Libertarian Answer Man: Deceptive Ads

Mr. Kinsella,

What is your view on false TV ads? Do you consider it fraud when a customer purchases a product from a TV ad but finds out that the ad lied about the product?

Like if there was a TV commercial that claimed drinking soda would make me fly, and I went to the store to purchase that brand of soda thinking it would make me fly and ends up not, is that company liable for fraud?

Kinsella:

I think we would have to wait and see how a legal system decided such matters, because they could take into account previous case law, local custom, ask questions of witnesses and experts to determine the relevant context. In short, you can’t decide everything from the armchair. Sometimes you have to wait.¹

My own view is that caveat emptor would be a reigning principle. Fools are easily parted with their money. You can’t rely on such information unless it is clearly deceptive, or you are given a clear guarantee. If you do, it’s at your own risk.

But whatever happens legally, practice would take it into account and change if necessary. If stupid customers win at such lawsuits, then vendors will start being more careful with their claims or add caveats, or maybe make the customer sign a waiver before the purchase. If the customers lose, then this would tend to spread the word of “caveat emptor” and customers would be more careful and/or buy insurance or rely more on private reputation agencies like the Better Business Bureau seal of approval. Suppose you know it’s hard to sue a vendor if they make shady claims. So you have a choice between Vendor A, who uses the BBB but whose prices are higher, but whose quality is probably higher; or Vendor B, who refuses to use BBB and thus might be more dishonest in his claims. One consumer may choose B because he’s cheaper, but now he’s taking a risk–some might say assuming the risk, and can’t complain if the product turns out to be shit.²

1. see The Limits of Armchair Theorizing: The case of Threats  [↩]
2. As for how to handle fraud, see Fraud, Restitution, and Retaliation: The Libertarian Approach and “A Libertarian Theory of Contract: Title Transfer, Binding Promises, and Inalienability,” in Legal Foundations of a Free Society (forthcoming), Part III.E. [↩]