Abstract

The slandering of a firm’s products by competing firms poses significant threats to the victim firm, with the resulting damage often being as harmful as that from product-harm crises. In contrast to a true product-harm crisis, however, this disparagement is based on a false claim or fake news; thus, we call it a pseudo-product-harm crisis. Using a pseudo-product-harm crisis event that involved two competing firms, this research examines how consumer sentiments about the two firms evolved in response to the crisis. Our analyses show that while both firms suffered, the damage to the offending firm (which spread fake news to cause the crisis) was more detrimental, in terms of advertising effectiveness and negative news publicity, than that to the victim firm (which suffered from the false claim). Our study indicates that, even apart from ethical concerns, the false claim about the victim firm was not an effective business strategy to increase the offending firm’s performance.