Advertising as Monopolization in the Information Age

Abstract

Economists have long recognized that advertising has two main functions: to inform and to persuade. In the information age, the information function is obsolete, because consumers can get all the product information they want from a quick Google search. That makes virtually all advertising today purely persuasive in function. The courts have long recognized that purely persuasive advertising is anticompetitive, because it induces consumers to buy products that they do not really prefer, harming consumers and placing sellers of consumers’ preferred products at a competitive disadvantage. Antitrust enforcers must respond to the obsolescence of the information function of advertising by treating advertising as a per se illegal form of monopolization under the Sherman Act.

Keywords: advertising, marketing, promotion, antitrust, product differentiation, monopoly, persuasive, informative, information age, product reviews, electronic word of mouth, innovation, monopoly, consumer welfare, refusal to deal, trademark, intellectual property

JEL Classification: M30, M31, M37, M38, L40, L41, K21, D80, D18, Z10