Business Ethics: Concepts & Cases: Chapter 6 Outline
The Ethics of Consumer Production and Marketing

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Introduction

•  Three Cases (5th edition)
1. Cigarettes
• contain an addictive substance: nicotine
• according to a 1996 estimate responsible for 400,000 deaths per year
• more than AIDS, alcohol, car accidents, murders, suicides, illegal drugs, and fires combined
• Being Aggressively advertised especially to children & adolescents (still: despite the death of Joe Camel), minorities, and women
2. Lawn herbicides
• contain toxic chemicals: including dioxin
• 1996 study showed that post spraying levels in houses were up to 10 to 100 times greater than on the lawn!
3. BIC-type lighters
• occasionally explode with disastrous consequences
• pose risks to children from accidental ignition
• some 200 people/year -- 1/2 of them children -- killed in lighter related accidents
•  "on balance,
• the high social value placed on the safety of people and property threatened by childhood fires, the high gravity of risk, the considerable probability of risk, and the likelihood of a reasonably available alternative
• may outweigh BIC's interest in producing its lighters without childproofing."
• Examples (6th edition)
  • Bridgestone/Firestone tires for Ford Excursions (2000-2003): over 200 killed & hundreds more injured in rollover crashes caused by tread separation on the tires.
  • Herbal supplements
    • ephedra supplements (now banned) linked to 155 deaths & serious injuries
    • other supplements (still available) linked to kidney failure, cancer, heart and respiratory failure, liver failure
  • Miscellaneous
    • window blind cords with loops have killed more than 160 children by strangulation
    • halogen torchier floor lamps are known to have caused more than 290 fires and 25 deaths since 1992
    • non child-resistant disposable lighters: cause some 2400 fires resulting in 70 deaths and 480 injuries yearly (judging from a recent year)
• Overview:

• Primary costs imposed by Consumer Products: Accidental injury and death: annual estimates for U.S.
• 20 million serious accidental injuries
• 100,000 deaths
• trending upwardly again since 1992
• Additional costs borne by consumers in 2003 = $700 billion (Consumer Product Safety Commission Estimate)
• due to deceptive selling practices
• shoddy construction
• other product failures

6.1 Markets and Consumer Protection

• 1992 Figures (5th edition)
• 585,000 injuries requiring hospital treatment inflicted on children & adults by toys, nursery equipment, playground equipment
• 322,00 people mangled using home workshop equipment
• 2,055,000 people needed emergency treatment for injuries involving home furnishings
• 3,467,000 treated for injuries involving home construction materials
• 2003 Auto accidents: 53,270 per week
  • causing 117 deaths per day
  • financial losses of $479 million per day
• Laissez faire or "market" approach holds consumers will automatically be protected from injury & other loss (due to product breakdown, etc.) by the operations of free and competitive markets
• thanks to consumer sovereignty
• product safety features consumers want and are willing to pay for will be produced
• producers will have to respond to consumer demand for safer products or risk losing customers to others who do
• government interference only interferes with the working of markets and producers' abilities to give the consumers what they want
• ends up forcing costly safety features on consumers that consumers may not really want at the cost
• Criticism: these free market benefits falsely assume a perfectly competitive market
• Seven defining features (review)
1. distribution: numerous buyers and sellers
2. openness: anyone can freely enter
3. perfect information: buyers and sellers have full and perfect information about products and prices
4. interchangeable goods: goods in the market like enough to be substitutable
5. nonsubsidization: no external costs or subsidies
6. rational agency: buyers and sellers are rational self interested utility maximizers
7. nonregulation: the market is unregulated
• Consumers commonly have imperfect information and make irrational choices
• imperfect information: often consumers do not understand the risks
• due to deceptive marketing or advertising misinforming consumers about risks

or simply not informing
• due to their simply lacking requisite information and expertise
• rejoinder: market mechanisms will create a market for information consumers need & want
• in theory it would seem consumers who want information can turn to organizations such as Consumers Union that make a business of acquiring and selling product information
• in practice it's hard to make a go of selling this sort of information due to
• leakage to people who don't pay: making the number of people willing to pay too few to cover the costs of acquiring the information
• consumers often unwilling to pay for information because they're unable to appreciate its value before they get it
• in real world such organizations only make a go of it by relying on contributions
• irrational agency consumers are often irrational in assessing risks
• rationalizations, denial & other interfering mechanisms: example
• "Cigarettes won't kill me
• I'll quit in a couple of years."
• rational choice involves estimating probabilities & people are bad at this
• irrational confidence: typically underestimate the chance of being injured by
• driving, smoking, eating high cholesterol diets
• irrational fears: overestimate the chance of being injured by
• tornados, grizzly bear attacks, suicide bombings, etc.
• personal example: friend who wouldn't wear a seatbelt because "if my car goes into the water I don't want to be tied in and unable to get out."
• trusting & optimistic natures: tend to believe
• we think the products we buy will work not malfunction.
• and we will use them aright
• woman I dated (once): when I asked her, "Please, fasten your seatbelt,"
• said, "Why, are you planning to have an accident?"
• probabilistic fallacies
• gambler's fallacy: tendency to think a run of one sort of outcome makes further outcomes of the sort less likely
• example: if a coin comes up heads three times in a row people tend to think it's due to come up tails
• this is irrational: if it's a fair coin odds are 50/50 regardless
• if the coin isn't fair: then it's more likely to come up the same again
• hasty generalization: estimating probabilities on the basis of skewed or biased or undersized samples
• my uncle smoked all his life and lived to 100
• so probably smoking won't hurt me
• people believe they exert control over purely chance events
• by sitting in their lucky chair or wearing their lucky hat
• pulling the arm instead of pressing the button to turn the wheel on the slot machine
• Furthermore: Oligopoly conditions are more the norm than the exception
  • violating conditions 1 & 2, distribution & openness
• even if consumers are wise enough to want safe products, oligopolies may be unresponsive to their wants
• Conclusion, Limitation, & Central Issue
• Conclusion: "On balance . . . it does not seem that market forces by themselves can deal with all consumer concerns for safety, freedom from risk, and value."
• Limitation: the world can't be made perfectly safe: producers can't be expected to protect people from extremes of ignorance and foolishness
• people who remove safety guards from power tools
• smoke while they're pouring gasoline into their lawnmowers, etc.
• Central Issue: Where does the consumer's duty to protect their own interests end and the manufacturer's duty to protect consumers' interests begin?
• Three theories (going politically from right to left)
1. Contract view: places the greatest responsibility on the consumer
2. "due care" places more responsibility on the producer
3. social costs view: places the most responsibility on the producer
• Nested character of the theories
• producer responsibilities under "social cost" include all "due care" responsibilities
• producer responsibilities under "due care" include all "contract" responsibilities

6.2 The Contract View of Businesses Duties to Consumers

• Summary statement
• When a customer buys a product they enter into a "sales contract" with the firm
• the firm freely & knowingly agrees to give the buyer a product with certain characteristics
• the consumer similarly agrees to pay a certain sum of money to the firm for the product
• Rights & Duties Created
• the firm: the duty to provide a product with the specified characteristics
• the consumer: the right to receive such a product
• Reminder: Moral Conditions on Contractual Obligation
• Without which the agreement is not really a free agreement
• Moral Conditions
• Full knowledge: both parties have full knowledge of the terms of the agreement
• Faithful representation: neither party must intentionally misrepresent other pertinent facts
• No undue influence: neither party must enter the contract under duress or undue influence.
• Consequent four main moral duties of a business to its customers
1. Compliance: to comply with the terms of the contract
2. Disclosure: to fully disclose the nature of the product
3. True representation: not to misrepresent the nature of the product or agreement
4. No undue influence: not to persuade the customer to buy under duress.

The Duty to Comply

• Most basic duty that a business owes its customers
• to provide the customer with a product that lives up to those claims
• the business expressly made about it
• which induced the customer to buy it
• plus any reasonably implied claims
• which formed the customers understanding of what they were purchasing and led to freely contract to buy it
• Sturdivant's list of key types of implied claims as concerning
• Reliability
• Service Life
• Maintainability
• Safety
• Reliability: concerns whether the product will function as the customer has been led to expect
  • Issue concerning devices containing many interdependent components
    • the more interdependent components a product incorporates
    • the greater reliability is demanded of each component
    • since the probability of the whole functioning correctly is the product of the parts.
    • example a unit with four components each with a 10% chance of failing has a 34% chance of failing: .9 * .9 * 9 * .9 = .66
• 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 understand it will function.
  • Understandings concerning service life:
    • customer generally expected to understand that service life will depend on use: on the amount of wear and tear the customer subjects the product to
    • can rely on explicit guarantees from the manufacturer or seller
    • obsolescence: seller who knows that a product will become obsolete
      • has a duty to correct any mistaken beliefs the buyer may be expected to form concerning the service life that may be expected
• Maintainability: concerns how easily the product can be kept in operating condition and repaired (if needs be)
  • Frequently such claims are spelled out in express warranties
  • Implicit claims by the seller of continued maintainability after the warranty expires
    • implied by the seller
    • reasonably understood by the buyer
• Product Safety: concerns the degree of risk associated with using the product.
  • Acceptable known levels of risk is the operative concept
    • no product is absolutely risk free
    • the issue is what levels of risk are acceptable or reasonable
  • A product is safe if its attendant risks are known
    • and judged to be acceptable by the buyer
    • in view of the benefits the buyer has been led to believe they will obtain from the product
  • obligation of the seller: to provide a product that involves only those risks they represent it to the customer as having
  • National Product Safety Commissions Checklist: a risk is unreasonable when
    • consumers do not know it exists
    • though aware of it, they are unable to properly estimate its frequency or severity
    • consumers don't know how to cope with it & are thus likely to incur harm unnecessarily
    • when the risk could be eliminated at a cost the customer would willingly pay
      • if they knew the facts
      • and had the choice
  • Summary: 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

• The seller has a duty to disclose
• the terms of the sales contract
• information about the product that would reasonably influence the customer's purchase decision
• risks: included by all accounts
• others (more stringent views)
• performance characteristics & costs of operation
• product ratings & applicable standards
• Basis of the duty: the moral force of contracts derives from their being free agreements
• freedom depends on knowledge
• the more the buyer knows about the product and competing products
• the more one can say the buyer's agreement was voluntary
• Criticism & Reply
• Criticism: provision of product information is itself a service for which the customer should pay
• Reply: if the buyer had to bargain for relevant information
• the information would be less readily obtainable: a lot less
• and the resulting contract would be less free: a lot less

The Duty not to Misrepresent

• Misrepresentation is to nondisclosure as commission to omission
• nondisclosure: not telling
• misrepresentation: lying
• A seller misrepresents a product when they represent it in a way
• intended to get the buyer to believe something about the product
• that they (the seller) know is false
• May be express or implicit
• express: e.g., a dryer marked "NEW" when it's reconditioned
• implicit: the reconditioned dryer is placed unmarked, on the floor, amidst several new models
• Rogue's gallery of misrepresentative practices
• brand name look-alikes: it's a "Rollex"
• fronting the expensive ingredient (SILK blend)
• fictitious regular prices to give the impression the item is marked down
• higher prices than advertised
• "bait and switch"
• paid testimonials

The Duty not to Coerce

• undue influence or coercion is exercised by the seller, typically, when the seller takes advantage of a buyer's fear or emotional stress to extract an agreement that the buyer would not agree to if thinking rationally
  • Other factors that the seller has a duty not to exploit: gullibility, immaturity, ignorance
  • alleged examples
    • the unscrupulous funeral director who oversells
    • the "high pressure" bridal salesman who extracted a binding agreement from my niece without her mother being there

Problems with the Contractual Theory

• Chief criticism: it's based on unrealistic assumptions:
1. 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
• indirectly with the customer
2. that sales contracts naturally provide protection to the consumer
• underlying idea: contracts will adequately protect the customer's interest
• by underwriting claims against the manufacturer for product defects
• but contractual disclaimers can be used to nullify contractual obligations of the manufacturer
• by expressly disclaiming that the product is reliable, serviceable, safe, etc.
• many manufacturers affix such disclaimers to their products
3. 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
• buyers must often rely on sellers for information
• which advantages the seller -- especially the unscrupulous seller
• understanding of the contract
• the manufacturer/seller knows just what's in the contract:
• their lawyers drew it up
• with an eye to their protection, not the consumers
• the buyer generally just accepts the terms, often with little more than a cursory glance at the contract
• Salesperson: "Oh, it's just the usual legal mumbo jumbo. I don't understand it myself "
• Customer (needing the product this afternoon): "Where do I sign?"

6.3 The Due Care Theory

• Based on the idea that the consumer is in a disadvantaged position
• sellers and buyers are not equals in consumer markets: LH v. Wal-Mart, Sears, GM
• consumers interests are particularly vulnerable to harm by manufacturers & vendors
• due to the manufacturers superior knowledge about the product
• 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)
• manufacturer not only has a duty to deliver a product that lives up to its express and implied claims
• 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)
• manufacturer's duty: to take due care to make sure that the product is as safe as possible
• 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
• after having conducted inquiries into how the product will be used
• 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
  • To anticipate & incorporate all feasible safety features
    • given the latest technology
  • 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
  • to eliminate faulty units
  • to identify weaknesses that might become apparent during production
  • to ensure against economizing measures that would compromise the final product
    • shortcuts in the assembly, testing or other processes
    • substitution of inferior materials
  • to exercise quality control over materials used throughout the manufacturing process
• Information: to affix and include labels, notices, and instructions to the product
• to warn the user of all dangers involved in using or misusing the product in a way that's
• clear
• simple
• prominent
• 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.
• 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)
• 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
• no clear method or hard and fast rule for determining how much care is "due"
• 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
• 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)
• sometimes risks of products don't become apparent until after many years of use
• example: asbestos
• 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)
• assumes the manufacturer should make decisions for the consumer regarding acceptable levels of risk
• that decision is better left up to the consumers themselves: it's their money and their risk

6.4 The Social Costs Theory

• Overview Imposes responsibilities on manufacturers over and above sales contractual duties & due care
• Caveat vendor (let the seller take care) is the complete watchword
• the manufacturer should pay the costs of any injuries sustained through any defects in the product.
• even when the manufacturer has taken due care in the manufacture and production
• and has exercised due care in informing users about remaining risks
• and in instructing them in the product's proper use.
• follows the legal doctrine of "strict liability" under which absence of negligence and lack of knowledge or intent are not excusatory: only consequences -- the resultant harm -- matters
• non consumer liability examples:
  • statutory rape ... even if she showed you a forged birth certificate & looked more like 20 than 15
  • workplace sexual harassment
  • Sharia law?
• Defense of the Social Costs View: Based on Utilitarian Remedy of Internalizing External Costs
• injuries resulting from product defects -- even if they're unavoidable defects -- are part of the total social cost of producing & using the product
• internalizing these costs would lead to
1. fairer distribution of costs
• injury related costs would be added to the cost of the product
• and hence spread out among all users: not borne entirely by the unlucky sap
• more efficient use of resources
2. the market price reflecting the true social cost of producing & using the product
• insuring the product won't be overproduced
• which wastes of social resources
• society gets taken:
• e.g., taxpayer expenses due to smoking related illness
3. safer products: if producers assume all the risks then they'll be highly motivated to eliminate risks

Problems with the Social Costs View

• It's Unfair
• Violates the basic principles of compensatory justice that one is obligated to compensate parties for consequences of one's acts only those consequences were
  1. foreseeable
  2. preventable.
• Parties treated unfairly include
• manufacturers
• others who had to pay for unwanted safety features
• insurance companies
• Won't reduce the number of accidents
• extra motivation for producers to make a safer product will be offset by decrease in motivation for users to use the product safely and correctly
• "safer planes" result in more "pilot error"
• Unfair to Insurance Providers?
• The claim
• they'll be faced with spiraling settlement costs under "strict liability"
• forced to raise their rates to unreasonably high levels to cover these costs
• this would be unfair to small business operators
• unable to afford insurance
• they'll have to go out of business
• Rebuttal
• costs aren't as great as claimed: insurance companies exaggerate
• the insurance industry remains highly profitable
• high insurance rates due to other factors like excessive profits
• Life's Unfair: It seems there's no just solution to the problem about unforeseeable risks which the Social Costs view tries to solve
• Which of two parties -- manufacturer or consumer --should bear the expense for injuries for which they were not responsible?
• which they could not foresee
• or could not prevent
• Whoever bears the cost, it's unfair.
• NOTE (LH): this would-be counsel of despair could also argue for the utilitarian approach ... since justice can't be done, that leaves utility!

6.5 Advertising Ethics

• Economics of it
• A massive multi-billion-dollar/year business
• Cost ultimately borne by the consumer
• Consumer Opinion Surveys have shown
• 66% believe advertising does not reduce prices
• 65 % believe advertising makes people buy things they shouldn't
• 63% believe advertisements are untruthful
• 54% believe it insults their intelligence
• Nevertheless -- when they vote with their wallets
• many buy advertised brands
• often willing paying extra
• In defense of advertising it is said advertising provides a useful communication service informing customers about products available to them
• Question: Is advertising a waste or a benefit, on balance?

A Definition

• Defenders of advertising appeal to its informative function
• some such defenders even define
• advertising as a form of information
• an "advertiser" as a kind of information giver
• Yet advertisements, we all know, are notoriously
• long on image: "Image is everything" (Nike slogan)
• long on allure: New Yorker & fashion magazine ads
• long on entertainment value
• Budweisser frogs & Frankie the Lizard
• the Taco Bell chihuahua: "you are getting hungry, very hungry"
• Joe Camel
• and short on information:
• parade cases
• those frogs, Nike, fashion magazine ads
• though not completely uninformative: I learned from that little dog
• about the existence & approximate character of Taco Bell products
• e.g., Gorditas
• of course they're also portrayed as deee-lectable which is sometimes not the case (misrepresentation?)
• and maybe some of that stuff should come with a cautionary High Fat High Salt warning (duty of disclosure?)
• The Primary Function of Advertising
• not to provide objective information
• of course if your product really is superior providing objective information probably won't hurt
• but it still might not help as much as projecting a sexy image
• it's all about SELLING THE PRODUCT
• Velasquez's definition: An advertisement is communication between sellers and potential buyers
• addressed to a mass audience (as distinct from a private message to a specific individual) and
•  intended to induce some members of that audience to buy some product from the seller
• by creating a desire for the product in the consumer
• or by creating a belief that the product is a means to satisfy some desire the consumer already has
• Three topics concerning the morality of advertising
1. social effects
2. effects on consumer desires
3. effects on consumer beliefs

Social Effects of Advertising

• Frequently heard criticisms
• degrades peoples tastes
• wastes valuable resources
• sustains monopoly & oligopoly power
• Psychological Effects of Advertising
  • Some complain of the vulgarity of it: it's distasteful and debases tastes:
    • an aesthetic criticism not an ethical one?
    • being strident, intrusive, and repetitive a way of getting people's attention
      • Billboard advertising
      • TV Car ads: Terry Hanks
    • ads for toilet bowl cleaners, deodorants, Preparation H, etc.
      • show images and focus peoples minds on things some think are not particularly edifying
      • or elevating things to fix your mind on.
  • Moral Criticism: Debases values
    • by inculcating and reinforcing materialistic conceptions of
      • what happiness is: having lots of toys and going on cruises
      • and how to get it: "VISA it's everywhere you want to be."
    • alleged consequence: people neglect and underestimate
      • the importance of other, more basic, values.
      • and the existence of other ways of finding self fulfillment besides buying.
    • alleged consequence: people lead more selfish lives
      • energies diverted away from nonmaterialistic pursuits beneficial to many & all
        • service & camaraderie
      • towards selfish pursuit of acquisition
    • Debatable that advertising is so powerful or values so malleable as this criticism would have us think
      • values are formed early & run deep: shaped & influenced by
        • parents & friends: mostly
        • church & school & work: considerably
        • arts & entertainment: not inconsiderably
        • advertising: very little
      • plausibly advertising can't to much to really change people's basic values
      • all it can do is appeal to values people already have
• Advertising and Waste
  • Economist's Distinction: Two Kinds of Costs
    • Production Costs: go into changing the product
      • development
      • production
      • improvement
    • Selling Costs do not go into changing the product, such as costs that go into persuading people to buy the product
  • Utilitarian Argument
    • Sellers costs and advertising in particular don't add anything to the utility of the product to the consumer.
    • Therefore, from the standpoint consumer utility, advertising expenditures are wasted
  • Reply: Advertising produces broader social benefits: so it's not wasted expense
    • Benefits
      • It informs consumers about available products & their characteristics
      • produces an economically beneficial rise in demand for all products, thus,
        • encouraging mass production and economies of scale
        • and an economy in which products are manufactured more efficiently
        • and cost less than they otherwise would.
    • Dueling Rejoinders
      1. advertising doesn't affect total consumption: it only shifts consumption from one product to another
         • increasing overall consumption is a good thing
         • but advertising doesn't do it
      2. increasing total consumption is a curse not a blessing
         • it's a bad thing: the threat of resource depletion requires stabilizing or even decreasing consumption
         • and advertising does it
• Advertising and Market Power
  • Worry: advertising resources large corporations command enable them to consolidate monopoly & oligopoly control of markets.
    • massive advertising campaigns of the major players establish brand name loyalties
    • the small player may be effectively closed out of the market
  • Reply: there's no evidence this really is the case
    • absence of a firm correlation between advertising expenditure & degree of concentration:
      • some concentrated industries (soaps, detergents, breakfast cereals) feature heavy advertising
      • other concentrated industries (drugs, cosmetics) do not [?drugs & cosmetics?]
    • in some oligopoly industries -- autos, e.g. -- smaller firms spend more per unit than large

Advertising and the Creation of Consumer Desires

• John Kenneth Galbraith's Criticism:
• Advertising is manipulative:
• it creates desires in consumers for the sole purpose of absorbing industrial output
• thus it uses people: whether it's in their interest to consume more is not a consideration
• Two types of desires
• physiological:
• characterization: of physiological origin:
• originate in the buyer and are relatively immune to being changed by persuasion.
• examples: food, shelter
• psychic: of psychological origin
• characterization: highly subject to being changed by persuasion
• originating from the would-be seller: advertising can
• swayed & expand & even create them
• example: social status
• Galbraith's charge: advertising exploitatively manipulates our psychic desires
• that it manipulates: perhaps obvious
• the case that this is exploitative
• psychic desires are easily manipulated to excess
• demand created by physical needs are finite . . . only so much you can eat
• but psychic demands are virtually infinite: "more, more, is the cry of the deluded soul" (Blake)
• it uses the consumer as means alone
• advertisements' express purpose is selling their product
• not the consumers welfare [maybe not if it's a product you really believe in?]
• would be redeeming social benefit: fuels ever expanding economy is a dubious benefit
• a kind of systemic compulsion
• there's cause to worry about long-term sustainability of growth given finitude of depletable resources
• ideal of consumer sovereignty is undermined: producers usurp it
• rather than production being molded to serve human desires
• human desires are molded to serve the needs of production
• Assessment of Galbraith's Criticism
• Dubious of empirical assumption about the manipulability of psychic desires
• mentioned above regarding advertising alleged abilities to change peoples values.
• advertising has no monopoly on creation of psychic wants: arguably plays a very small role in shaping people's basic preferences
• Nevertheless, some advertising is clearly intended to manipulate:
• to arouse in the consumer a psychological desire for the product without the consumer's knowledge
• which interferes with the consumer being able to rationally weigh whether purchase of the product is in his or her own best interest
• examples
• ads using "subliminal suggestion"
• ads that attempt to make consumers associate unreal sexual or social fulfillment with the product
• advertising aimed at exploiting children's gullibility
• about the wonderful feats of the animated action character
• misrepresent the characteristics and capabilities of the plastic action figure doll
• modeled on the character: or vice versa it often happens these days
• for sale near you.
• such advertising is manipulative in intent because it seeks
• to circumvent conscious reasoning & hence undermine the rational agency of the consumer
•  to influence the consumer to do what the advertiser wants
• regardless of what is in the consumer's best interests

Advertising and its Effects on Consumer Beliefs

• Much criticism of advertising focuses on its communicative aspect and its deceptive use
• can communicate truths: information
• but also falsehoods: misinformation & disinformation
• Pertinent to the would-be defense of the utility of advertising -- against the charge of wastefulness -- since
• if information has value: if being informed is a benefit
• disinformation presumably has disvalue: being misinformed is a cost
• Deceptive advertising unarguably wrong on both Kantian & Utilitarian grounds
• Kantian grounds:
• violation of consumer's rights to rational self determination
• lying is a paradigm case of a nonuniversalizable practice
• Utilitarian grounds:
• breeds distrust of communication in general
• false beliefs have disutility: leads to wrong (more costly, less beneficial) choices
• interferes with the beneficial workings markets by undermining the free rational agency of buyers
• All communication involves three terms
1. the author(s) who originate it
2. the medium that carries it
3. the audience who receives it
• Authors
  • Have moral duty not to deceive
  • Whether an advertisement is culpably deceptive depends on the intent of the author
    • the author must intend the audience to believe something false
    • that the author knows is false
    • which the author intentionally leads the audience to believe
      • whether through explicit assertion
      • or implication
      • or otherwise: e.g., in subliminal ads
    • In the case of vulnerable audiences like children
      • duty not to exploit their vulnerabilities
• Media
  • Have a duty to ensure the ads they transmit are not misleading.
  • In the case of vulnerable audiences like children
    • duty not to exploit their vulnerabilities
• Audience
  • Have a right not to be deceived.
  • In the case of vulnerable audiences (like children)
    • have a right not to have their vulnerabilities exploited
• Ethical Checklist: "the main factors that should be taken into consideration when determining the ethical nature of a given advertisement"
  • Social Effects
    • What does the author intend the effects to be?
    • What are the actual effects?
  • Effects on Desire
    • Is the argument intended to be informative or merely persuasive?
    • If mainly persuasive does it attempt to create a desire that is irrational or possibly injurious?
  • Effects on Belief
    • Is the content of the advertisement truthful?
    • Does the advertisement have a tendency to mislead its target audience?
      • True claims can be misleading
        • 9-10 dentists use the Oral-B toothbrush
        • supposed to conclude: dentists overwhelming judge Oral-B the best toothbrush
          • why else would they choose it?
      • but they don't exactly "choose" it: they're distributed free to dentists

6.6 Consumer Privacy

• Threats to privacy in the computer age
  • British firms are known (from reports they file) to collect highly detailed and very personal information about their customers including
    • sexual information
    • political information
  • MIB (the Medical Information Bureau) -- "a company founded in 1902 to provide insurance companies with information about the health of individuals applying for life insurance to detect fraudulent applications" -- currently has medical histories on about 15 million people
  • Credit Bureaus
  • Other
• Privacy rights
  • 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
• Protective functions of privacy
  1. prevents others from acquiring information about us that would expose us to shame, ridicule, or even blackmail
  2. keeps others out of our business: leaves room for unconventionality
  3. protects those we love from having their beliefs about us shaken
  4. protects us from self-incrimination
• Enabling functions of privacy
  • privacy enables intimacy: intimacy involves sharing confidences which requires having confidences
  • privacy enables various professional relations to exist
    • attorney-client
    • doctor-patient
  • enables individuals to sustain distinct social roles
  • enables individuals to control their own image or self-presentation
• Consumers' rights to privacy need to be balanced with legitimate business needs for information: key concerns:
  • relevance: databases 'should include only information that is directly relevant to the purpose for which the database is being maintained"
  • informed: consumers should be informed about what information is being collected and why
  • consent: consumers should explicitly or implicitly consent to any information collection
  • accuracy: data collecting agencies must take care that the data is accurate
  • purpose: the purpose for which the information is collected must be legitimate, i.e., if its collection is generally beneficial to those about whom it is being collected.
  • recipients and security: data collectors "must insure that information is secure and not available to parties that the individual has not explicitly or implicitly consented to be a recipient of that information"

Cases for Discussion

Becton Dickinson and Needle Sticks

1. In your judgment, did Becton Dickinson have an obligation to provide the safety syringe in all its sizes in 1991.  Justify your position, using materials from this chapter and the principles of utilitarianism, rights, justice, and caring?
2. Should manufacturers be held liable for failing to market all the products for which they hold exclusive patents when someone's injury could have been avoided if they had marketed those products?  Explain.
3. In your judgment, who was morally responsible for Maryann Rockwood's accidental needle stick: Maryann Rockwood?  The clinic that employed her?  The government agencies that merely issued guidelines?  Becton Dickinson?
4. Evaluate the ethics of Becton Dickinson's use of the GPO system in the late 1990s.  Are the GPO's monopolies?  Are they ethical?  Explain.

The Ford/Firestone Debacle

• Ford Explorer
  • in the 1990s became the most popular SUV in the U.S.
  • overall a safe vehicle for its drivers & passengers
    • fatality rate 27% lower than passenger cars
    • 17% lower than other SUVs
  • SUVs are generally safer for those riding in them due to their greater mass
  • SUVs were more profitable for Ford
    • profit on sedans = $1000
    • profit on Explorers = $8000
• Rollover proneness
  • SUVs generally are built higher off the ground than sedans giving them higher centers of gravity
  • the higher center of gravity makes them more tippy: the Explorer's twin I-Beam suspension gives it an even higher center of gravity
  • Consumers Union tests Explorers proved more tip over prone than other SUVs
  • More expensive fixes proposed by Ford engineers rejected
    • replacing the Twin I-Beam suspension
    • lowering the engine
    • mounting the wheels 2" further apart
  • Less expensive remedies enacted
    • stiffen the springs
    • shorten the suspension
    • lower the tire pressure
      • from 30-35 p.s.i. as recommended by Firestone, the tire manufacturer
      • to 26 p.s.i.
• Firestone
  • had supplied tires for Ford since 1896
  • in 1975 began supplying steel belted radials
  • by 1978 failures of Firestone's steel belted radials were involved hundreds of accidents resulting in many injuries and 34 deaths
  • Firestone argued that these failures were not due to any defect but caused by under inflation: nevertheless it recalled 14.5 million tires at a cost of $160 million
  • in 1988 Firestone was purchased by the Japanese tire manufacturer Bridgestone
  • July 1994 strike by 4000 workers
    • strike dragged on for 2.5 years
    • Firestone hired 900 replacement workers to permanently replace striking workers at the Decatur plant where a large percentage of Explorer tires were made, a move the union claimed would put untrained and unskilled workers on the assembly line
• Problems with Explorer and its ATX and Wilderness AT tires begin to emerge
  • in 1993 five lawsuits charges that the tires were prone to catastrophic failures that were causing rollovers on Explorers
  • Firestone data "indicated that the tread sometimes separated from the tires and peeled off" particularly under hot conditions
  • by 1998 Ford had replaced all its Firestone tires on Explorers in the Middle East with Goodyear tires after rollover accidents caused by tire separation. resulting in at least 14 deaths across the region
    • at Firestone's insistence Ford called this a "consumer satisfaction program" not a recall
    • Firestone disclaimed responsibility, once again claiming the failures were caused by under inflation
  • in May 2000, the NHTSA notified Ford and Firestone that it was launching an investigation of the tires in question
    • after receiving 193 complaints that the rubber came off the tire casing resulting in 21 fatalities
    • Ford & Firestone's own investigation revealed a steady upward trend in separations over the past several years: the rate of failure for tires made at the Decatur plant was 3 to 6 times greater than for tires manufactured at other plants
• Denouement
  • August 2000: Ford & Firestone recall 6.5 million tires
  • Ford's stock lost 15% and Bridgestone's 50%
  • Firestone announced plans to close the Decatur plant
  • May 2001: Ford announces that it will no longer use Firestone tires on Explorers
    • recalled another 13 million Wilderness AT tires despite Firestone's continuing claims that the tires weren't defective
    • pledged to make design modifications to the 2002 Explorer to reduce rollover tendencies
  • Estimated total costs of recalls
    • to Ford: $3 billion
    • to Firestone: $750 million
  • By the end of 2001 NHTSA had counted 175 deaths and 500 injuries related to Firestone tire failures on Ford Explorers
  • According to the NHTSA design flaws or shoddy manufacturing caused Firestone radials to be more prone to tread separation.
  • Firestone's own internal study showed the low inflation pressure of 26 p.s.i. increased the internal tire temperature and this contributed to the tread separation.

Questions

1. What systemic, corporate, and individual ethical issues are raised by the Explorer/Firestone case?
2. In your view, and in light of the three theories of manufacturer's responsibilities, what, if anything, did Ford do wrong, and what, if anything, should it have done differently?  What if anything did Firestone do wrong, and what, if anything, should it have done differently.
3. Who, in your view, is morally responsible for the deaths that occurred?