Advertising, Barriers to Entry and Competition Policy

Abstract

The controversy as to whether or not advertising impairs the efficient functioning of markets because it acts as a “barrier” to new firms wishing to enter a market has once again attracted the interest of the UK competition authorities. Looks at the advertising and barrier to entry issue as seen in a number of Monopolies and Mergers Commission investigations. Concludes that the conventional negative view of advertising needs to be tempered by the positive role played by advertising in facilitating actual entry, and suggests that insofar as there are a number of other factors which may inhibit market entry it is necessary to look at this issue “in the round” rather than from one narrow perspective.