City
Mexico

Global Economics Group ( email )

1400 S. Dearborn, Suite 400
Chicago, IL 60603
United States

HOME PAGE: http://www.globaleconomicsgroup.com

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