Kingfisher
School of Business and Finance
The Ethics of Consumer
Production and Marketing
Module 8
Daryl Ejeil F. Sinlao
Learning Objectives
Identify risks that may occur with the use of consumer products
Evaluate the arguments for and against consumer protection within markets
Explain how a firm's moral duties to consumers may be held in a contractual
relationship
Describe the manufacturer’s responsibilities to consumers as presented by
the due-care view
Examine the broader role of manufacturer responsibility as expressed by the
social costs view
Assess the ethical concerns associated with information and persuasion in
advertising
Outline ethical and unethical business practices as they relate to the
consumer’s right to privacy
Costs associated with Consumer Products
Costs associated with consumer products:
• Deceptive advertising
• Inferior product construction
• Product malfunctions
• Warrantees not honored by manufacturers
Markets and Consumer Protection (1 of 2)
Criticisms of advertising:
• Uninformative.
• Misrepresentation.
• Wasteful.
The Market Approach to Protecting Consumers
• Argument against government interference in consumer safety:
• Consumers are protected from injury by the free market, since competition
demands quality.
Criticisms of the Market Approach to Protecting Consumers
• Inadequate information.
• Consumer irrationality.
• Monopolies and oligopolies.
Markets and Consumer Protection (2 of 2)
Beyond Market Forces
Three views of consumer–seller obligations:
• Contractual.
• Due care.
• Social costs.
The Contractual View of the Manufacturer’s
Duties to Consumers (1 of 3)
Explain how a firm's moral duties to consumers may be held in a contractual
relationship
The contractual view
• Product purchases generate a voluntary contract between buyer and manufacturer
or service provider.
A firm’s four main moral duties to the customer:
• “Complying with the terms of the sales contract and the secondary duties.”
• “Disclosing the nature of the product or service.”
• “Avoiding misrepresentation.”
“Avoiding the use of duress and undue influence.”
The Duty to Comply
The most basic duty to customers:
• Provide products and services that live up to claims made about them.
The Contractual View of the Manufacturer’s
Duties to Consumers (2 of 3)
The Duty of Disclosure
The duty of disclosure.
• A seller has a duty to disclose any potentially disqualifying information to the buyer.
The Duty Not to Misrepresent
The duty not to misrepresent a product or service.
• Misrepresentation is coercive.
Examples of misrepresentation.
The Duty Not to Coerce
The duty not to coerce.
• Coercion and irrational decisions.
The Contractual View of the Manufacturer’s
Duties to Consumers (3 of 3)
Problems with the Contractual View
Some problems with the contractual view.
• Assumptions that buyers and sellers are equal and
make direct agreements.
• View implies consumer responsibility for purchase.
• Erroneously assumes buyers and sellers meet as
equals
The Due-Care View of the Manufacturer’s
Duties to Consumers (1 of 2)
Describe the manufacturer’s responsibilities to consumers as
presented by the due-care view
• Due-care view of manufacturer’s duties to consumers.
Components of Due Care
The components of due care:
• Design: Identify weakness or potential defects in the design stage
• Production: Eliminate defects and weaknesses
• Marketing: Appropriately label product
The Due-Carew View of the Manufacturer’s
Duties to Consumers (2 of 2)
Difficulties with Due Care
Some problems with due care:
• Extent of due care not specified.
• No mechanism for determining who pays for
unforeseen injuries.
• Manufacturer is in a paternalistic position of
deciding how much risk is best for consumers
The Social Costs View of the Manufacturer’s
Duties to Consumers
Examine the broader role of manufacturer responsibility as expressed by the
social costs view
• The social costs view.
• Strong version of caveat venditor.
• Manufacturer is responsible for the product and any foreseen and unforeseen dangers.
Utilitarian Arguments Underlying the Social Costs View
• Utilitarian arguments underlie the social costs view.
• Basis for strict liability legal doctrine.
Criticisms and Defense of the Social Costs View
Some criticisms of the social costs view:
• Unjust.
• Erroneous assumptions.
• Undue burden.
Advertising Ethics (1 of 3)
Assess the ethical concerns associated with
information and persuasion in advertising
Concerns with advertising:
• Costs are passed to consumer.
• It is wasteful.
• It is not informational.
Distinguishing Advertising from Other
Communication
• The two-step process:
• Advertising’s main objective is to induce audience
members to purchase the advertised product or service.
This is achieved in two steps:
• Creating a desire in the consumer.
• Creating a belief in the consumer that the goods advertised
will satisfy that desire.
Advertising Ethics (2 of 3)
The Social Effects of Advertising
Effects of advertising:
• Psychological.
• Waste.
• Market power.
Advertising and the Creation of Consumer Desires
Galbraith’s claims:
• Advertising creates psychological desires that, as such, as pliable and
unlimited.
• Advertising thereby manipulates consumers.
• Such manipulation treats people as mere means, not ends, and so it is
unethical.
Advertising Ethics (3 of 3)
Advertising and Its Deceptive
Effects on Consumer Beliefs
Requirements of deceptive
advertising:
• Advertiser intends to deceive.
• Media or intermediaries who
willingly transmit the deception.
• A vulnerable audience –
Miseducated and
Disinformed customers
Consumer Privacy (1 of 2)
Outline ethical and unethical business practices as
they relate to the consumer’s right to privacy
• Violation of consumer rights to privacy
• Misuse of data collected, manipulated, or disseminated.
Defining the Right to Privacy
• A right to privacy.
• Protects what and how much information is shared with
others.
• Values of privacy.
Consumer Privacy (2 of 2)
Some ways businesses try to preserve consumer
privacy
• Relevance
• Purpose
• Consent
• Accuracy
• Security, recipients, and users
Evaluating Advertisement Ethically
Kingfisher
School of Business and Finance
The Ethics of Consumer
Production and Marketing
Module 8
Daryl Ejeil F. Sinlao