Restricting the advertising of a product in order to reduce consumption: an ineffective measure

Montreal, June 16, 2011 – The consumption of products deemed harmful to one’s health cannot typically be reduced by restricting or prohibiting the advertising of such products. That is one of the main conclusions of a publication released today by the Montreal Economic Institute (MEI).

For example, campaigns like the one calling for the retirement of mascot Ronald McDonald are very likely to prove ineffective in reducing the consumption of the products concerned. Advertising does indeed have a certain effect on consumers. However, experience shows that in the case of established products, like fast food, advertising serves mainly to lure customers away from competitors, not to create new ones. “For example, Peter will remain indifferent to a beer ad if he never drinks beer. On the other hand, for a beer drinker like John, it is possible that the ad will lead him to choose one brand over another. This is the purpose of advertising for a business whose product is already established: to capture market share from competitors,” explains Michel Kelly-Gagnon.

Several empirical studies on the influence of advertising reviewed in the Economic Note support this theory. Indeed, the ban on beer ads in Manitoba in the 1970s did not reduce consumption; on the contrary, consumption increased by 4.5%, around the same increase seen in Alberta, where beer ads remained legal. Similarly, prohibiting the display of tobacco products in Canada, Iceland, Ireland and Thailand has had no effect on consumption habits.

“As noted in an article that appeared in the British newsweekly The Observer in January, 2011, we can see that governments are more and more inclined to restrict or ban the advertising of products deemed harmful, rather than prohibit their use outright. We want to speak out against this trend from the start, especially since it turns out to be ineffective and needlessly restricts the creativity and dynamism of the advertising world,” concludes Michel Kelly-Gagnon.

The Economic Note entitled The Influence of Advertising on Consumption, prepared by Michel Kelly-Gagnon, president and CEO of the MEI, can be consulted free of charge on our website.

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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its publications, media appearances and conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms. It does not accept any government funding.

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