Comparative Advertising and Competition Policy

International University in Germany Working Paper No. 19/2004

38 Pages Posted: 5 Apr 2005

See all articles by Francesca Barigozzi

Francesca Barigozzi

University of Bologna - Department of Economics

Martin Peitz

University of Mannheim - Department of Economics

Date Written: August 2004

Abstract

Only recently, competition authorities tend to see comparative advertising as helpful in promoting competition. They now encourage firms to use it. They reason that comparative advertising, if fair and not misleading, increases consumers' information about alternative brands. For this to work, comparative claims must be credible. Competition policy and legal practice are essential in making comparative advertising (directly and indirectly) informative.

In this paper, first we provide a legal background of comparative advertising in Europe and the US. Second, we provide an analysis of some recent legal cases in Europe and the US. Third, we provide an economic analysis of comparative advertising. Here, we discuss the ways comparative advertising can affect market outcomes. In our analysis we put emphasis on the scope of information transmission through comparative advertising and on the way antitrust laws affect it. We uncover two important effects: in the case of search goods, comparative advertising can relax price competition by differentiating products; however, in the case of experience and credence goods, it can intensify competition by signaling the sponsoring brand's quality.

Keywords: advertising ban, advertising, marketing, antitrust, signaling

JEL Classification: L15, L41, M37, L13, K21

Suggested Citation

Barigozzi, Francesca and Peitz, Martin, Comparative Advertising and Competition Policy (August 2004). International University in Germany Working Paper No. 19/2004, Available at SSRN: https://ssrn.com/abstract=699583 or http://dx.doi.org/10.2139/ssrn.699583

Francesca Barigozzi

University of Bologna - Department of Economics ( email )

P.zza Scaravilli 2
40126 Bologna, 40126
Italy

Martin Peitz (Contact Author)

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany
+49 621 181-1835 (Phone)

HOME PAGE: http://peitz.vwl.uni-mannheim.de/

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