Michael A. Carrier & Rebecca Tushnet, An Antitrust Framework for False Advertising, 106 Iowa L. Rev. 1841 (2021)
From the introduction:
Federal
law presumes that false advertising harms competition. Federal law also
presumes that false advertising is harmless or even helpful to competition.
Contradiction is not unknown to the law, of course. This contradiction, though,
is acute. For not only are both the regimes at issue designed to protect
competition, but they are both enforced by the same agency: the Federal Trade
Commission (“FTC”), which targets “unfair competition” through antitrust and
consumer protection enforcement.
Anticompetitive
conduct, the focus of antitrust law, increases price and reduces quality. False
advertising, the focus of much consumer protection law, deceives consumers and
distorts markets. Both types of conduct harm consumers. Despite this overlap,
nearly all courts have dismissed private antitrust claims based on false
advertising. They have concluded that the conduct cannot violate antitrust law.
Or they have presumed that the harm is de minimis. This makes no sense. As the
Supreme Court has long established, “false or misleading advertising has an
anticompetitive effect.”
Courts’
concerns stem from the reasonable notion that not every instance of false
advertising violates antitrust law. And (usually implicitly) they have worried
about applying antitrust’s robust remedies of treble damages and attorneys’
fees. These courts fear that antitrust liability will disincentivize companies
from engaging in advertising that is merely questionable and that might provide
useful information to some consumers. But false advertising law preserves a
robust space for puffery and debatable opinions; overdeterrence concerns don’t
justify analysis that is inconsistent with both the economics and psychology of
advertising and that, at a minimum, essentially makes it impossible to bring a
successful antitrust case based on false advertising. Nor do the Lanham Act’s
remedies for false advertising fully address harms to competition. Reasoning
that conduct that is already illegal on other grounds need not concern
antitrust law ignores the multiple other contexts in which breaches of
non-antitrust laws are considered to be potential antitrust violations.
We
begin by introducing the laws of antitrust and false advertising, explaining
the regimes’ objectives and methods. We then survey the antitrust caselaw,
critiquing three approaches courts considering false advertising claims have
taken. Finally, we introduce our antitrust framework for false advertising
claims. At the heart of the framework is a presumption that monopolists
engaging in false advertising violate antitrust law, with that presumption
rebuttable if the defendant can show that the false advertising was
ineffective. The framework also applies to cases of attempted monopolization by
incorporating factors (falsity, materiality, and harm) inherent in false
advertising law, along with competition-centered issues on targeting new market
entrants and entrenching barriers to entry. To illustrate how our framework
should work, we apply it to an important area: advertising for biosimilars,
which are pharmaceutical products with a substantial and growing role in
treating numerous diseases.
False
advertising that exacerbates monopoly power has been dismissed by antitrust law
for too long. This Essay seeks to resolve the contradiction in the law by
showing how false advertising threatens the proper functioning of markets.
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