Is the product actually better? If not, that sounds like a dysfunctional market. Brand seems adjacent to deception. Is that what we want more of?
Said another way, brands are an ecosystem of response to a company's product and marketing. Despite kajillions of dollars spent on advertising, a lot of Microsoft's brand is BSOD, Vista, Clippy and constant restarts. Despite objective safety numbers and no evidence of failure, people trusted Toyota less, billions of dollars less, when the brake/accelerator "story" was happening last year.
A brand is what people expect to get. The $2.99 corn flakes, even if they are as good as Kellogg's, are dragged down by every other crappy generic cereal a customer has ever eaten.
Look at wine. Studies show that people enjoy the _same_ wine if they pay more for it. Is that deception? Intrinsically, why does one bottle of wine cost more than the other? Because it's _better_? What exactly makes one bottle of wine better than the other? It's very subjective.
When it comes to products/service that are more quantifiable perhaps the better argument can be made. But that's almost never possible. Businesses distinguish their product/service by other factors that are not easily quantifiable (eg. better customer service, better user experience) that add value.
I think deception is the wrong word to use but certainly consumers can save a lot of money by simply being educated about what they're buying (eg. buying the generic version of Claritin/drugs for 60% of the price).
No, it is not a dysfunctional market. People are perfectly willing to pay more for the perception of increased quality.
In terms of classification, this means that the firms in the market are in monopolistic competition.
Here is a halfway decent Wikipedia page on the topic:
Everything else being equal, marketing is just propaganda that makes the market less functional. And a "strong brand" is the result of successful propaganda.