Pseudo-product-harm crises, resulting from false claims about a firm’s products, pose significant challenges to firms. Unlike traditional product-harm crises, a firm involved in a pseudo-product-harm crisis can suffer from substantial damage until or even after the truth emerges. Using a pseudo-product-harm crisis event that involves two competing firms, this research examines how consumer sentiments evolve surrounding the crisis in response to the firms’ advertising (as paid media) and news publicity (as earned media). Our analyses show that while both firms suffer, the damage is larger to the offending firm (which causes the crisis) than to the victim firm (which suffers from the false claim) in terms of advertising effectiveness and negative news publicity. Our study indicates that apart from the ethical concern, false claims about competing firms are not an effective business strategy to increase firm performance.