Chapter 6:

[The Ethics of Consumer

Production and Marketing]
 The due care theory
• The due care theory of the manufacturer’s duties to consumers is 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.
• In this view the doctrine of caveat emptor is replaced with the doctrine of caveat
vendor.
• Caveat emptor: let the buyer take care.
• Caveat vendor: let the seller take care.
• The manufacturer has not only the duty to deliver a product that lives up to the
claims but has also the duty to exercise care to prevent customers from being
injured by the products. This due care is inserted in the design of the product. Like
the choice of reliable materials, the quality control to test the product, warnings,
labels and instructions attached to the product.
• This due care view implies that agents have a moral duty not to harm other parties
by their acts, especially when the other parties are vulnerable. This principle can be
supported by the requirements of an ethic of care.
 The due care theory
• The duty to exercise due care imposes specific responsibilities on the
producer. These responsibilities of the producer extend to three areas:
1. Design
• When the producer designs a product he must research its risks in the
conditions of use. These product risks must be minimized through research,
testing and selecting materials strong enough to stand up to all probable
usages . Further the producer must take the capacities of the users into
account.
2. Production
• The manager should control the manufacturing process to eliminate defects
and ensure that materials and manufacturing do not add defects or risk.
Economizing measures are not taken during manufacture that would
compromise the safety of the final product
3. Marketing
• The manufacturer should attach labels, notices or instructions on the product
to warn and protect consumers for the dangers involved in using the product.
It is a breach of the duty not to harm or injure if the manufacturer attempts
to conceal or downplay the dangers related to drug usage.
 The due care theory
• There are some problems with the due care view:
• It does not provide a clear method for determining when one has exercised
enough due care. The theory does not say what the producer must spend to
eliminate risk. Every product involves at least some small risk of injury. If
the manufacturer should try to eliminate even low-level risks, this would
require that the manufacturer invest so much .
• The theory does not indicate who should pay for product injuries that cannot
be foreseen. In a technologically innovative society, new products whose
defects cannot emerge until years or decades have passed will continually be
introduced into the market. Risks are known when thousands of people have
already used them.
• It falsely assumes that the manufacturer should be the one that makes the
important decisions for the consumer. at least with respect to the levels of
risks that are proper for consumers to bear
 The social cost view
• The social cost view of the manufacturer’s duties to consumer is the view that a
manufacturer should pay the costs of any injuries caused by defects in the product.
He should even pay if the manufacturer exercised all due care in designing, making
and marketing, and the injury could not have been foreseen.
• This theory is a strong version of the doctrine of caveat vendor; let the seller take
care.
• This theory has also formed the bases for the doctrine of strict liability. This is a
legal doctrine that holds that manufacturers must bear the costs of injuries resulting
from product defects regardless of fault.
• Because the manufacturer bears all the external costs from the injury and the
internal costs, all costs are internalized and added as one part of the price of the
product. This internalizing leads to a more efficient use of society’s resources. It
would also lead to a more fair distribution of costs and maximizes utility.
 The social cost view
• There are three major criticisms on the social cost view:
1. The theory is unjust because it violates the basic point of
compensatory justice that one should compensate injured parties only
if the injury was foreseeable and preventable.
2. The theory falsely assumes that passing the costs of all injuries on to
manufacturers will reduce the number of accidents. Instead of
preventing accidents it encourages consumer carelessness by relieving
them of the responsibility for their injuries.
3. It has increased the number of successful consumer lawsuits which
imposes heavily losses on insurance companies and makes insurance
too expensive for many firms. However, studies show that there is
only a small increase in lawsuits and insurance firms remain
profitable
 Advertising ethics
• Advertising is a public communication tool aimed at a large social group intended to induce
members of this audience to buy the seller’s products. The seller creates a desire for the
product or a belief that the product will satisfy the desires.
• Commercial advertising is a 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.
• advertising is intended to induce members of its audience to buy the seller’s products. An
advertisement can succeed in this intent in two main ways: (1) by creating a desire for the
seller’s product in consumers and (2) by creating a belief in consumers that the product is a
means of satisfying some desire the buyer already has.
• Critics claim that advertising has several negative effects on society.
– Psychological effects of advertising: Advertisements are often boring, insipid, and insult the
intelligence of viewers. In illustrating the use of toothpaste, mouthwashes, deodorants, for example,
advertisements sometimes employ images that many people find vulgar.
– Advertising lowers the taste of consumers by inculcating materialistic values and ideas about how
happiness is achieved. Advertisements often gratify basic and inner needs and aspirations implying
that problems will be eliminated by use of certain products. Secondly it asserts that success comes
from use f materialistic products.
 Negative Effects
• Advertising and waste: it wastes valuable resources and therefore violates utilitarian
principles.
• Economists distinguish between two costs
1. Production costs: the costs of the resources consumed in producing or improving a product.
2. Selling costs: the additional costs of resources that do not go into changing the product but
are invested instead in getting people to buy the product.
• The costs of resources consumed by advertising are selling costs. Critics argue that these
costs are a waste because they do not add to consumer utility.
• However, this criticism ignores how advertising can increase consumption which is good as
products are manufactured with ever greater efficiency and ever more cheaply.
• Advertising appears to be effective for individual companies not because it expands
consumption, but only because it shifts consumption away from one product to another.
Hence it proves that beyond the level needed to impart information, advertising becomes a
waste of resources
• Increasing consumption has led to a rapid industrial expansion that has polluted much of the
natural environment and has rapidly depleted our nonrenewable resources. Unless we limit
consumption, we will soon outrun the finite natural resources.
 Negative Effects

• Advertising and market power: it creates monopoly power

• Big firms use advertising to create brand loyalties which let them become
monopolies or oligopolies which lead them to increase prices. As a result, a few
large oligopoly firms emerge in control of consumer markets from which small
firms are effectively barred. Advertising, then, is supposed to reduce competition
and raise barriers to entry into markets.
• However, this criticism ignores the fact that there are studies that show that big
monopoly or oligopoly firms do not advertise more than little firms. Some
concentrated industries (soaps, cigarettes, breakfast cereals) expend large amounts
on advertising, but others (drugs, cosmetics) do not. Moreover, in at least some
oligopoly industries (e.g., the auto industry), smaller firms spend more per unit on
advertising than the large major firms.
 Advertising and the Creation of Consumer Desires
• John K. Galbraith argues that advertising is manipulative: It is the creation of desires in
consumers for the sole purpose of absorbing industrial output.
• Galbraith distinguished two kinds of desires: those that have a “physical” basis, such as
desires for food and shelter, and those that are “psychological in origin,” such as the
individual’s desires for goods that “give him a sense of personal achievement.
• it creates psychic desires which, unlike physical desires, are pliable and unlimited.
• Psychic desires are created so that firms can use us to absorb their output; ensuring that
people buy what is produced. In this way, we are treated as means instead of ends and thus
this is unethical.
• Production is not molded to serve human desires; rather, human desires are molded to serve
the needs of production. The consumer is used merely as a means for advancing the ends and
purposes of producers, and this diminishes the consumer’s capacity to freely choose.
• It is unclear whether all the effects of advertising of Galbraith are correct but we can say that
some advertisements are intended to manipulate. They are intended to arouse in consumers a
psychological desire for the product without consumers’ knowledge and without consumers
being able to rationally weigh whether the product is in their own best interest
 Advertising and Its Deceptive Effects on Beliefs
. Most of the criticisms focus on the deceptive aspects of modern advertising.
• Deceptive advertising involves three elements just like a communication:
1. The authors who originates the communication
• There are three necessary conditions for deception of the author:
– The author must have the intention to make the audience belief something that is false.
– The author must know that what he tells is false.
– The author must intentionally utter or do something that leads the audience to believe this false thing.
• The advertiser cannot be held morally responsible for misinterpretations of an advertisement when these
are unforeseen and unintended.
• The “author” of an advertisement should be taken to include not only the heads of an
advertising agency, but also the persons who create advertising copy and those who
“endorse” a product.
2. The medium that carries the communication
• The truth in advertising also partly rests on the media or intermediaries that carry or transmit the message
of the advertisements. These media can communicate false messages of the advertisement and are
therefore also responsible for the deceptive effects. Eg In the drug industry, retail agents serve
3. The audience who receives the communication
• Whether the advertisement is deceptive also depends on the capacities of the audience that receives the
message. An audience that has knowledge is probable able to correctly interpret and advertisement that
may be misleading.In contrast, vulnerable audiences may not be able to recognize the deceptive nature of
the advertisement.
Consumer privacy
• Technological improvement has given us the power to collect, manipulate and disseminate
personal information about consumers. This power has enabled us to invade the privacy of
consumers and may lead to harm.
• The right to privacy is the right of a person to determine what, to whom and how much
information about themselves will be disclosed to other parties.
• There are two basic types of privacy:
• Psychological privacy: Privacy with respect to a person’s inner life. These include thoughts,
plans, personal beliefs, feelings, wants etc. of a person.
• Physical privacy: Privacy with respect to a person’s physical activities. Physical privacy is
important because it protects psychological privacy.
• Privacy is very important because it protects individuals from disclosures that can lead to
shame, can encourage interference in someone’s private life, hurt loved ones and lead to self-
incrimination.
• It is also important because it enables some things:
• It enables the person to develop ties of friendship, love and trust.
• It enables the development of professional relationships. Like lawyer and client, doctor and patient
• It enables a person to distinct social roles.
• It gives us the ability to determine how others will see us. self-determination is secured by one’s right to
determine the nature and extent of disclosure of information about oneself .
•
Consumer privacy
• It is beneficial for a consumer to have life insurance. So businesses can provide consumers with great
benefits. There are several considerations to balance the legitimate business needs with the right to
privacy:
1. Purpose
• The purpose of the information being collected must be a legitimate business need. It is legitimate when it
leads to benefits for the person from who the information is collected., for example, if banks are generally
willing to extend loans, insurers are generally willing to insure them,
2. Relevance
• Databases may only include information that is directly relevant to the purpose for which the database is
being compiled. credit information provided to banks or credit card issuing agencies should not include
information about political affiliations, medical history etc
3. Informing
• When information from consumers is collected one should inform the consumers that this is done. One
should also inform the consumers about the purpose for which the information is collected.
4. Consent
• A business may only collect information if the person has consented to provide information to that
business and only if the information is used for the purpose for which the person has consented to have it
used.
5. Accuracy
• The information that is collected by the business must be accurate.
6. Security and recipients
• Agents that collect information must be sure that information is secure and not revealed to parties that do
not have the consensus of the individual to receive the information.