Examples of Bridgestone/Firestone and Metabolife

International clearly demonstrate, consumers are exposed daily to high levels of risk simply by using consumer products
The risk translates into injury, death and high

costs.

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 Consumers must also bear the costs of deceptive sales

practices, shoddy merchandise, and un-honored warranties.

This chapter examines ethical issues raised by product

quality and advertising

 Consumer safety is seen as a good that is most

efficiently provided through the mechanism of free market whereby sellers must respond to consumer demands.
If consumers want products to be safer - must be

willing to pay more for safer products and shows preference for manufacturers of safe products.

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 Producers must build more safety into their

products or they risk losing customers to competitors.

Market ensures that producers respond

adequately to consumers desires for safety

 If consumers:

do not place a high value on safety unwilling to pay for safety or has no preference for safer products then it is wrong to push increased levels of

safety down their throat through government regulations.

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 Such government interference distorts markets,

making them unjust, disrespectful of rights and inefficient. Only consumers can say what value they place on safety and they should be allowed to register their preferences through free choices in markets and not to be coerced by businesses or governments into paying for safety levels they may not want.

 The critics of this market approach

respond that the benefits of free markets are obtained with certainty only when markets have the seven characteristics that define them:

TME 6

7 Characteristics of Free Market a) there are numerous sellers and buyers b) everyone can freely enter and exit the market c) everyone has full and perfect information d) all goods in the market are exactly similar e) there is no external costs f) all buyers and sellers are rational utility maximizes g) the market is unregulated

These characteristics are absent in consumer markets, focusing especially on characteristics (c) and (f). Markets are efficient only if participants have full and perfect information about the goods they are buying.

TME 6

 The view that the relationship between a business

firm and its consumers is essentially a contractual relationship and the firms moral duties to the customer are those created by this contractual relationship.

 Moral Duties to Consumers Under Contractual

Theory Complying with the terms of the sales contract and secondary duties (Duty to comply). Disclosing the nature of the product (Duty of Disclosure). Avoiding misrepresentation and (Duty Not to Misrepresent). Avoiding the use of duress and undue influence (Duty not to Coerce).

DUTY TO COMPLY The next basic moral duty that a business firm owns its customers (under contract view) is the duty to provide consumers with a product that lives up to those claims that the firms expressly made about the product which led the customers to enter the contract freely.

 Duty to comply Eg. Winthrop Laboratories - marketed a painkiller that it advertised as no addictive. A patient using the painkiller became addicted to it and died of overdose. Court found Winthrop liable for the patients death because although it had expressly stated that the drug as non addictive Winthrop Labs. had failed to live up to its duty to comply with this express contractual claim

 DUTY TO COMPLY The express or implied claims that a seller might make about the qualities possessed by the product range over a variety of areas are affected by a number of factors. The definition of product quality used here is : the degree to which product performances meet predetermined expectation with respect to : a) reliability b) service life c) maintainability d) safety

 (a) Reliability
The probability that at product will function as the

consumer is led to expect that it will function.

 (b) Service Life

The period of time during which the product will

function as effectively as the consumer is lead to expect it to function; Eg. wear and tear obsolescence (technological changes)

 (c) Maintainability

The ease with which the product can be repaired

and kept in operating condition; Eg. warranty

 (d) Product Safety

The degree of risk associated with using a product.

 (2)

THE DUTY OF DISCLOSURE An agreement is not binding unless both parties to the agreement knows what they are doing and freely choose to do it. The seller who intends to enter to contract with a customer has a duty to disclose exactly what the customer is buying and what the terms of the sale are. The seller has a duty to inform the buyer of any characteristics of the product that could affect the customers decision to purchase the product.

 For Example: if the product the consumer is buying

possesses a defect that poses a risk to the users health or safety, the consumer should be so informed. Sellers should also disclose a products components or ingredients, its performance characteristics, cost of operation, product ratings and any other applicable standards

 (3) THE DUTY NOT TO MISREPRESENT

Misrepresentation renders freedom of choice

impossible Misrepresentation is coercive A person who intentionally misled, acts as the deceiver wants the person to act and not as the person would freely have chosen to act if the person had known the truth.

 Free choice is an essential ingredient of a binding

contract - intentionally misrepresenting the nature of a commodity is wrong. The deception may be created by a verbal lie as when a new model is described as new or may be created by a gesture as when as unmarked used model is displayed together with several new models.

 (4) DUTY NOT TO COERCE

People act irrationally when under the influence of fear

or emotional stress. When a seller takes advantage of a buyers fear or emotional stress to extract consent to an agreement that the buyer would not make if the buyer was thinking rationally, the seller is using duress or undue influence to coerce

 Chief criticism: it's based on unrealistic

assumptions: that manufacturers who really know the product enter into direct agreement with the customer in reality there are usual many levels of middle-merchants who may know no more about the product than the consumer and sometimes less

 contractarian reply: doctrine of indirect

agreements manufacturers promote their products through their own advertising campaigns these advertisements supply the claims that customers rely on in their purchase decisions the intermediate retailers merely function as "conduits" for the manufacturers product so, the manufacturers forge both direct & indirect agreements directly with the retailer

 that buyer and seller meet as equals in the sales

agreement assuming buyer and seller are equal "adversaries" in contracting the sale: caveat emptor (let the buyer beware) seems fair and reasonable each looks out for their own interests but there are inequalities disadvantaging the consumer knowledge of the product: the manufacturer is in a much better position to know the product

 The due care theory of the manufacturers duties

to consumers The view that because manufacturers are in a more advantaged position, they have a duty to take special care to ensure that consumers interests are not harmed by the products that they offer them. The doctrine of caveat emptor (buyer beware) is replaced with the doctrine of caveat vendor (seller beware)

 The due care view hold that because consumers

must depend on the greater expertise of the manufacturer, the manufacturer not only has a duty to deliver a product that lives up to the express and implied claims about it, but also has a duty to exercise due care to prevent others from being injured by the product even if the manufacturer explicitly disclaims such responsibility and the buyer agrees to the disclaimer (Exemption clause -reasonableness)

 Due care must enter into:

the design of the product the choice of reliable materials for constructing

the product manufacturing processes involved in putting the product together the quality control used to test and monitor production warning, labels and instructions attached to the product

 According to due care view, the manufacturer in

virtue of a greater expertise and knowledge, has a positive duty to take whatever steps to ensure that when the product leaves the plant it is safe as possible and customer has right to such assurance.

 (1) DESIGN
Manufacturer should ascertain whether the

design of an article conceals any danger, whether it incorporates all feasible safety devices, whether it uses materials that are adequate for the purposes the product is intended to serve. Manufacturer must conduct research and extensive tests to uncover any risks that will be involved in employing the article under various conditions of use.

 (2) Production Production manager should control the

manufacturing processes so as to eliminate any defective items, identify any weaknesses that become apparent during production. Ensure that shortcuts, substitution of weaker materials or other economizing measures are not taken during manufacture that would compromise the safety of the final product.

 (3) INFORMATION
Manufacturer should fix labels, notices, or

instructions on the product that will warn the user of all dangers involved in using or misusing the item, and that will adequately guard the user against harm or injury. Eg. Poison labels on pharmaceutical products.

 Instruction should be clear and simple, and

warning of any hazards involved in using or misusing the product should be clear, simple and prominent. In case of drugs, manufacturers have a duty to warn physicians of any risks or dangerous side effects that research or prolonged use have revealed (Vioxx, Celebrex, Lipobay, Phenylpropanolamine, Thalidomide)

 The view that a manufacturer should pay the costs of

any injuries sustained through any defects in the product even when the manufacturer exercised all due care in the design and manufacture of the product and has taken all reasonable precautions to warn users of every foreseen danger.

 Manufacturer has a duty to assume the risks of even

those injuries that arise out of defects in the product that no one could reasonably have foreseen or eliminated. This theory is a strong version of the doctrine caveat vendor. Let the seller take care.

 A legal doctrine that holds that manufacturers must

bear the costs of injuries resulting from product defects regardless of fault. The third theory formed the basis of the legal doctrine of strict liability (Eg. Rylands v Fletcher)

 Manufacturer should pay the costs of all injuries

caused by the defect in a product even if exercised due care (Eg. Proton : defects in the steering wheel) Argues that injuries are external costs that should be internalized. Manufacturer bear the external costs that results from these injuries as well as the internal costs of design and manufacture and all costs are internalized and added on as part of the price of the product

 Internalizing all costs in this way, will lead to a more

efficient use of societys resources: First, because the price will reflect all the costs of producing and using the artifact, market forces will ensure that the product is not over produced and resources are not wasted on it. Second, since manufactures have to pay the costs for the injuries they will be motivated to exercise greater care and reduce the number of accidents.

 Unfair to manufacturers since it forces them to

compensate unforeseeable injuries. Assumption that adherence to the social cost view will prevent accidents is false. By relieving consumers of the responsibility of paying for their own injuries the social costs theory will encourage carelessness in consumers Leads to successful consumer lawsuits in cases where manufacturers took all due care

 Advertising industry is a massive business

Annually large amounts are spent on it

 Communication between a seller and potential

buyer that is publically addressed to a mass audience and is intended to induce members of this audience to buy the sellers product

 It degrades peoples tastes It wastes valuable resources

It creates monopoly power

 It debases the tastes of public by presenting irritating

and aesthetically unpleasant displays It inculcates materialistic values and ideas in consumers

 selling cost
It is used not to improve the product, but merely

persuade people to buy it

 It effects the consumer beliefs by presenting

deceptive information

 The author

The medium
The audience

 the moral issues raised by advertising are

complex and involve several unsolved problems

 Social effects
Effects on desire Effects on beliefs

 Advertisement is a form of

Communication(truthful or Deceptive) Deceptive advertising Using untrue testimonials Failing to disclose defects in product Using word guarantee where nothing is guaranteed

 Authors

Medium
Audience

 He must intended to have audience believe Must know it is false Must knowing to do something that will lead to

audience

MEDIUM
Lead positive cooperation to success of advertisement
Should ensure contents are true

AUDIENCE
Knowledgeable audience thinks well

Two types of privacy

1- PSYCHOLOGICAL

PRIVACY

Privacy with a person inner life (Person thoughts, plans, beliefs value etc) 2- PHYSICAL

PRIVACY

Privacy w.r.t person physical activities

 Others do not acquire information

Prevent others from interfering in our planes Protect individuals from shame and interference

Enables the personal relationship

 Relevance Informing Consent Accuracy Purpose Recipient and security