Chapter 6 The Ethics of Consumer Production and Marketing

Business Ethics Concepts & Cases Manuel G. Velasquez

Chapter Six  The Ethics of Consumer Production and Marketing

Risks to Consumers Consumers are at great risk every day. There is high eves of risk from the use of consumer products.  These risks coud come from the foo!ing area" •

#angerous and risky products

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#eceptive seing practices

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Poory constructed products

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$aiure to honor !arranties

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#eceptive and unpeasant advertising

Market %pproach to Consumer Protection •

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n a market' seers !i provide safety if consumers demand it. n a market' the price of safety and the amount seers provide !i (e determined (y the costs of providing it and the vaue consumers pace on it. Safety shoud instead (e provided through the market. Safety is a commodity that shoud not (e mandated (y government. )overnment intervention in consumer markets makes them unfair' ine*cient' and coercive.

Pro(ems !ith the Market %pproach •

%ssumes markets are perfecty competitive' (ut they are not (ecause"  –

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Buyers do not have ade+uate information !hen products are compex and information is costy and hard to ,nd. Buyers are often not rationa a(out product risk or pro(a(iities and are often inconsistent. Many consumer markets are monopoies or oigopoies.

Contract -ie! of Business $irms #uties to Customer •

 The vie! that the reationship (et!een a (usiness ,rm and its customers is essentiay a contractua reationship' and the ,rms mora duties to the customer are those created (y this contractua reationship.

Mora #uty to Consumers under Contractua Theory •

#uty to compy !ith express and impied caims of"  –

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 reia(iity service ife maintaina(iity safety

#uty of discosure #uty not to misrepresent #uty not to coerce

Pro(ems !ith Contractua  Theory •

%ssumes makers of products dea directy !ith consumers (ut they do not.  –

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Manufacturers advertisements do form a kind of direct promise to consumers.

Seers can remove a their duties to (uyers (y getting them to agree to discaimers of responsi(iity. %ssumes consumer and seer meet as e+uas' (ut seer has more kno!edge so consumer must rey on the seer.

#ue Care Theory of $irms #uties to Customer •

 The vie! that (ecause manufacturers are in a more advantaged position and consumers must rey on them' they have a duty to take specia care to ensure that consumers interests are not harmed (y the products that they o/er them.

Manufacturers #uties in #ue Care Theory •

n designing product"  –

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n production"  –

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 research its risks in conditions of use design it so risks are minimi0ed take capacities of users into account use strict +uaity contro to eiminate defects ensure materias and manufacturing do not add defects or risk

n marketing"  –

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provide users !ith information a(out using product safey !arn of a dangers do not market to those una(e to avoid risk

Pro(ems !ith #ue Care  Theory •

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#oes not imit !hat producer must spend to eiminate risk. #oes not indicate !ho shoud pay for product in1uries that cannot (e foreseen. Puts manufacturer in paternaistic position of deciding ho! much risk is (est for consumers.

Socia Costs -ie! of the Manufacturers #uties to Consumers

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 The vie! that a manufacturer shoud pay the costs of any in1uries caused (y defects in the product' even if the manufacturer exercised a due care in designing' making' and marketing it' and the in1ury coud not have (een foreseen. Product in1uries are externa costs that shoud (e internai0ed as a cost of (ringing the product to market' this maximi0es utiity and distri(utes costs more fairy.

Criticisms of the Socia Costs -ie! •

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2n1ust to manufacturers since compensatory 1ustice says one shoud compensate in1ured parties ony if the in1ury !as foreseea(e and preventa(e. $asey assumes that the socia cost vie! prevents accidents.  –

nstead' it encourages consumer careessness (y reieving them of responsi(iity for their in1uries.

Criticisms of the Socia Cost -ie! 3Cont.4 •

5as increased the num(er of successfu consumer a!suits' !hich imposes heavy osses on insurance companies and makes insurance too expensive for sma ,rms.  –

Response" studies sho! ony sma increase in a!suits and insurance ,rms remain pro,ta(e.

Characteristics of %dvertising  –

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% pu(ic communication aimed at a arge socia group intended to induce mem(ers of this audience to (uy the seers products. t succeeds (y creating a desire for the seers product or a (eief that a product !i satisfy a preexisting desire.

Criticisms of %dvertising Based on Socia E/ects •

t de(ases the tastes of the pu(ic.  –

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Response" this criticism is not a mora criticism.

t incucates materiaistic vaues.  –

Response" this criticism ignores the ack of evidence that advertisements can change peopes vaues.

Criticisms of %dvertising Based on Socia E/ects •

ts costs are seing costs that' unike production costs' do not add to the utiity of products and so !aste resources.  –

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Response" this criticism ignores ho! advertising can increase consumption !hich is good.

t is used (y (ig ,rms to create (rand oyaties !hich et them (ecome monopoies or oigopoies.  –

Response" this criticism ignores studies sho!ing (ig monopoy or oigopoy ,rms do not advertise more than itte ,rms.

Criticisms of %dvertising Based on ts E/ects on #esires •

%dvertising creates psychic desires !hich' unike physica desires' are pia(e and unimited.  –

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Psychic desires are created so ,rms can use us to a(sor( their output. 2sing us this !ay treats us as means and not as ends and so is unethica.

Response" this criticism ignores studies !hich suggest non6su(imina advertising cannot create and manipuate desires in aduts.

Re+uirements of #eceptive %dvertising •

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%n author !ho 3unethicay4 intends to make the audience (eieve !hat he or she kno!s is fase (y means of an intentiona act or utterance 3tak or !ards4. Media or intermediaries !ho communicate the fase message of the advertisement . %n audience !ho is vunera(e to the deception and !ho acks the capacity to recogni0e the deceptive nature of the advertisement.

mportance of Consumer Privacy •

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Protects individuas from discosures that can shame' interfere in ones private ife' hurt oved ones' and ead to sef6 incrimination. Ena(es the intimacy that deveops persona reationships' the trust and con,dentiaity that underies cient6 professiona reationships' the a(iity to maintain distinct socia roes' and the a(iity to determine ho! others !i see us.

Baancing Right to Privacy and Business 7eeds •

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s the purpose of coecting information a egitimate (usiness need that (ene,ts the consumer8  s the information that is coected reevant to the (usiness need8 s the consumer informed the information is (eing coected and the purpose8 #id the consumer consent to the information discosure8 s the information accurate8 s the information secure and not discosed to recipients or used in !ays to !hich the consumer did not consent8