The Ethics of Consumer Production and

Marketing
Learning Objectives
1. Appreciate the nature and extent of costs imposed by consumer product
malfunction and misuse.
2. Understand the basis and main claims of the laissez faire approach and the
"false assumptions" criticism of this approach.
3. Understand the centrality of the question of who is responsible for consumer
protection; how three main contending theories -- contract, "due care," and
social costs -- respond to this issue; how the theories relate to each; and their
ideological affiliations.
4. Understand the basics of the contract view; the four main moral duties of
businesses to customers, compliance, disclosure, true representation, and no
undue influence; the moral basis of these duties; and the "unrealistic
assumptions" that critics charge against the view.
5. Understand the distinction between explicit and reasonably implied claims
and Sturdivant's summation of the the key types of implied claims as
concerning reliability, service life, maintainability, and safety.
6. Understand the basics of the "due care" view; how manufacturers
responsibilities extend to the three areas of design, production,
and information; and the three problems chiefly alleged against this view.
7. Understand the idea of "strict liability"; the basics of the social costs view;
the utilitarian defense of the view as internalizing external costs; and the
four problems critics chiefly allege against this view.
8. Understand the extent and nature of advertising; moral issues concerning
its social effects, effects on consumer desires, and effects on consumer
beliefs; and the duties of authors and media, and the rights of audiences, in
these regards.
Overview
Consumer product malfunction and misuse take a large toll: of the more than more
than 19 million serious accidental injuries and 93,000 accidental deaths recorded in
the U. S. in 1995, for instance, more than half involved consumer products. In
addition to these primary costs, additional costs to consumers due to deceptive
selling practices and shoddy construction, are very considerable. The laissez
faire approach holds that thanks to consumer sovereignty, product safety features
consumers want and are willing to pay for will be produced; but the assumption
underlying this approach -- that consumer markets are, approximately, perfectly
competitive -- doesn't hold true. Perfect information and rational agency
conditions are especially ill satisified in consumer markets. Consumers are
commonly ill informed, due to deceptive marketing, or simply due to lack of
information and expertise. Consumers also often make irrational choices, given
the information they possess, due to irrational fears, irrational trust, and fallacious
probability estimates. Furthermore, given the prevalence of oligopoly conditions
in consumer markets, as throughout the economy, the extent to which such markets
have the requisite openness and distribution to work as the laissez faire approach
anticipates is questionable. Finally, the dimension of the problem, itself, speaks
against the adequacy of the laissez faire approach. Three views emerge offering
answers to the question of where responsibility for consumer protection lies: the
contract view, the "due care" view, and the social costs view. Iin the order just
listed, these three views depart further and further from the laissez
faire approach. The contract approach leaves responsibility mainly with the
consumer:caveat emptor -- "let the buyer beware" -- is the watchword of this
approach. At the other extreme, the social costs approach places responsibility for
consumer protection entirely on the producer: caveat vendor -- let the seller take
care -- is the watchword here. The "due care" approach seeks a middle ground,
acknowledging more care to be due from the vendor than under the contract
approach, while still apportioning considerable responsibility for consumer
protection to consumers themselves.
On the contract view of businesses' duties to consumers, when a customer buys a
product they (either implicitly or explicitly) enter into a "sales contract" with the
vendor: the vendor freely and knowingly agrees to give the buyer a product with
certain characteristics, and the consumer freely and knowingly agrees to pay the
vendor a certain sum of money for the product. Out of this agreement arise a duty
on the part of the vending firm to supply a product with the specified
characteristics, and a corresponding right of the consumer to receive such a
product. The moral authority of contracts being rooted in the free agreement of the
parties explains why three moral conditions limit contractual obligation: full
knowledge (of the terms), faithful representation (of the situation), and absence of
undue influence. From these three conditions four main moral duties of businesses
to consumers arise: a duty of compliance with the terms of the contract; a duty
of disclosure regarding the nature of the product; a duty of true representation of
the nature of the product and the terms of the agreement; and a duty not to
exercise undue influence in persuading the customer to enter into the contract.
The duty to comply is the most basic among the duties of businesses to consumers:
it includes, beyond the duty to live up to any claims the vendor expressly made
which induced the consumer to buy, any reasonably implied claims which formed
the customer's understanding of what they were purchasing and led them to freely
contract to buy it. Sturdivant distinguishes the four main types of implied claims
as concerning, reliability, service life,maintainability, and safety. Reliability
concerns whether the product will function as the customer has been led to expect:
notably, under this heading, where devices have many interdependent components,
producers have a responsibility to insure all components have very high degrees of
reliability. Service life concerns the length of time the product will continue to
function effectively in the manner in which the customer has been led to expect:
under this heading the customer is expected to understand that service life will
depend on use (wear and tear); manufacturers and sellers are expected to reliably
abide by the terms of their explicit guarantees; and sellers who know that a product
will become obsolete have a duty to correct any mistaken beliefs the buyer may
entertain on this score. Maintainability concerns how easily the product can be
kept in operating condition and repaired: under this heading businesses, again, are
expected to abide by the explicit terms of their warrantees and to make good on
implied claims -- implied by the seller and reasonably understood by the buyer --
of continued maintainability after warrantees expire. Product safety concerns the
degree of risk associated with using the product. Here, since no product is
absolutely risk free, acceptable known levels of risk is the operative concept. Here
the seller has a duty to provide a product with a level of risk no higher than they
have expressly or implicitly represented to the customer, which the customer has
freely and knowingly agreed to assume. The duty of disclosure is a duty of the
seller to inform the buyer of both the terms of the contract and to provide any
information about the product that might reasonably influence the customer's
purchase decision: this includes risks, on all accounts, and on some (more stringent
accounts) performance characteristics, costs of operation, product ratings, and
applicable standards, besides. The duty of true representation is to the duty of
disclosure as omission to commission: nondisclosure is not telling;
misrepresentation false telling. A seller misrepresents a product or agreement
when they represent it in a way intended to get the buyer to believe something
about the product or agreement that the seller knows to be false. Misrepresentation
may be implicit as well as express and includes such tactics as brand name
lookalikes, fronting expensive ingredients, fictitious "regular" pricing, charging
higher prices than advertised, "bait and switch" tactics, and paid testimonials. The
"no undue influence duty" is a duty of the seller not to coerce the buyer's decision
to buy. Undue influence is exercised, typically, when the seller plays on a buyer's
emotions to extract an agreement that they buy would not agree to if thinking
rationally: in this connection the seller has a duty not to exploit the fears, stress,
gullibility, immaturity, or ignorance of the buyer.
The chief criticism of the contract theory is that it is based on unrealistic
assumptions. Principally the following three: (1) that manufacturers who really
know the product enter into direct agreement with the customer; (2) that sales
contracts naturally provide protection to the customer; and (3) that buyer and
seller meet as equals in the sales agreement. In reality, critics contend, (1) that
there are usually many levels of middle-merchants who may know even less about
the product than the customer; (2) that sales contracts, through the use of
disclaimers, serve more to nullify than to provide protection to customers; and,
perhaps most importantly, (3) that buyer and seller are very far from being equal
"adversaries" in the negotiation of sales. Customers have less knowledge of the
product and may have to rely on sellers for information. They are further
disadvantaged with regard to their understanding (and their ability to affect) the
terms of the contract, allowing sellers to dictate terms favorable to themselves that
the buyer may have little choice but to accept.
The due care theory is based on recognizing the disadvantaged position consumers
are in vis a vis sellers:. Huge differences of size and resources between individual
consumers and giant corporations aggravates the disadvantages stemming from
individuals' lesser knowledge of the products and understanding of contracts cited
above. Consequently, consumers' interests are extremely vulnerable to harm by
manufacturers and vendors. Manufacturers and vendors, therefore, have a duty to
take special care consumers are not harmed by their product. This duty goes
beyond the duty of the manufacturer to deliver a product that lives up to express
and implied claims (which exists on the contract view) to include a further
obligation to exercise "due care" to prevent consumers from being injured by the
product. even if the manufacturer expressly disclaims such responsibility, the
manufacturer who fails to exercise due care is negligent. The manufacturer has a
positive duty to take due care to make sure the product is as safe as possible, and
the consumer has a corresponding right to products -- in the design, manufacture,
testing, and labeling of which -- due care was taken. In general the manufacturer's
responsibilities extend to three areas: design, production, and information. Design
responsibilities include ascertaining whether the product design poses hidden
dangers; anticipating and incorporating all technologically feasible safety features
and ascertaining whether products remain safe and useful throughout their intended
service life and beyond. Production responsibilities include elimination of faulty
units, detection of weaknesses, avoidance of cost cutting "shortcuts" that may
compromise the final product, and exercise of quality control over
materials. Information responsibilities include clear, simple, and prominent
labeling of products with warnings about hazards posed by their use and misuse,
taking into account the capacities of the individuals who will use the
product. Manufacturers of potentially hazardous products, additionally, should not
oppose reasonable regulation to help safeguard users against these hazards. One
problem with the due care approach -- as with care ethics -- is the vagary of the
notion of "due care". Additionally, critics from the left complain that the due care
approach leaves the problem of unforeseeable risks unaddressed. Critics from the
right, on the other hand, complain the approach is too paternalistic and that
decisions regarding acceptable levels of risk are best left to consumers themselves.
The social costs theory imposes strict liability for costs to consumers due to the
malfunction or misuse of consumer products on those products' manufacturers and
vendors. On this view, the manufacturer should pay the costs of any injuries
sustained through the use of the product even when the manufacture has taken due
care in the products design and manufacture, and in informing customers about the
risks, and in instructing them in the proper use, of the products. Under strict
liability absence of negligence or lack of knowledge are not excusatory. Only the
resultant harm matters: the only relevant considerations in assessing liability are
whether the product caused the injury, and the extent of the injury. In particular,
evidence of misuse is inadmissible. Utilitarians defend the social costs view as the
most effective means of internalizing external costs of production since injuries
resulting from products -- even if unavoidable -- are part of the products total
social cost. Internalizing the costs, it is argued would lead to fairer distribution of
costs, market prices that more truly reflect total social costs, and safer
products. Critics of this approach content it violates violates basic principles
compensatory justice in holding firms responsible for unforeseeable and
unavoidable harms; that it won't reduce the number of injuries because product
users, being absolved of all responsibility, will be more careless in their use of the
products; and insurance providers, in particular, critics argue, will be unfairly
impacted.
Advertising is a massive multi-billion-dollar-a-year industry whose costs are
ultimately borne by consumers. Though consumer surveys show a high degree of
disapproval of advertising, nevertheless, it seems advertising works to attract
consumers to advertised products. Defenders of advertising generally appeal to its
informative function. The question is whether advertising, on balance, is
beneficial or a waste. While some of its defenders would like to define advertising
as informative, this is misleading: the primary function of advertising is to sell the
product, not to inform. Thus Velasquez (p. 343) offers what would seem to be a
more accurate and honest definition according to which an advertisement is a
communication between sellers and potential buyers addressed to a mass audience
and intended to induce some members of that audience to buy some product from
the seller. Three principle issues regarding the morality of advertising are (1) its
social effects, (2) its effects on consumer desires, and (3) its effects on consumer
beliefs.
With regard to its social effects the most frequently heard criticisms of advertising
are (1) that it degrades people's tastes and values; (2) that it encourages excessive
consumption and thus wastes valuable resources; (3) and that it helps create and
sustain monopoly and oligopoly power. With regard to tastes, much advertising is
strident, intrusive, repetitive, and vulgar: thus, critics contend, it debases our
aesthetic sensibilities. Worse yet, it debases our moral values by inculcating and
reinforcing materialistic conceptions of happiness and success. It is debatable
whether peoples tastes and values are so malleable, or advertising so powerful, as
this criticism presumes. With regard to waste, some contend that advertising is a
seller's cost that adds nothing to the utility of the product. Defenders of advertising
counter that it provides benefits in the form of information about available
products and produces a beneficial rise in the demand for all products. Different
critics, in turn, offer two different rejoinders. Some say advertising doesn't affect
total consumption: it only shifts consumption from one product to another. Others
say it does increase total consumption, and that's a bad thing in light of long range
concerns about resource depletion. Needless to say, these two rejoinders conflict
with each other: the first says increasing consumption is a good thing, but
advertising doesn't do it; the second says is does increase consumption, and that's
bad. Finally critics contend that the resources available to large corporations give
them unfair advantages when it comes to advertising, and thus advertising helps
consolidate monopoly and oligopoly control of markets. Defenders of advertising
say there is empirical evidence that it does not have this effect.
With regard to advertising's affects on consumer desires, the central criticism is
that advertising is manipulative; that it creates desires in people for the sole
purpose of absorbing industrial output, without regard for whether it is in people's
interests to consume more of these products. John Galbraith formulate his version
of this criticism on the basis of his distinction between physiological desires and
psychic desires. Physiological desires, being physically based, are finite, and
difficult to manipulate: psychic desires, being psychologically based, are virtually
unlimited, and easily manipulated. According to Galbraith, advertising
manipulates psychic desires; and this is exploitative insofar as it is done without
regard for the interests or welfare those whose desires are being thus
manipulated. Furthermore, such manipulation undermines consumer sovereignty:
rather than production being molded to fit human desires, advertising molds human
desires to serve the needs of production. Though Galbraith's criticisms may be
flawed by their dubious assumptions about the manipulability of psychic desires --
again, it is debatable whether peoples tastes and values are so malleable, or
advertising so powerful, as this criticism presumes -- nevertheless, some
advertising is clearly intended to manipulate us in morally questionable
ways. Such morally questionable advertising attempts to arouse a psychological
desire for the product without the consumer's knowledge or in ways which
interfere with the consumers' abilities to weigh whether purchase of the product is
in their best interests. Such advertising is exploitative in that it attempts to
circumvent conscious reasoning and hence to undermine the rational agency of the
consumer in order to induce the consumer to do what the advertiser wants,
regardless of what is in the consumer's best interests.
With regard to its affects on consumer beliefs, while advertising can be used to
communicate truths, as its defenders insist, frequently advertising is used to hide
the truth, or even communicate falsehoods. Such deceptive advertising is arguably
wrong on both Kantian and utilitarian grounds. On Kantian grounds such
advertising may be seen to reprehensibly violate consumer rights to rational self-
determination: lying, furthermore, is a paradigm example of a nonuniversalizable
act. On Utilitarian grounds it may be said that deceptive advertising breeds a more
general mistrust of communication, leads to wrong (hence more costly, less
beneficial) choices, and interferes with the beneficial workings of market by
undermining rational agency. Advertising, like all communication involves three
terms -- author, medium, and audience. In light of the immorality of deceptive
advertising, its authors have a moral duty not to deceive: in the case of vulnerable
audiences, such as children, this includes a duty not to exploit their
vulnerabilities. The media have a similar duty to insure that the advertisements
they transmit are not misleading, again taking special care to insure that the
vulnerabilities of children and other impressionable audiences are not being
exploited. Audiences, correspondingly, have a right not to be deceived and, in the
case of the especially vulnerable audiences, not to have their special vulnerabilities
exploited.
http://managementinnovations.wordpress.com/2008/12/02/ethics-of-consumer-production-and-
marketing-theories-and-definitions/

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The Due Care Theory
Based on the idea that the consumer is in a disadvantaged position
o sellers and buyers are not equals in consumer markets: LH v. Wal-
Mart, Sears, GM
o consumers interests are particularly vulnerable to harm by
manufacturers & vendors
due to the manufacturers superior knowledge about the
product
o therefore manufacturers have a duty to take special care to ensure
that consumers' interests are not harmed by their product
due to their superior knowledge of the product
Caveat vendor (let the seller take care) supplements caveat emptor (let the
buyer beware)
o manufacturer not only has a duty to deliver a product that lives up to
its express and implied claims
o has an additional duty to exercise "due care" to prevent others from
being injured by the product
even if the manufacturer expressly disclaims such
responsibility
and the buyer agrees to the disclaimer
the manufacturer who violates this duty is "negligent"
This creates a positive duty (for the manufacturer) and right (for the
consumer)
o manufacturer's duty: to take due care to make sure that the product
is as safe as possible
o for the consumer: to a product in which due care was taken in its
design, choice of materials, & manufacture
testing & quality control
and labeling with warnings, instructions, etc.
The Duty to Exercise Due Care
Manufacturers exercise sufficient care when they take adequate steps to
prevent whatever injurious effects they can foresee the use of their
products may have
o after having conducted inquiries into how the product will be used
o and after having tried to anticipate possible misuses of the product:
e.g., glue sniffing
In general the manufacturer's responsibilities extend to three areas:
1. Design
2. Production
3. information
Design: to ascertain whether the design of the product conceals any
dangers
o To anticipate & incorporate all feasible safety features
given the latest technology
o To ascertain whether the materials are adequate for the purposes
the product is intended to serve throughout the product's expected
service life & beyond:
given the effects of wear and aging
given the way consumers are likely to use (and misuse) the
product
Production: to insure that adequate care is taken and quality control
exercised in the production process
o to eliminate faulty units
o to identify weaknesses that might become apparent during
production
o to ensure against economizing measures that would compromise the
final product
shortcuts in the assembly, testing or other processes
substitution of inferior materials
o to exercise quality control over materials used throughout the
manufacturing process
Information: to affix and include labels, notices, and instructions to the
product
o to warn the user of all dangers involved in using or misusing the
product in a way that's
clear
simple
prominent
o to take into consideration the capacities of the persons who will use
the product:
relevant capacities: maturity, intelligence, literacy, disability,
etc.
moral requirement: if the manufacturer anticipates that the
product will be used by individuals with restricted capacities
then the manufacturer owes a greater degree of care in the
manufacture, labeling, etc.
o manufacturers should not oppose regulative measures when it is
reasonable to help safeguard users against hazardous products, e.g.,
alcohol: not allowed to be sold after 2 am: not to be sold to
minors
cigarettes: not to be sold to minors: not to be specifically
advertised to minors: not to be smoked in public buildings,
etc.
gasoline: to be dispensed only into approved containers
automobiles:
not to be operated without a license
subject to periodic safety inspections (in some states)
Problems With Due Care
Vagary of the notion of "due care" (compare care ethics generally)
o to be told "a reasonable amount" is not very helpful: e.g., how much
salt to put in the soup
I already knew that (a reasonable amount)
what I want to know is how much is a reasonable amount
o no clear method or hard and fast rule for determining how much
care is "due"
o one (vaguely utilitarian) proposal for removing some of the vagary
the greater the possible harm to the greater number the
greater care must be exercised
e.g., nuclear power plants v. windmill construction
o Limited utility: issues remain (compare utilitarianism generally)
re: trade offs
risk is never totally eliminable: every product involves
some
how much cost is warranted in removing which risks?
measurement problems:
how much is a life or a limb worth?
what's an acceptable level of risk to life & limb?
justice: whatever the acceptable risk point (one in a million
say) the poor sap who is that one bears the whole cost
Unforeseeable risks won't be eliminated by due care (from the left)
o sometimes risks of products don't become apparent until after many
years of use
example: asbestos
o issue remains: who should bear the cost injuries due to these risks
manufacturer: "Why me?"
injured users: "Why me?"
the taxpayers: "Why me?"
Paternalism of Due Care (from the right)
o assumes the manufacturer should make decisions for the consumer
regarding acceptable levels of risk
o that decision is better left up to the consumers themselves: it's their
money and their risk
http://www.wutsamada.com/alma/bizeth/velasq6.htm

Code of Ethics
Members of the American Marketing Association are committed to ethical professional conduct. They have joined
together in subscribing to this Code of Ethics embracing the following topics:
Responsibilities of the Marketer
Marketers must accept responsibility for the consequences of their activities and make every effort to ensure that
their decisions, recommendations and actions function to identify, serve and satisfy all relevant publics:
customers, organizations and society.
Marketers' Professional Conduct must be guided by:
The basic rule of professional ethics: not knowingly to do harm;
The adherence to all applicable laws and regulations;
The accurate representation of their education, training and experience;
The active support, practice and promotion of this Code of Ethics.
Honesty and Fairness
Marketers shall uphold and advance the integrity, honor and dignity of the marketing profession by:
Being honest in serving consumers, clients, employees, suppliers, distributors, and the public;
Not knowingly participating in conflict of interest without prior notice to all parties involved; and
Establishing equitable fee schedules including the payment or receipt of usual, customary and/or legal
compensation for marketing exchanges.
Rights and Duties of Parties in the Marketing Exchange Process
Participants in the marketing exchange process should be able to expect that
Products and services offered are safe and fit for their intended uses;
Communications about offered products and services are not deceptive;
All parties intend to discharge their obligations, financial and otherwise, in good faith; and
Appropriate internal methods exist for equitable adjustment and/or redress of grievances concerning
purchases.
It is understood that the above would include, but is not limited to, the following responsibilities of the marketer:
IN THE AREA OF PRODUCT DEVELOPMENT AND MANAGEMENT:
disclosure of all substantial risks associated with product or service usage;
identification of any product component substitution that might materially change the product or impact on the
buyer's purchase decision;
identification of extra cost-added features.
IN THE AREA OF PROMOTIONS:
avoidance of false and misleading advertising;
rejection of high-pressure manipulations, or misleading sales tactics;
avoidance of sales promotions that use deception or manipulation.
IN THE AREA OF DISTRIBUTION:
not manipulating the availability of a product for the purpose of exploitation;
not using coercion in the marketing channel;
not exerting undue influence over the reseller's choice to handle a product.
IN THE AREA OF PRICING:
not engaging in price fixing;
not practicing predatory pricing;
disclosing the full price associated with any purchase.
IN THE AREA OF MARKETING RESEARCH:
prohibiting selling or fundraising under the guise of conducting research;
maintaining research integrity by avoiding misrepresentation and omission of pertinent research data;
treating outside clients and suppliers fairly.
Organizational Relationships
Marketers should be aware of how their behavior may influence or impact the behavior of others in organizational
relationships. They should not demand, encourage or apply coercion to obtain unethical behavior in their
relationships with others, such as employees, suppliers, or customers.
Apply confidentiality and anonymity in professional relationships with regard to privileged information;
Meet their obligations and responsibilities in contracts and mutual agreements in a timely manner;
Avoid taking the work of others, in whole, or in part, and representing this work as their own or directly
benefiting from it without compensation or consent of the originator or owner; and
Avoid manipulation to take advantage of situations to maximize personal welfare in a way that unfairly
deprives or damages the organization of others.



American Marketing Association Code of Ethics for Marketing on the Internet
PREAMBLE
The Internet, including online computer communications, has become increasingly important to marketers'
activities, as they provide exchanges and access to markets worldwide. The ability to interact with stakeholders
has created new marketing opportunities and risks that are not currently specifically addressed in the American
Marketing Association Code of Ethics. The American Marketing Association Code of Ethics for Internet marketing
provides additional guidance and direction for ethical responsibility in this dynamic area of marketing. The
American Marketing Association is committed to ethical professional conduct and has adopted these principles
for using the Internet, including on-line marketing activities utilizing network computers.
GENERAL RESPONSIBILITIES
Internet marketers must assess the risks and take responsibility for the consequences of their activities. Internet
marketers' professional conduct must be guided by:
Support of professional ethics to avoid harm by protecting the rights of privacy, ownership and access.
Adherence to all applicable laws and regulations with no use of Internet marketing that would be illegal, if
conducted by mail, telephone, fax or other media.
Awareness of changes in regulations related to Internet marketing.
Effective communication to organizational members on risks and policies related to Internet marketing, when
appropriate.
Organizational commitment to ethical Internet practices communicated to employees, customers and relevant
stakeholders.
PRIVACY
Information collected from customers should be confidential and used only for expressed purposes. All data,
especially confidential customer data, should be safeguarded against unauthorized access. The expressed
wishes of others should be respected with regard to the receipt of unsolicited e-mail messages.
OWNERSHIP
Information obtained from the Internet sources should be properly authorized and documented. Information
ownership should be safeguarded and respected. Marketers should respect the integrity and ownership of
computer and network systems.
ACCESS
Marketers should treat access to accounts, passwords, and other information as confidential, and only examine
or disclose content when authorized by a responsible party. The integrity of others' information systems should
be respected with regard to placement of information, advertising or messages.