Are New FTC Advertising Policies Inhibiting Competition?

Abstract

Abstract The FTC's new policy requiring substantiation of advertising claims is imposing costs and raising entry barriers which may result in higher prices to consumers without creating offsetting values. Also Its treatment of advertising in the cereal complaint. suggesting that advertising is a barrier to entry, flies In the face of the logic and the evidence concerning the role of advertising. Advertising is a means of entry not a barrier. It is primarily a method of creating disloyalty among buyers from an advertiser's competitors, not a method of cementing the patronage of current buyers of products. The FTC staff argues that advertising raises coste. it fails to recognize that advertising is an inexpensive substitute for expensive alternative methods of marketing and. consequently, reduces costs. This article is based on a speech given to the American Bakers Association. San Francisco, October 10. 1972.