THE ETHICS OF

CONSUMER
PRODUCTION AND
MARKETING
SUB TOPICS1CS
1) Market and consumer protection
2) The contract view of Business Firm’s Duties to Consumers
3) The due care theory
4) The social cost view of manufacturer duties
5) Advertising ethics
6) Consumer privacy
MARKET AND CONSUMER
PROTECTION
Problems consumers face
Dangerous and risky products
Deceptive selling practices
Poorly constructed products
Failure to honor warranties
Deceptive and unpleasant advertising
Market Approach to Consumer Protection
Claims safety is a commodity that should not be mandated by government.
Safety should instead be provided through the market.
In a market, sellers will provide safety if consumers demand it.
In a market, the price of safety and the amount sellers provide will be determined by
the costs of providing it and the value consumers place on it
Government intervention in consumer markets makes them unfair, inefficient, and
coercive.
Problems with the Market Approach
Assumes markets are perfectly competitive but they are not because:
• Buyers do not have adequate information when products are complex and
information is costly and hard to find
• Buyers are often not rational about product risk or probabilities and are often
inconsistent
• Many consumer markets are monopolies or oligopolies.
THE CONTRACT VIEW OF
BUSINESS FIRM’S DUTIES TO
CONSUMERS
contract view of the business firm’s duties to its customers
The view that the relationship between a business firm and its customers is
essentially a contractual relationship, and the firm’s moral duties to the customer are
those created by this contractual relationship.
Duties 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 and are affected by a number of factors.
Frederick Sturdivant classified these areas in terms of four variables: “The definition
of product quality used here is: the degree to which product performance meets
predetermined expectations with respect to (1) reliability, (2) service life, (3)
maintainability, and (4) safety.
reliability
The probability that a product will function as the consumer is led to expect that it will
function.
service life
The period of time during which the product will function as effectively as the consumer is
led to expect it to function.
Maintainability
The ease with which the product can be repaired and kept in operating condition.
product safety
The degree of risk associated with using a product.
Types of Duties
Duty to disclosure
The Duty Not to Misrepresent
The Duty Not to Coerce
PROBLEMS WITH THE
CONTRACTUAL THEORY
Assumes makers of products deal directly with consumers but they do not; however
manufacturer’s advertisements do form a kind of direct promise to consumers.
• Sellers can remove all their duties to buyers by getting them to agree to disclaimers
of responsibility.
• Assumes consumer and seller meet as equals, but seller has more knowledge so
consumer must rely on the seller.
3 THE DUE CARE THEORY
due care theory of the manufacturer’s duties to consumers
The view that because manufacturers are in a more advantaged position and
consumers must rely on them, they have a duty to take special care to ensure that
consumers’ interests are not harmed by the products that they offer them.
THE DUTY TO EXERCISE DUE
CARE
Manufacturers’ Duties in Due Care Theory
• When designing product, research its risks in conditions of use, design it so risks
are minimized, take capacities of users into account.
• In production, use strict quality control to eliminate defects and ensure materials
and manufacturing do not add defects or risk.
• When marketing provide users with information about using product safely, warn
of all dangers, do not market to those unable to avoid risk.
PROBLEMS WITH “DUE CARE”
Problems with Due Care Theory •
Does not limit what producer must spend to eliminate risk
• Does not indicate who should pay for product injuries that cannot be foreseen
• Puts manufacturer in paternalistic position of deciding how much risk is best for
consumers.
4 THE SOCIAL COSTS VIEW OF
THE MANUFACTURER’S
DUTIES
social costs view of the manufacturer’s duties to consumers
The view that a manufacturer should pay the costs of any injuries caused by defects
in the product, even if the manufacturer exercised all due care in designing, making,
and marketing it, and the injury could not have been foreseen.
strict liability
A legal doctrine that holds that manufacturers must bear the costs of injuries
resulting from product defects regardless of fault.
The Social Costs View
• Claims manufacturer should pay the costs of all injuries caused by defects in a
product even if the manufacturer exercised all due care and the injury could not have
been foreseen •
Argues product injuries are external costs that should be internalized as a cost of
bringing the product to market, this maximizes utility and distributes costs more
fairly.
Criticisms of the Social Cost View
• Unjust to manufacturers since compensatory justice says one should compensate
injured parties only if the injury was foreseeable and preventable
• Falsely assumes that the social cost view prevents accidents; instead, encourages
consumer carelessness by relieving them of responsibility for their injuries
• Has increased the number of successful consumer lawsuits which imposes heavy
losses on insurance companies, and makes insurance too expensive for many firms;
however studies show only small increase in lawsuits and insurance firms remain
profitable.
5.ADVERTISING ETHICS
Characteristics of Advertising
• A public communication aimed at a large social group intended to induce members
of this audience to buy the seller’s products.
• It succeeds by creating a desire for the seller’s product or a belief that a product
will satisfy a preexisting desire.
commercial advertising
Communication between a seller and potential buyers that is publicly addressed to a
mass audience and is intended to induce members of this audience to buy the seller’s
products.
Social Effects of Advertising
 Psychological Effects of Advertising
 Advertising and waste
 Advertising and market power
 Criticisms of Advertising Based on its Social Effects
 • It debases the tastes of the public; but this criticism is not a moral criticism.
 • It inculcates materialistic values; but this criticism ignores the lack of evidence that advertisements can change people’s
values. • Its costs are selling costs that, unlike production costs, do not add to the utility of products and so waste resources; but
this criticism ignores how advertising can increase consumption which is good; however, studies suggest advertising does not
increase consumption and anyway increasing consumption is not necessarily good.
 • It is used by big firms to create brand loyalties which let them become monopolies or oligopolies; however this criticism
ignores studies showing big monopoly or oligopoly firms do not advertise more than little firms
Advertising and the creation of consumer desires
Deceptive Advertising Requires
• An author who (unethically) intends to make the audience believe what he or she knows is
false by means of an intentional act or utterance.
• Media or intermediaries who communicate the false message of the advertisement and so
are also responsible for its deceptive effects.
• An audience who is vulnerable to the deception and who lacks the capacity to recognize the
deceptive nature of the advertisement.
6.6 CONSUMER
PRIVACY
right to privacy
The right of persons to determine what, to whom, and how much information about
themselves will be disclosed to other parties
psychological privacy
Privacy with respect to a person’s inner life
physical privacy
Privacy with respect to a person’s physical activities.
Importance of Privacy
• Protects individuals from disclosures that can shame, can encourage interference in
one’s private life, hurt loved ones, and lead to self incrimination.
• Enables the intimacy that develops personal relationships, the trust and
confidentiality that underlies client professional relationships, the ability to maintain
distinct social roles, and the ability to determine how others will see us.
Balancing Right to Privacy and Business Needs
• Is the purpose of collecting information a legitimate business need that benefits the
consumer
Is the information that is collected relevant to the business need
• Is the consumer informed the information is being collected and the purpose
• Did the consumer consent to the information disclosure
• Is the information accurate
• Is the information secure and not disclosed to recipients or used in ways to which
the consumer did not consent