MARKETING, ADVERTISING AND PRODUCT

SAFETY-ETHICAL ISSUES
• VIRTUALLY ALL ASPECTS OF MARKETING-FROM
THE DEVELOPMENT OF NEW PRODUCTS TO
PRICING, PROMOTION, AND SALES- RAISE
ETHICAL QUESTIONS.
• MARKETING CONSISTS OF THE PERFORMANCE OF
BUSINESS ACTIVITIES THAT DIRECT THE FLOW OF
GOODS AND SERVICES FROM THE PRODUCER TO
CONSUMER OR USER.
CONSUMER RIGHTS
• TRADITIONALLY, PRODUCERS ARE REGARDED
AS HAVING THE FOLLOWING RIGHTS:
1. THE RIGHT TO MAKE DECISIONS REGARDING THE
PRODUCTS OFFERED FOR SALE, SUCH AS THEIR
DESIGN AND STYLE.
2. THE RIGHT TO SET THE PRICE FOR PRODUCTS AND
ALL OTHER TERMS OF SALE, INCLUDING WARRANTIES.
3. THE RIGHT TO DETERMINE HOW PRODUCTS WILL BE
MADE AVAILABLE TO CONSUMERS(DECISIONS ABOUT
DISTRIBUTION CHANNELS).
4. THE RIGHT TO PROMOTE PRODUCTS IN ANY WAY THAT
THEY CHOOSE, INCLUDING THE USE OF ANY TRUTHFUL
ADVERTISING MESSAGE.
• THESE RULES ARE LIMITED BY THE USUAL RULES
OF FAIR MARKET EXCHANGES.
• -THAT IS PRODUCTS MUST BE AS REPRESENTED;
• -PRODUCERS MUST LIVE UPTO THE TERMS OF
THE SALES AGREMMENT, AND
• -ADVERTISING AND OTHER INFORMATION ABOUT
PRODUCTS MUST NOT BE DECEPTIVE.
• CONSUMERS, ON THE OTHER HAND, ARE
TRADITIONALLY RECOGNIZED AS HAVING ONLY
THE RIGHT NOT TO BUY-THAT IS RESTRICTED TO
“VETO” OPTION.
• THE RIGHTS OF CONSUMERS ARE NOT VIOLATED
IF PRODUCERS FAIL FOR ANY REASON TO
PROVIDE CONSUMERS WITH GOODS THEY
DESIRE.
• MOREOVER, THE BURDEN OF PROTECTING THE
INTERSTS OF CONSUMERS FALLS PRIMARILY ON
CONSUMERS THEMSELVES.
• IN PARTICULAR, THEY HAVE THE RESPONSIBILITY
FOR ACQUIRING THE INFORMATION NEEDED TO
MAKE RATIONAL CHOICES.
• THE NUMBER ONE RULE IS THUS CAVEAT
EMPTOR, OR BUYER BEWARE.
• IN 1962, PRESIDENT JOHN KENNEDY OF
U.S. PROCLAIMED A FOUR-POINT BILL OF
RIGHTS FOR CONSUMERS:
1. THE RIGHT TO BE PROTECTED FROM HARMFUL
PRODUCTS.
2. THE RIGHT TO BE PROVIDED WITH ADEQUATE
INFORMATION ABOUT PRODUCTS.
3. THE RIGHT TO BE OFFERED A CHOICE THAT INCLUDES
THE PRODUCTS THAT CONSUMERS TRULY WANT.
4. THE RIGHT TO HAVE A VOICE IN THE MAKING OF
MAJOR MARKETING DECISIONS.
• THE FIRST TWO OF THESE RIGHTS ARE NOW
EMBODIED TO SOME EXTENT IN CONSUMER
PROTECTION LEGISLATION-THE CONSUMER
PRODUCT SAFETY ACT (1972), THE FAIR
PACKAGING AND LABELING ACT(1966) AND THE
MAGNUSON-MOSS WARRANTY ACT(1975).
PACKAGING AND LABELING
• CONSUMERS NEED A CERTAIN AMOUNT OF
INFORMATION TO MAKE RATIONAL CHOICES, AND
OFTEN THIS INFORMATION IS NOT EASILY
OBTAINED.
• THE MORE INFORMATION CONSUMERS HAVE, THE
BETTER THEY CAN PROTECT THEMSELVES IN THE
MARKETPLACE.
• THE ETHICAL QUESTION, THOUGH, IS, HOW MUCH
INFORMATION IS A MANUFACTURER OBLIGATED
TO PROVIDE?
• TO WHAT EXTENT ARE CONSUMERS
RESPONSIBLE FOR INFORMING THEMSELVES
ABOUT THE PRODUCTS FOR SALE?
• MANUFACTURERS OFFER A NUMBER OF
REASONS FOR NOT PROVIDING MORE
INFORMATION.
• -A DETAILED LISTING OF AMOUNTS OF
INGREDIENTS MIGHT JEOPARDIZE RECIPES THAT
ARE TRADE SECRETS;
• -LISTING THE KIND OF FAT WOULD PREVENT
THEM FROM SWITCHING INGREDIENTS TO TAKE
ADVANTAGE OF CHANGES IN THE RELATIVE
PRICES OF DIFFERENT OILS;
• -PRODUCT DATING IS OFTEN MISUNDERSTOOD BY
CONSUMERS, WHO REJECT OLDER PRODUCTS
THAT ARE STILL GOOD,
• AND PACKAGING HAS TO BE DESIGNED WITH
MANY CONSIDERATIONS IN MIND, SUCH AS EASE
IN FILLING, THE PROTECTION OF GOODS IN
TRANSIT, THE PREVENTION OF SPOILAGE, AND SO
ON.
• SO THE MANUFACTURERS SAY THEY HAVE A
NUMBER OF PRACTICAL CONSTRAINTS.
PRICING
• THE QUESTION OF HOW MUCH INFORMATION
SELLERS ARE OBLIGATED TO PROVIDE ARISES
ALSO IN PRICING.
• THE PROLIFERATION OF PRODUCTS AT
DIFFERENT PRICES MAKES IT DIFFICULT FOR
CONSUMERS TO COMPARE EVEN THOSE FROM
THE SAME MANUFACTURER.
• AS A RESULT, LOCAL AND STATE GOVERNMENTS
NOW REQUIRE RETAILERS TO MARK THE PRICE
ON EACH PRODUCT.
• GENERALLY, SELLERS ARE NOT OBLIGATED TO
PROVIDE COMPLETE INFORMATION.
• BUT ONLY TO AVOID MISREPRESENTATION.
• HOWEVER, BUYERS ARE ENTITLED TO RELY ON
ANY REPRESENTATION THAT ARE MADE TO MAKE
MINIMAL ASSUMPTIONS ABOUT THE QUALITY OF
GOODS AND THEIR SUITABILITY.
• THESE ARE REFERRED TO IN LAW AS IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR USE.
• HOWEVER, BEYOND THE OBLIGATIONS TO BE
TRUTHFUL AND FULFILL WARRANTIES, BOTH
EXPRESSED AND IMPLIED, CAVEAT EMPTOR IS
THE RULE OF THE MARKETPLACE.
• AN ALTERNATIVE RULE THAT UNDERLIES MUCH
CONSUMER PROTECTION LEGISLATION IS THAT
MANUFACTURERS HAVE AN OBLIGATION TO
PROVIDE RELEVANT INFORMATION.
• THIS IS NECESSARY, AS CONSUMERS CANNOT
REASONABLY OBTAIN FOR THEMSELVES
SUFFICIENT INFORMATION TO PROTECT
THEMSELVES IN THE MARKET PLACE.
• BECAUSE MANUFACTURERS ALREADY HAVE THE
INFORMATION AS THEY MAKE KEY DECISIONS
ABOUT THE PRODUCTS, THEY CAN PROVIDE
INFORMATION IN A COST EFFECTIVE WAY.
DECEPTIVE AND MANIPULATIVE MARKETING
PRACTICES
• MARKETING PRACTICES ARE DECEPTIVE WHEN
CONSUMERS ARE LED TO HOLD FALSE BELIEFS
ABOUT A PRODUCT.
• EXAMPLES
MARKDOWNS FROM A SUGGESTED RETAIL PRICE
THAT IS NEVER CHARGED.
BOGUS CLEARANCE SALES IN WHICH INFERIOR
GOODS ARE BROUGHT IN.
 PACKAGING AND LABELING ARE DECEPTIVE
WHEN THE SIZE OR SHAPE OF A CONTAINER, A
PICTURE OR DESCRIPTION, OR THE USE OF
TERMS SUCH AS ECONOMY SIZE AND NEW AND
IMPROVED MISLEAD CONSUMERS IN SOME
SIGNIFICANT WAY.
• MANIPULATION IS DISTINGUISHED FROM
DECEPTION IN THAT IT TYPICALLY INVOLVES NO
FALSE OR MISLEADING CLAIMS.
• INSTEAD, IT CONSISTS OF TAKING ADVANTAGE OF
CONSUMER PSYCHOLOGY TO MAKE A SALE.
• MORE PRECISELY, MANIPULATION IS
NONCOERCIVELY SHAPING THE ALTERNATIVES
OPEN TO PEOPLE OR THEIR PERCEPTION OF
THOSE ALTERNATIVES SO THAT THEY ARE
EFFECTIVELY DEPRIVED OF A CHOICE.
• EXAMPLES OF RELATIVELY HARMLESS FORMS OF
MANIPULATION INCLUDE MULTIPLE PRICING,
SUCH AS
“3 FOR $1” AND “BUY TWO, GET ONE FREE” AND
ODD-EVEN PRICING, $2.99 INSTEAD OF $3.00.
 WHEN CUSTOMERS ARE ACCUSTOMED TO
PAYING A CERTAIN PRICE FOR A PRODUCT,
MANUFACTURERS OFTEN REDUCE THE AMOUNT
IN ORDER TO MAINTAIN THE SAME PRICE, A
PRACTICE KNOWN AS CUSTOMARY PRICING.
• A MORE OBJECTIONABLE FORM OF
MANIPULATION IS “BAIT AND WATCH”.
• A PRACTICE IN WHICH A CUSTOMER IS LURED
INTO A STORE BY AN ADVERTISEMENT FOR A
LOW-COST ITEM AND THEN SOLD A HIGHER
PRICED VERSION.
• OFTEN THE LOW COST ITEM IS NOT AVAILABLE.
• BUT EVEN IF IT IS, THE ADVERTISED PRODUCT
MAY BE OF SUCH LOW QUALITY THAT
CUSTOMERS ARE EASILY “SWITCHED” TO A
HIGHER PRICED PRODUCT.
• BAIT ANT SWITCH IS MANIPULATIVE NOT ONLY
BECAUSE CONSUMERS ARE TRICKED INTO
ENTERING THE STORE BUT BECAUSE THEY ENTER
IN A FRAME OF MIND TO BUY.
• THE DIFFICULT ETHICAL QUESTION IN THIS AREA
CONCERN THE DEFINITIONOF DECEPTION AND
MANIPULATION
AND
THE DIVIDING LINE BETWEEN ACCEPTABLE AND
UNACCEPTABLE MARKETING PRACTICES.
MARKETING RESEARCH
• COMPANIES ENGAGE IN A GREAT AMOUNT OF
SYSTEMATIC INFORMATION GATHERING ABOUT
CONSUMERS.
• THIS IS DONE TO AID THEM IN DEVELOPING NEW
PRODUCTS AND PLANNING MARKETING
STRATEGIES.
• DATA ARE COLLECTED USING ALL THE
TECHNIQUES OF SOCIAL SCIENCE RESEARCH,
INCLUDING IN-DEPTHS SURVEYS, FIELD STUDIES,
AND CONTROLLED LABORATORY EXPERIMENTS.
• ONE SET OF PROBLEMS FOR MARKETING
RESEARCH CONDUCTED BY OUTSIDE AGENCIES
CONCERNS THE RELATIONS BETWEEN
RESEARCHERS AND CLIENTS.
• ALSO, INTEGRITY IN UNDERTAKING RESEARCH
ASSIGNMENTS AND HONESTY IN INTERPRETING
DATA AND PRESENTING RESULTS.
• A THREAT TO PRIVACY COMES FROM THE USE OF
RESEARCH DATA IN THE GROWING FIELD OF
DATA BASE MARKETING, IN WHICH RETAILERS,
THROUGH CREDIT-CARD RECORDS AND OTHER
INFORMATION, ARE ABLE TO CONSTRUCT
DETAILED PROFILES OF INDIVIDUAL CUSTOMERS.
ANTICOMPETITIVE MARKETING PRACTICES
• THE MAJOR ANTICOMPETITIVE MARKETING
PRACTICES FOLLOWED ARE:-
1. PRICE FIXING
2. RESALE PRICE MAINTENANCE
3. PTICR DISCRIMINATION
4. RECIPROCAL DEALING, TYING ARRANGEMENTS AND
EXCLUSIVE DEALING
• THE OVERALL ETHICAL OBJECTION TO THESE
PRACTICES IS THAT THEY ARE NOT FAIR FORMS
OF COMPETITION.
• IN PARTICULAR, ANTICOMPETITIVE PRACTICES
DISTORT PRICES BY PREVENTING THE MARKET
FROM SERVING AS A MECHANISM FOR SETTING
PRICES FAIRLY.
ADVERTISING
• ADVERTISING IS WIDELY CRITICIZED.
• EXAGGERATED CLAIMS AND OUTRIGHT
FALSEHOODS ARE THE MOST OBVIOUS TARGETS
FOR COMPLAINTS.
• FOLLOWED CLOSELY BY THE LACK OF TASTE,
IRRITATING REPETITION, AND OFFENSIVE
CHARACTER OF MANY ADS.
• QUESTIONS HAVE BEEN RAISED ABOUT THE
MORALITY OF SPECIFIC KINDS OF ADVERTISING.
• SUCH AS ADVERTISING FOR ALCHOHOL AND
TOBACCO PRODUCTS AND ADS AIMED AT
CHILDREN.
• PARTICULAR ADS ARE ALSO FAULTED FOR THEIR
USE OF EXCESSIVE SEX OR VIOLENCE.
• FINALLY, THERE IS GREAT CONCERN ABOUT THE
POTENTIAL OF ADVERTISING FOR BEHAVIOUR
CONTROL.
• THERE ARE TWO ETHICAL ISSUES IN
ADVERTISING, NAMELY
-THE CHARGE THAT ADVERTISING USES
UNACCEPTABLE MEANS OF PERSUASION
-AND THE PROBLEM OF DEFINING AND
PREVENTING DECEPTIVE ADVERTISING
• PERSUASION
• THERE IS NO DISPUTING THE FACT THAT THE
POWER OF PERSUASION IS SUBSTANTIAL.
• THE MAJOR DIFFERENCE IS WHETHER THERE IS
ANYTHING MORALLY OBJECTIONABLE ABOUT
THE USE OF THIS POWER.
• DEFENDERS OF ADVERTISING POINT OUT THAT
THERE IS ARGUMENT IN ITS FAVOUR.
• ADS THAT CITE GOOD REASONS FOR BUYING A
PRODUCT (BY SHOWING ITS USES, FOR EXAMPLE)
OR
PREFERRING ONE PRODUCT OVER ANOTHER
(SUCH AS LOW COST OR BETTER QUALITY)

MAKE A RATIONAL APPEAL TO CONSUMERS AND

PERMIT THEM TO EVALUATE THE REASONS AND
DECIDE FOR THEMSELVES.
• SIMILARLY, GOOD ADVERTISING APPEALS ON
MANY LEVELS;
-IT IS AESTHETICALLY PLEASING,
-INTELLECTUALLY STIMULATING,
-AND OFTEN HUMOROUS OR HEARTWARMING.
• IN MANY ADS, BOTH RATIONAL AND
NONRATIONAL ELEMENTS ARE COMBINED FOR
GREATER EFFECT WITHOUT REDUCING PEOPLE’S
FREEDOM OF CHOICE.
• ANY CRITERION OF RATIONAL PERSUATION MUST
CONSIDER THE ENDS FOR WHICH TECHNIQUES OF
PERSUATION ARE USED
AND
NOT MERELY THE TECHNIQUES THEMSELVES,
CONSIDERED AS MEANS.
• CAMPAIGNS AGAINST SMOKING AND DRUG USE
ARE NOT USUALLY THOUGHT TO BE
OBJECTIONABLE
• BUT IF ADS TO INDUCE PEOPLE TO SMOKE AND
ANTISMOKING ADS BOTH EMPLOY THE SAME
NONRATIONAL TECHNIQUES OF PERSUATION-
INCLUDING SOME THAT PEOPLE CANNOT
REASONABLY EXPECTED TO RESIST-THEN THE
MORAL DIFFERENCE BETWEEN THEM CANNOT BE
SOLELY A MATTER OF THE MORALITY OF THE
MEANS.
• SO THE MORALITY OF ADVERTISING DEPENDS, AT
LEAST IN PART, ON THE ENDS FOR WHICH
CERTAIN TECHNIQUES ARE USED.
DECEPTIVE ADVERTISING
• EXAMPLES
– AN AD CLAIMS THAT A CHILDREN’S CEREAL CONTAINS
LESS SUGAR THAN AN APPLE. THE CEREAL IS 40
PERCENT SUGAR, AND ITS CALORIES HAVE LITTLE
NUTRITIONAL VALUE, WHEREAS AN APPLE CONTAINS
MANY NUTRIENS THAT THE CEREAL LACKS.

– AIRFARES ARE OFTEN ADVERTISED FOR ONE-WAY

TRAVEL, BUT THIS PRICE IS AVAILABLE ONLY WITH A
ROUND-TRIP PURCHASE. THE ADVERTISED AIRFARE
ALSO OMITS APPLICABLE TAXES. THE ROUND-TRIP
CONDITION AND THE POSSIBILITY OF TAXES ARE
REVEALED IN SMALL PRINT ELSEWHERE IN THE AD.
• WHETHER THESE ADS ARE DECEPTIVE IS NOT
EASY TO DETERMINE BECAUSE THE TERM
DECEPTION DOES NOT HAVE A CLEAR SETTLED
MEANING.
• THERE ARE OTHER ADVERTISING CLAIMS THAT
ARE FALSE IF TAKEN LITERALLY BUT ARE
COMMONLY REGARDED AS HARMLESS
EXAGGERATION.
EXAMPLES
-EVERY RAZOR BLADE GIVES THE CLOSEST, MOST
COMFORTABLE SHAVE
 -EVERY TYRE, THE SMOOTHEST, SAFEST RIDE; AND
-EVERYPAIN KILLER, THE QUICKEST, GENTLEST RELIEF.
• DECEPTION OCCURS WHEN A FALSE BELIEF,
WHICH AN ADVETISEMENT EITHER CREATES OR
TAKES ADVANTAGE OF, SUBSTANTIALLY
INTERFERES WITH THE ABILITY OF PEOPLE TO
MAKE RATIONAL CONSUMER CHOICES.
• AT LEAST TWO FACTORS ARE RELEVANT TO THE
NOTION OF SUBSTANTIAL INTERFERENCE.
• ONE IS THE ABILITY OF CONSUMERS TO PROTECT
THEMSELVES TO MAKE RATIONAL CHOICES
DESPITE ADVERTISING THAT CREATES OR TAKES
ADVANTAGE OF FALSE BELIEFS.
• THUS, CLAIMS THAT ARE EASILY VERIFIED OR
NOT TAKEN SERIOUSLY BY CONSUMERS ARE NOT
NECESSARILY DECEPTIVE.
• THE SECOND FACTOR IS THE SERIOUSNESS OF
THE CHOICE THAT CONSUMERS MAKE.
• FALSE BELIEFS THAT AFFECT THE CHOICES WE
MAKE ABOUT OUR HEALTH OR FINANCIAL
AFFAIRS ARE OF GREATER CONCERN THAN
FALSE BELIEFS THAT BEAR ON
INCONSEQUENTIAL PURCHASES.
PRODUCT LIABILITY THEORY
• DO MANUFACTURERS HAVE A RESPONSIBILITY TO
ENSURE THAT A PRODUCT IS SAFE BEFORE IT IS
PLACED ON THE MARKET?
• THE RIGHT OF CONSUMERS TO BE PROTECTED
FROM HARMFUL PRODUCTS RAISES
INNUMERABLE PROBLEMS FOR
MANUFACTURERS.
• EVERY PRODUCT CAN BE MADE SAFER AT SOME
COST.
• BUT IS THERE A LIMIT TO THE SAFETY
IMPROVEMENTS THAT A MANUFACTURER OUGHT
TO PROVIDE?
• THREE THEORIES ARE COMMONLY USED TO
DETERMINE WHEN A PRODUCT IS DEFECTIVE AND
WHAT IS OWED TO THE VICTIMS OF ACCIDENTS
CAUSED BY DEFECTIVE PRODUCTS.
THE DUE CARE THEORY
• THIS THEORY HOLDS THAT MANUFACTURERS
OUGHT TO EXERCISE DUE CARE.
• THEIR OBLIGATION IS TO TAKE ALL REASONABLE
PRECAUTIONS TO ENSURE THAT PRODUCTS THEY
PUT ON THE MARKET ARE FREE OF DEFECTS
LIKELY TO CAUSE HARM.
• ACCORDING TO THIS THEORY, MANUFACTURERS
ARE LIABLE FOR DAMAGES ONLY WHEN THEY
FAIL TO CARRY OUT THIS OBLIGATION AND SO
ARE AT FAULT IN SOME WAY.
• BY FAILING TO EXERCISE DUE CARE, A
MANUFACTURER IS ACTING WRONGLY AND
HENCE OUGHT TO PAY COMPENSATION TO
ANYONE WHO IS INJURED AS A RESULT.
• THE LEGAL EXPRESSION OF THIS THEORY IS THE
VIEW IN THE LAW OF TORTS THAT PERSONS ARE
LIABLE FOR ACTS OF NEGLIGENCE.
• A MANUFACTURER CAN BE ASSUMED TO KNOW
MORE THAN THE AVERAGE PERSON ABOUT THE
PRODUCT AND, HENCE, CAN BE LEGALLY
REQUIRED TO EXERCISE A GREATER DEGREE OF
CARE.
• THE STANDARD OF DUE CARE FOR
MANUFACTURERS OR OTHER PERSONS
INVOLVED IN THE SALE OF A PRODUCT TO A
CONSUMER, INCLUDING WHOLESALERS AND
RETAILERS, COVERS A WIDE VARIETY OF
ACTIVITIES.
• AMONG THEM ARE THE FOLLOWING.
1. DESIGN
2. MATERIALS
3. PRODUCTION
4. QUALITY CONTROL
5. PACKAGING, LABELING, AND WARNINGS
6. NOTIFICATION
THE CONTRACTUAL THEORY
• THE SECOND THEORY IS THAT THE
RESPONSIBILITY OF MANUFACTURERS FOR HARM
RESULTING FROM DEFECTIVE PRODUCTS IS THAT
SPECIFIED IN A SALES CONTRACT.
• THE RELATION BETWEEN BUYER AND SELLER IS
VIEWED IN THIS THEORY AS A CONTRACTUAL
RELATION, WHICH IS SUBJECT TO THE TERMS OF
THE CONTRACT.
• EVEN IN THE ABSENCE OF AN EXPLICIT, WRITTEN
CONTRACT, THERE MAY STILL BE AN IMPLICIT,
UNDERSTOOD CONTRACT BETWEEN THE TWO
PARTIES THAT IS ESTABLISHED BY THEIR
BEHAVIOUR.
• THERE IS ALSO AN IMPLIED WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE WHEN THE
BUYER IS RELYING ON THE SELLER’S EXPERTISE
IN THE SELECTION OF THE PRODUCT.
• THE ETHICAL BASIS FOR THE CONTRACTUAL
THEORY IS FAIRNESS IN COMMERCIAL DEALINGS.
THE STRICT LIABILITY THEORY
• A THIRD THEORY, NOW GAINING WIDER
ACCEPTANCE, HOLDS THAT MANUFACTURERS
ARE RESPONSIBLE FOR ALL HARM RESULTING
FROM A DANGEROUSLY DEFECTIVE PRODUCT
EVEN WHEN DUE CARE HAS BEEN EXERCISED
AND ALL CONTRACTS OBSERVED.
• THIS VIEW, IS KNOWN IN LAW AS STRICT
LIABILITY.
• A MANUFACTURER NEED NOT BE NEGLIGENT NOR
BE BOUND BY ANY IMPLIED OR EXPRESS
WARRANTY TO HAVE RESPONSIBILITY.
• THE MERE FACT THAT A PRODUCT IS PUT INTO
THE HANDS OF CONSUMERS IN A DEFECTIVE
CONDITION THAT POSES AN UNREASONABLE
RISK IS SUFFICIENT FOR HOLDING THE
MANUFACTURER LIABLE.
• THE ETHICAL ARGUMENTS FOR STRICT LIABILITY
RESTS ON THE TWO DISTINCT GROUNDS OF
EFFICIENCY AND EQUITY.
• ONE ARGUMENT IS PURELY UTILITARIAN AND
JUSTIFIES STRICT LIABILITY FOR SECURING THE
GREATEST AMOUNT OF PROTECTION FOR
CONSUMERS AT THE LOWEST COST.
• THE SECOND ARGUMENT IS THAT STRICT
LIABILITY IS THE FAIREST WAY OF DISTRIBUTING
THE COSTS INVOLVED IN THE MANUFACTURE AND
USE OF PRODUCTS.
• BOTH OF THESE ARGUMENTS RECOGNISE THAT
THERE IS A CERTAIN COST IN ATTEMPTING TO
PREVENT ACCIDENTS AND IN DEALING WITH THE
CONSEQUENCES OF ACCIDENTS THAT DO OCCUR.
• PREVENTING ACCIDENTS REQUIRES THAT
MANUFACTURERS EXPEND GREATER RESOURCES
ON PRODUCT SAFETY.
MONOPOLIES AND RESTRICTIVE TRADE PRACTICES
ACT, 1969 (MRTP ACT)
• MRTP ACT MAKES DETAILED PROVISIONS IN
RESPECT OF RESTRICTIVE TRADE PRACTICES.
(RTP).
• RTP IS ONE, WHICH HAS, OR MAY HAVE, EFFECT
OF PREVENTING, DISTORTING OR RESTRICTING
COMPETITION IN ANY MANNER AND IN
PARTICULAR:
a) WHICH TENDS TO OR OBSTRUCTS FLOW OF CAPITAL,
RE RESOURCES FOR PRODUCTION, OR
b) WHICH TENDS TO IMPOSE UNJUSTIFIED COSTS OR
RESTRICTIONS ON CONSUMER RELATING TO GOODS
AND SERVICES; BY MANIPULATION OF PRICES, OR
CONDITIONS OD DELIVERY OR TO AFFECT SUPPLIES IN
MARKET.
• SOME TRADE PRACTICES ARE ‘DEEMED
RESTRICTIVE TRADE PRACTICES.
• THE DEEMED RTPs ARE AS FOLLOWS:-
a) RESTRICTIONS ON BUYING AND SELLING-THIS MEANS
RESTRICTING PERSON OR PERSONS TO WHOM GOODS
MAY BE SOLD OR FROM WHOM TO BE BOUGHT. E.g.
CHEMISTS ASSOCIATION ASKING ITS MEMBERS NOT
TO DEAL IN GOODS OF PARTICULAR MANUFACTURER;
ASSOCIATION NOT PERMITTING BUYERS TO DO
BUSINESS WITH NON-MEMBERS.
b) TIE-IN SALES OR FULL LINE FORCING-THIS MEANS
REQUIRING A PERSON TO PURCHASE SOMETHING
ELSE COMPULSORILY ALONG WITH GOODS HE WANTS
TO PURCHASE.
c) EXCLUSIVE DEALING AGREEMENT-NOT TO DEAL WITH
GOODS OTHER THAN THOSE OF SELLER. e.g.
MANUFACTURER ASKING DEALER NOT TO DEAL IN
SIMILAR PRODUCTS OF HIS COMPETITOR, DIRECTLY
OR INDIRECTLY.
SUPREME COURT HAS HELD THAT A ‘NEGATIVE
COVENANT’ RESTRAINING FRANCHISES FROM
DEALING WITH COMPETING GOODS DURING TERM OF
FRANCHISE AGREEMENT IS VALID AND IS NOT
RESTRICTIVE OF TRADE AND BUSINESS. (FRANCISE
MEANS OWNER ALLOWING USE OF HIS BRAND NAME
SUBJECT TO CERTAIN CONDITIONS, QUALITY
RESTRICTIONS etc.
d) COLLECTIVE PRICE FIXATION AND TENDERING-THIS
MEANS A COLLECTIVE AGREEMENT TO PURCHASE OR
SELL OR TO TENDER ONLY AT AGREED PRICE AND
TERMS. e.g. ALL TYRE MANUFACTURERSINCREASING
PRICE UNIFORMLY AND SIMULTANEOUSLY BY MUTUAL
AGREEMENT.
e) DISCRIMINATORY DEALINGS-MEANS ALLOWING
CONCESSIONS, DISCOUNT, BENEFITS, ALLOWANCES,
REBATE etc. GIVING CONCESSIONS OR BENEFIT ON
THE BASIS OF TURNOVER OR GIVING LARGE
DISCOUNTS TO LARGE BUYERS WOULD BE A RTP IF
SUCH DISCOUNTS ARE INJURIOUS TO COMPETITION.
GIVING LARGER DISCOUNT TO LARGE BUYERS WILL
REDUCE COMPETITIVENESS OF SMALL DEALERS.
f) RESALE PRICE MAINTENANCE-THIS MEANS’NOT TO
ALLOW RESALE BELOW CERTAIN PRICE OR NOT TO
SELL ABOVE A CERTAIN PRICE.’ IF MAXIMUM PRICE IS
INDICATED, IT SHOULD BE CLEARLY STATED THAT THE
DEALER IS FREE TO CHARGE BELOW THE INDICATED
PRICE. ANY AGREEMENT FOR RESALE PRICE
MAINTENANCE IS VOID.
DIRECT PRICE MAINTENANCE PERMITTED WHERE THE
MANUFACTURER SELLS GOODS THROUGH ITS OWN
RETAIL SHOPS AND FIXES PRICES TO BE CHARGED IN
SUCH SHOPS.
g) RESTRICTIONS ON OUTPUT OR SUPPLY-THIS MEANS
AN AGREEMENT TO LIMIT, WITHHOLD OR RESTRICT
THE OUTPUT OR SUPPLY OF ANY GOODS OR
ALLOCATE ANY MARKET OR AREAS FOR DISPOSAL OF
GOODS. e.g. CONDITION IN AN AGREEMENT
PROHIBITING SALE OUTSIDE ALLOTTED AREA.
THIS DOES NOT MEAN THAT THESE ARE
THE ONLY RTPs.
UNFAIR TRADE PRACTICE
• A TRADE PRACTICE WHICH FOR PURPOSE OF
PROMOTING SALE, USE OR SUPPLY OF ANY
GOODS OR PROVISION OF SERVICES, ADOPTS
ANY UNFAIR METHOD OR UNFAIR OR DECEPTIVE
PRACTICE.
• FALSE OR MISLEADING REPRESENTATION- MAY
BE ORAL OR IN WRITING. THE STATEMENT MAY BE
ON WRAPPER OR CONTAINER OR ON DISPLAY
BOARD OR CONTAINED IN OR ON ANYTHING THAT
IS MADE AVAILABLE TO MEMBER OF PUBLIC.
• PRODUCT SAFETY STANDARDS.