Ratting on a Brewer of Non-Water-Tasting Beer?

Is white chocolate better than, or not as good as, white chocolate? Can you prove it? No to the last question, of course, because tastes resided in each individual’s mind. De gustibus non est disputandum. Now, does Bud Light beer taste like water?

An economist worth his salt must be surprised to read in the Wall Street Journal (“Molson Coors Told to Stop Saying Rivals’ Beer Tastes Like Water,” February 23, 2022) that an advertisement suggesting Bud Light tastes like water is misleading because not supported by evidence, as if matters of taste could be and consumers were idiots:

BBB National Programs’ National Advertising Division, an ad-industry self-regulatory group, determined that Molson Coors Beverage Co. should stop marketing its light beer products by implying that those produced by rivals have little or no flavor. … “Consumers may also reasonably expect that the statement is supported by such evidence.”

(A little personal anecdote may illustrate how deeply the taste of beer is subjective. When my sons were kids, they administered a blind beer-tasting session for me, or on me. It ominously revealed that I preferred the beer of which I had previously claimed it tasted like pee. That beer was precisely, if my memory serves, the Bud Light. I now basically only drink Stella Artois, but my reader doesn’t have to share my tastes.)

There is another way to look at the decision of the National Advertising Division: the NAD is a private standard organization in which no advertiser is forced to participate, but whose voluntary participants presumably believe that it participation contributes to the credibility to their ads. Any producer remains free to not to participate and any consumer is at liberty to buy beer produced by non-participants. So there would be nothing to object to (nihil obstat, as we would say in Latin).

But it is a testimony to our authoritarian times that the clout of this so-called private organization comes, at least partly, from its on-going threat to call upon its big brother to enforce its decisions. The website of NAD makes this clear (although not very easy to find):

If the advertiser agrees to comply with any recommended changes to their advertising, the case is closed. If the advertiser does not agree to comply, it is referred to the FTC and other appropriate regulatory agencies.

If the vice-president of the NAD is correctly paraphrased by the Wall Street Journal, she made the threat against the producer of the non-water-tasting beer more explicit:

Those that don’t comply with [NAD’s] findings are referred to the Federal Trade Commission, which will often review business practices beyond the ads in question, she said.

Is it the regulator who has captured the regulated, or the other way around? (On the theory of “regulatory capture,” see Mark J. Perry, “Nobel Economist George Stigler on ‘Capture Theory’ and the Inevitability of Businesses Seeking Regulation (and Tariffs), American Enterprise Institute, April 23, 2018; and Betty Joyce Nash, “Regulatory Capture,” Richmond Fed, 2010.)