Some years ago, an article started showing up in news feeds from a seemingly skeptical investigative reporter who claimed to have tested the efficacy of an acai berry–based colon cleanse. Posted on a website called onlinenews6, the reporter’s article claimed she lost 25 pounds in only four weeks.
But the website was not owned by a legitimate news organization, and the reporter didn’t exist. Instead, it was part of a deceptive promotion by a company that was selling the acai cleanses and hoping to profit off of consumers’ trust in objective news.
Long before US president Donald Trump brought the phrase fake news into the mainstream, the Federal Trade Commission used it to justify shuttering 150 websites from 10 companies that made “false and unsupported claims” and deceptively represented their websites as objective news. Chicago Booth’s Anita Rao finds that not only do these types of fake news websites change readers’ beliefs about the products they deceptively promote, but they can separate consumers from their money.
While “native advertising” can often mimic legitimate news and is considered legal so long as it is properly identified, the FTC determined that these 10 companies’ pitches—selling mainly weight-loss supplements, colon cleanses, and natural diet supplements—conveyed “to consumers expressly or by implication that they’re independent, impartial, or from a source other than the sponsoring advertiser―in other words, that they’re something other than ads.”
Rao, who has previously analyzed false claims about products, examined 2010–11 data―before and after the FTC action―from Comscore, a media measurement and analytics company. Comscore tracks, at the domain level, browsing and buying behavior of 100,000 internet users across the United States, and its data set is based on a random sample drawn from a cross section of more than 2 million global internet users. Rao analyzed referral domains to see whether potential customers still went to a product page after the FTC shut down fake news sites. She finds that after the sites were closed, visits to their related product sites such as acaireduce.com dropped between 6 percent and 15 percent.
When it comes to the labels on packaged goods, consumers often know they shouldn’t believe everything they read.
When Marketers Fudge Facts, Consumers Are Taken In
Consumers will pay more for American-made products—but probably not enough to justify relocating production.
The ‘Made-in-USA’ Label Boosts Prices, but Just a LittleShe then separated these visits into three groups: those that arrived organically through searches or by entering URLs, those that came from fake news ad sites, and those that came from online ads. Although visits from fake news ad sites dropped (mechanistically, since those sites had been shuttered), and organic visits also dropped, there was an uptick in people coming in through regular online ads, implying that certain people were already in the market for such products and would find such questionable product pages no matter what.
Additionally, websites that contained words such as acai, diet, and cleanse, which were related to the types of products sold in the study, also experienced increased traffic, suggesting that consumers came to them looking for those types of products. To the extent these sites are legitimate, the FTC shutdown had a beneficial effect on consumers. Moreover, overall transactions on regular domains such as Amazon increased, perhaps because fake news had diverted time and money from legitimate sources and products.
Could fake news be used to trick people into purchasing scam treatments for COVID-19? Rao says that while her research doesn’t have data on this specifically, “people, when more susceptible, are willing to hold onto anything that might seem to be a cure.”
Anita Rao, “Deceptive Claims Using Fake News Marketing: The Impact on Consumers,” Working paper, April 2020.
While consumer demand for organic milk has climbed, small organic dairy farms have dwindled.
Organic Milk Is Booming, but Its Farmers Are Not
Debates about marijuana legalization have typically overlooked any effects of cigarette smoking and its associated costs.
When Recreational Marijuana Is Legalized, Cigarette Sales Rise
Research suggests that consumers’ fear of the coronavirus had a far greater effect on economic activity than lockdown measures did.
Fear, Not Government Shutdowns, Chilled the EconomyYour Privacy
We want to demonstrate our commitment to your privacy. Please review Chicago Booth's privacy notice, which provides information explaining how and why we collect particular information when you visit our website.