The Ethics of

Consumer
Production and
Marketing
USMAN CHAUDHRY
The Ethics of Consumer
Production and Marketing
Things to consider;
• How far the manufacturers go to make their products safe.
• The relationship between a business and its customers.
• Do businesses have a duty to protect customers from any harm?
• What responsibility do businesses have for customer injury?
• Advertising – helping or harming consumers?
• Customer’s privacy and the businesses.

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Markets and Consumer
Protection
Problems consumers face;
• Dangerous and risky products
• Deceptive selling practices
• Poorly constructed products
• Failure to honour warranties
• Deceptive and unpleasant advertising

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Markets and Consumer
Protection
In the market approach to consumer protection, consumer safety
is seen as a “good” that is most efficiently provided through the
mechanism of free market whereby sellers must respond to
consumer demands.
If consumers want products to be safer - must be willing to pay
more for safer products and shows preference for manufacturers
of safe products.
Producers must build more safety into their products or they risk
losing customers to competitors.
◦ Market ensures that producers respond adequately to consumer’s desires for
safety

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Markets and Consumer
Protection
But if consumers:
◦ do not place a high value on safety
◦ unwilling to pay for safety or
◦ has no preference for safer products
◦ then it is wrong to push increased levels of safety down through
government regulations.

Only consumers can say what value they place on safety and
they should be allowed to register their preferences
through free choices in markets and not to be coerced by
businesses or governments into paying for safety levels they
may not want.

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Markets and Consumer
Protection
The critics of this market approach respond that the benefits of free
markets are obtained with certainty only when markets have the seven
characteristics that define them;
a) There are numerous buyers and sellers
b) Everyone can freely enter and exit the market
c) Everyone has full and perfect information
d) All goods in the market are exactly similar
e) There are no external costs
f) All buyers and sellers are rational utility maximizers
g) The market is unregulated

These characteristics are absent in consumer markets, especially on

characteristics (c) and (f).

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 Markets and Consumer
Protection

Rational Utility Maximizer

◦ A rational utility maximizer is a person who has a well defined and consistent
set of preferences, and who knows how personal choice will affect those
preferences.

Problems with the assumption of full information

• many products are too complex for consumers to understand and markets
cannot provide consumers with product information.

Many, perhaps most, consumer markets are not competitive but are, instead, monopolies
.or oligopolies in which sellers can manipulate prices and supply

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Markets and Consumer
Protection
Consumers must be protected through the legal structures of
government and through the voluntary initiatives of responsible
businesspeople.

But, part of the responsibility for consumer injuries must rest on

.consumers
◦ Are they trained and possess knowledge and expertise of products and adequately
trained to use them?

So, where does the consumers’ duty to protect his or her own
interest end, and where does the manufacturer’s duty to
protect consumers’ interest begin?

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Theories of Ethical Duties of
Manufacturers
There are three different theories on the ethical duties of manufacturers, each
of which strikes a different balance between consumers’ duty to protect
themselves and the manufacturer’s duty to protect consumers.

◦ The Contract View

◦ The Due Care View and
◦ The Social Cost View

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The Contract View
According to the contract view, the relationship between a
business firm and its consumers is essentially a contractual
relationship and the firm’s moral duties to the customer are
those created by this contractual relationship.

 Sales Contract- when a consumer buys a product, this view

holds, the consumer voluntarily enters into a “sales contract”
with the business firm. The firm freely and knowingly agree to
give the consumer a product with certain characteristics and the
consumer in turn freely and knowingly agrees to pay a certain
sum of money to the firm for the product.

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…Contract
Contract is a free agreement that imposes on the parties
the basic duty of complying with the terms of the
agreement.
Both the parties to the contract must have full knowledge of the
nature of the agreement they are entering.
Neither party to a contract must intentionally misrepresent the
facts of the contractual situation to the other party.
Neither party to a contract must be forced to enter the contract
under duress or undue influence

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Moral Duties to Consumers
Under Contractual Theory
The theory claims that a business has four main moral duties:
The basic duty of
1. Complying with the terms of the sales contract (Duty to Comply) and
the secondary duties of;
2. Disclosing the nature of the product (Duty of Disclosure).
3. Avoiding misrepresentation and (Duty Not to Misrepresent).
4. Avoiding the use of duress and undue influence (Duty not to Coerce).

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Moral Duties Towards
Consumers
Duty To Comply
◦ The duty to provide consumers with a product that lives up to those
claims that the firm expressly made about the product, which led the
customers to enter the contract freely and which formed the
customers’ understanding concerning what they were agreeing to buy.
◦ Winthrop Laboratories painkiller
◦ The definition of product quality used here is: the degree to which
product performances meet predetermined expectation with respect
to;
◦ a) reliability
◦ b) service life
◦ c) maintainability
◦ d) product safety

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Moral Duties Towards
Consumers
The Duty Of Disclosure
An agreement is not binding unless both parties to the agreement
knows what they are doing and freely choose to do it.
The seller who intends to enter to contract with a customer has a
duty to disclose exactly what the customer is buying and what the
terms of the sale are.
The seller has a duty to inform the buyer of any characteristics of
the product that could affect the customer’s decision to purchase
the product.

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Moral Duties Towards
Consumers
The Duty Not To Misrepresent
Misrepresentation reduces freedom of choice
Misrepresentation is coercive
Influencing the thinking process
A person who intentionally misled, acts as the deceiver wants the
person to act and not as the person would freely have chosen to
act if the person had known the truth.
 Rahat Bakery’s Logo
 Pashmina products

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Moral Duties Towards
Consumers
Duty Not To Coerce
People act irrationally when under the influence of fear or
emotional stress.
When a seller takes advantage of a buyer’s fear or emotional
stress to extract consent to an agreement that the buyer would
not make if the buyer was thinking rationally, the seller is using
pressure or undue influence to coerce.
 Funeral Services (e.g., International)

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The Due Care Theory
The Due Care theory of the manufacturer’s duties to
consumers
◦ The view that because manufacturers are in a more advantaged
position, they have a duty to take special care to ensure that
consumers’ interests are not harmed by the products that they offer
them.
◦ The doctrine of caveat emptor (buyer beware) is replaced with the
doctrine of caveat venditor (seller beware)

◦ e.g., mobile phones and other such devices

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The Due Care Theory
The “due care” view hold that because consumers must depend
on the greater expertise of the manufacturer, the manufacturer
not only has a duty to deliver a product that lives up to the
express and implied claims about it, but also has a duty to
exercise due care to prevent others from being injured by the
product even if the manufacturer explicitly disclaims such
responsibility and the buyer agrees to the disclaimer.

◦ Samsung Note 7

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The Due Care Theory
Due care must be provided into:
◦ The design of the product
◦ The production – material, manufacturing process, and quality
◦ The Information – (marketing) warning labels and instructions
attached to the product
◦ Harmful effects, age policy etc.

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 The Social Costs View
The view that a manufacturer should pay the costs of any injuries caused by
the defects in the product, even if the manufacturer exercised all due
care in designing, making, and marketing it, and the injury could not have
been foreseen.

Strict Liability (Absolute Liability)

◦ A legal doctrine that holds that manufacturers must bear the costs of
injuries resulting from product defects regardless of fault.

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 The Social Costs View
Manufacturer should pay the costs of all injuries caused by the defect in
a product even if exercised due care
Argues that injuries are external costs that should be internalized.
◦ Internalizing all costs in this way, will lead to a more efficient use of society’s
resources:
◦ No overproduction
◦ Manufacturers will take extra care to avoid accidents

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Advertising Ethics
•Commercial advertising is a communication between a seller and
potential buyers that is publically addressed to a mass audience and is
intended to induce members of this audience to buy seller’s products.
•It succeeds by creating a desire for the seller’s product or a belief that a
product will satisfy a preexisting desire.
•Defenders of advertising claim, “it is, before all else, communication.”

•Advertisement can be - Truthful or Deceptive

•Contain full information?

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…Advertising
Is advertising, then, a waste or a benefit? Does it harm
consumers or help them?
 Games - Violence
 Mobile phones - packages/rates

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Advertising and Creation of
Consumer Desires
John K. Galbraith argued that advertising is manipulative.
Sometimes only to increase the sales, minds of people are
influenced and demands are created.
Physical desires
 Relatively immune to being changed by persuasion
 Food, shelter etc.

Psychological desires
 Are capable of being managed, controlled and expanded
 Health, beauty, comfort, luxury etc.

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Consumer Privacy
Right to privacy
•The right of persons to determine what, to whom, and how
much information about themselves will be disclosed to other
parties.
•Privacy protects individuals from shame, interference, hurting loved ones
etc.
– Psychological Privacy – Privacy with respect to a person’s inner life.
– Physical privacy – Privacy with respect to a person’s physical activities
◦ Credit bureaus/agencies
◦ Facebook
◦ Google

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