The importance of being important: Measuring materiality in consumer deception litigation

Abstract In many cases alleging consumer deception, a plaintiff must prove both that the representation at issue was false or misleading and that it was material. While there is an extensive body of law addressing when a representation is false or misleading, there is a paucity of authority on how to establish that the representation was material. Neither federal regulation nor case law has clearly laid out a standard method by which materiality should be measured. In this article we empirically show how a research study's design can impact its effectiveness in identifying an attribute's materiality and propose a measurement method that can effectively measure both small and large effects of that attribute, independent of the overall desirability of a product and the importance of other characteristics of that product. Using mathematical simulations, we show that between‐groups experiments are less effective than within‐groups experimental choice tasks at identifying the presence of a material attribute when ceiling effects or other important traits are present in a product. We also explain why focalism bias and the need for marketplace realism are inappropriate objections to the use of a within‐groups choice task to measure materiality. Finally, we demonstrate the utility of our proposed methodology with two case studies.