Ethics of Consumer

Production & Marketing

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 Firm’s duties towards
Consumers

1. Contractual Theory

2. Due Care Theory

3. Societal Cost Theory

Contractual Theory

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 Contractual Theory

 Contractual Relationship between Firm & Consumer

 Firm’s moral duties are created by this contractual

relationship
Moral Duties under Contractual Theory

1. Duty to Comply 2. Duty to Disclosure

 Reliability 3. Duty not to Misrepresent
 Service Life 4. Duty not to Coerce
 Maintainability

 Product Safety
 Criticism for Contractual Theory

1. Incorrect assumption that Buyers & Sellers meet as

equals in the contract

2. Disclaimers nullify contractual duties of manufacturer

3. Unrealistic assumption that Manufacturers make direct

agreement with Consumers
Due Care Theory

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 Due Care Theory

Manufacturer has
 Knowledge and expertise that a consumer lacks

 Duty to take special care of consumers’ interests

 Doctrine of Caveat Vendor

 Areas of manufacturer’s responsibility

 Design

 Production

 Information
 Criticism for Due Care Theory

1. No clear rule to determine “Due Care”

2. Incorrect assumption that manufacturer can discover

faults before consumer buys or uses it
Social Cost Theory

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 Social Cost Theory

Manufacturer must bear

 costs of any injury sustained through any defects in the
product,
 even when due care is exercised,

 and reasonable precautions are taken to warn users of

foreseen danger
 Social Cost Theory (contd..)

Internalization of cost leads to-

1. Efficient use of society’s resources

2. Motivation to exercise greater care in production

3. Distribution of losses among all users

 Criticism for Social Cost Theory

1. Violates Compensatory Justice

2. Successful Consumer Lawsuits in spite of Due Care

3. Incorrect assumption that passing of injury cost to

manufacturer will lead to decrease in accidents
 Case Study

1. McDonald’s Coffee Case

Liebeck v/s McDonald’s Restaurant

2. Becton Dickinson Case

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 McDonald’s Coffee Case
Liebeck v/s McDonald’s Restaurant
 81 year old woman suffers third degree burns from coffee
purchased at McDonald’s

 Undergoes skin graft operations

 Coffee was served at 180-190 °F

 Coffee or any food should be not served hotter than 130-

140 °F
McDonald’s coffee case Outcomes
• Jury award:
– Compensatory damages = $200,000 but reduced to
$160,000 because jury decided customer was 20% at fault
– Punitive damages = $2,700,000
– Total = $2,860,000

• Judge’s decision:
– Compensatory damages = $160,000
– Punitive damages = $480,000
– Total = $640,000

• Final settlement: Not known

 Becton Dickinson Case

 Becton Dickinson- one of largest manufacturers of medical

supplies

 Held exclusive rights to a patent for new Safety-Lock syringe

 For 5 years, they produced only 3cc safety syringes, which

were too expensive

 Nurses continued to use unprotected syringes due to

unavailability
 Becton Dickinson Case (contd..)

 Nurse, Maryann Rockwood got infected of Aids while

using an unprotected syringe and sued the company

 Duty to provide syringes in all sizes, as they held

exclusive rights to the patent

 By withholding the other sizes from the market, it

contributed to her injury

 Out of court settlement

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Thank You

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