*Results not typical.
Over at Managerial Econ, Luke Froeb highlights a new FTC initiative to crack down on testimonial advertising. Its target? Ads that highlight extreme results (“I lost 100 pounds eating Wonder chocolate”), without revealing what typical results look like. The FTC won’t forbid firms from highlighting extreme results, but if they do, they will also have to report typical results:
Under the revised Guides, advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect. In contrast to the 1980 version of the Guides – which allowed advertisers to describe unusual results in a testimonial as long as they included a disclaimer such as “results not typical” – the revised Guides no longer contain this safe harbor.
The FTC’s goal is to protect consumers from misleading ads, a worthy goal. But Luke (who was the FTC’s top economist for several years) believes that the new rule may have some side-effects. In particular, he wonders whether this policy will also make life more difficult for firms with legitimate products, since they would have to invest in studies to document the experience of typical consumers before they could highlight the experience of individual successes.