The Free Market 13, no. 9 (September 1995)
Want to please a lawyer? Find a long-established legal rule that minimizes disputes. Then propose that this rule be radically changed. Such thrill seeking seems to be the motive behind a recent proposal to make advertisers liable for “puffery.”
The national Conference of Commissioners on Uniform State Laws is considering amending the Uniform Commercial Code to ease the way for suits against advertisers who use puffery. Because all states, save Louisiana, have adopted the UCC, this proposal will make nearly every firm in America the target of costly litigation.
“Puffery” consists of promotional claims that no one out of diapers takes literally. Your two-year old might believe that polar bears enjoy sipping Coca-Cola. But you know better. Because two-year-olds make no spending decisions, advertisers have always been free to enliven their ads with harmless hyperbole.
Under existing UCC law, the burden of proof rests on plaintiffs asserting that particular advertising claims are factually misleading rather than mere puffery. If the Commissioners’ proposal becomes law, however, every advertising claim will be presumed to be part of the agreement between the seller and buyer. Buyers will be presumed to have relied upon even the most obviously absurd advertising exaggerations.
The burden of proof will then be on defendant advertisers to prove that a reasonable person would not be misled by the challenged advertising claim. Because lawyers will easily find reasonable-looking plaintiffs to testify that they were misled by this or that advertisement, advertisers who make any claims beyond dry factual statements risk severe litigation losses.
Advertisers are now liable for harms caused by genuinely misleading advertising. For example, Coca-Cola would be liable to consumers for damages caused if it advertises that Coke cures cancer. Reasonable consumers might be fooled into drinking more Coke only because of its alleged medicinal properties. But, by definition, puffery does not mislead reasonable consumers.
Besides, puffery entertains. We all know that Dave doesn’t actually cook hamburgers at Wendy’s. We all know that toy rabbit powered by a single Eveready battery will not keep going, and going, and going. Even if puffery’s only function is to entertain, that would be sufficient reason not to discourage it.
But puffery does far more: it informs consumers as well as promotes product quality. Before a consumer can buy a product, the consumer must be made aware of the product. One function of advertising is to create such awareness. In this age of vivid video images and electronic sounds, sellers must compete hard for consumers’ attention. Puffery is one benign means advertisers use to grab that attention.
Puffery enables an advertiser to grab consumers by their collars and say “Hey, have I got a great product for you!” If firms are discouraged from placing in their ads all but the most dry factual claims, consumers will be forced to spend more of their own time and resources discovering which products are available.
One consequence will be diminished product innovation. Because consumers are more familiar with established products than with new products, puffery is pivotal to the marketing of new products. Fewer resources will be devoted to product innovation if firms encounter greater legal risks in bringing new products to consumers’ attention. As fewer products are introduced onto the market, established products face less intense competition. Product quality declines.
Advocates of this change in UCC law insist that no real change is in the offing. Northwestern University law professor Richard Speidel, a member of the committee drafting the new law, contends that there is “not a change in substance at all” from the existing UCC. Really? Would Speidel make this claim if, say, a Constitutional amendment removed the burden of proof from prosecutors and placed it on criminal defendants? Moreover, if the proposed change has no substance, why bother with it?
Lawyers will be the big winners from any movement away from the existing uncontroversial legal treatment of puffery. With legal change comes greater legal uncertainty, and with greater legal uncertainty come more legal disputes. Demands on already over-burdened courts will grow. Imagine the billing hours lawyers will run up debating whether or not Chevrolet really is the heartbeat of America. Under the misleading banner of helping consumers, lawyers will reap big bucks cleaning up a mess that lawyers themselves are trying to create.
