Oreos, trademarks, and the free market


In my experience, no one has come close to replicating the Oreo. No one else has achieved the taste, feel, or even look of the delicious sandwich cookie, helping make the Oreo the best selling cookie in America. Yes, Nabisco, the makers of Oreos, has benefited from the government’s protection of trademarks, but the trademark would not be worth all that much if their cookie were not as good as it is.

In a bit of market beauty, Oreos started as a knockoff of Sunshine’s Hydrox cookie. You’ve probably never even heard of the Hydrox cookie until now. You can owe that to the millions of consumers prior to you who determined that the Oreo was the better cookie. Today, knockoffs are plentiful as other companies attempt to compete with Oreo, but fail to deliver an equal product. There have been recent accusations of the Chinese paying two men to steal the formula for part of the cookie, but even if an exact replica of the cookie were to be achieved, it would require an even larger achievement to convince a sizeable share of the market to eat these cookies over Oreos, not to mention the difficulty of the near 100% likelihood that people would call the competing cookies “Oreos” (just like Scotch tape and Kleenex).

The expected response to all of this would be:

“Okay, but you just said that Oreos have been helped along by the government’s trademark system, which isn’t something that is supported by free market advocates. So in your free market, how would consumers know that they’re getting authentic Oreos when anyone could many an exact copy of the shape of the cookie and the packaging?”

Let’s pretend that we are in a free market that has no laws regarding intellectual property. Say you go to the store and buy what you think is a package of Oreos. Upon eating them, you immediately realize that you’ve purchased an imitation—and a crummy one at that. How confident would you be in buying Oreos again from that store? How much would you trust to purchase anything from that store?

Oreos and the businesses that sell them have it in their best interest to keep their customers happy by delivering cookies that consistently meet the customers’ expectations since disappointment would undoubtedly lead to lower sales. Most businesses would not attempt to scam their customers by selling imitation cookies packaged as authentic Oreos, so they would probably only sell the authentic Oreos. Or maybe they would sell both, but they would unambiguously mark which cookies were the real thing. They could stamp or place a sticker on them, implicitly telling their patrons that they’re putting their good reputation on the line to let you know that you’re buying what you think you’re buying.

Given the age of the internet and digital information, it is also plausible that Nabisco would catalog and publish in some way all (or most) of the businesses that sell their cookies. If someone wanted to do business with them, they would probably require that the only “Oreo” cookies that are sold in the store be Oreos produced by Nabisco. This helps to reduce the possibility that someone buys a non-Nabisco Oreo.

The free market is a wonderful place where in an effort to achieve mutual benefit people will work together to solve their problems. The desired end to make money is driven by the means of making sure customers are happy. Not having customers means no money. It’s a simple concept, but the injection of the state in the marketplace kills competition and removes some of the economic incentives to treat customers well.

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Stuart Gathman
You said: “They could stamp or place a sticker on them, implicitly telling their patrons that they’re putting their good reputation on the line to let you know that you’re buying what you think you’re buying.” That is exactly what a trademark is. Trademark law simply prohibits theft or counterfeiting of those stickers. The term “intellectual property” is meaningless – there are no IP laws. There *are* trademark laws, copyright laws, and patent laws. Of the three, trademark is the least abused – and the most supportive of a free market. An Oreo knockoff can even say, “Compare to Oreo… Read more »