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THE ETHICS OF CONSUMER PRODUCTION AND MARKETING:Should Consumers Bear More Responsibility?

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Business Ethics ­MGT610
VU
LESSON 34
Second, as a number of researchers have shown, people are irrational and inconsistent when
weighing choices based on probability estimates of future costs and payoffs. Research shows
that people inconsistently rank one payoff as being both better and worse than another. Finally,
markets often fail to have numerous buyers and sellers. Since most consumer markets are
monopolies or oligopolies, the sellers are able to extract abnormally high profits by ensuring
that demand always exceeds supply.
As a whole, then, market forces by themselves are not able to deal with consumer concerns for
safety, freedom from risk, and value. Instead, consumers must be protected by governmental
action and the voluntary initiatives of businesses. Of course, part of the responsibility for
consumer injuries does rest on consumers. People often use items that they have neither the
skill nor experience to handle.
Injuries also occur because of flaws in design, materials, or manufacturing, however. In these
cases, it is the manufacturer's duty to minimize injuries. Their expertise makes them most
knowledgeable about the safest materials and methods of making their products.
Where does the consumer's duty end and the manufacturer's duty begin? Three different
theories address this question: the contract, "due care," and the social costs views.
Who Should Pay? The Product Liability Debate
Every year, 34 million people are injured or killed as a result of product related accidents. Such
injuries are the major cause of death for people between the ages of 1 and 36, outnumbering
deaths from cancer or heart disease. The estimated cost of these injuries is $12 billion annually.
Tens of thousands of product injury lawsuits are filed each year. As the number of claims has
risen, so too have the number of companies forced to file bankruptcy because of massive suits.
Moreover, an increasing number of companies are claiming that they have pulled established
products off the market and halted research on promising products for fear of liability.
Manufacturers claim that they are victims of a system gone haywire. According to strict
liability laws, a manufacturer can be held liable for injuries even when he or she had no way of
preventing those injuries. Holding manufacturers responsible for injuries caused by products
known to be defective or potentially dangerous is one thing, but today manufacturers face
lawsuits--often bordering on the outrageous--for injuries they could not have prevented.
Consumer activists, on the other hand, claim that the threat of product liability suits forces
manufacturers to make product safety a priority and that those who suffer injuries caused by
products should be compensated for their injuries by the manufacturers of those products.
Product injuries represent a major cost of introducing products into a society. Since virtually
every new product carries some unknown risk, a possibility always exists that the product may
cause injuries or imposes other costs on users. This raises an important moral question: How
should these costs is distributed among the members of our society?
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Business Ethics ­MGT610
VU
Should Consumers Bear More Responsibility?
Manufacturers contend that consumers should bear more responsibility for product injuries
because the costs of placing full liability onto companies far outweigh the benefits. Since the
1960s, there has been a steady increase of product liability cases. According to one study,
13,500 product liability suits were filed in federal court in 1986, compared to only 1,500 in
1974. Due to this barrage of litigation, the cost of doing business has risen dramatically.
Insurance premiums have skyrocketed, where insurance is available at all. Manufacturers' legal
costs have also soared: about 60% of the average corporation's litigation expenses today are
product liability cases. The rising cost of product liability insurance and lawsuits has led, in
turn, to great increases in consumer prices.
The economy also has suffered from the boom in product liability claims. When companies
facing massive lawsuits have been forced to scale down their operations, the result is a loss of
jobs. In a recent report by the Conference Board, 15% of corporations surveyed had laid off
workers because of product liability costs, while 8% had been forced to close plants altogether.
In addition, the threat of liability has affected American businesses' ability to compete
internationally. In other countries, there are severe limits on what manufacturers can be held
responsible for and there are fewer tendencies to sue. By not having to contend with a morass
of lawsuits, these companies can offer cheaper products, and put American manufacturers at a
competitive disadvantage.
It is also argued that the fear of being hit with a liability claim keeps many lifesaving drugs and
devices off the market, and stifles creativity and innovation. Even the most rigorous conformity
to safety regulations doesn't prevent liability. One report found that 39% of the companies
surveyed delayed introducing new products or had discontinued products because of product
liability suits. The pharmaceutical industry has been hit the hardest. Only one company in the
U.S. now manufactures vaccines, a product often targeted in lawsuits. Vaccines for AIDS will
certainly not reach the market without protection against lawsuits. Said one spokesperson from
the drug industry, "Decisions [are] already being made on [AIDS] research priorities for
liability reasons."
The costs to manufacturers and to society will only increase as technologies grow more
complex and their applications more varied. Testing products for safety under every possible
condition of use will not only impose great testing costs on manufacturers but will result in
enormous delays in the introduction of new products that could benefit society.
Manufacturers also maintain that it is morally unjust to hold someone liable for injuries that he
or she could not have prevented. Through extensive research and repeated testing, companies
do all that they possibly can, to ensure product safety. And, to prevent harm, warnings and
instructions are plastered over each piece of merchandise.
Finally, some manufacturers point out that in a free market system, businesses have the right to
make and sell whatever products they choose and consumers have the right to choose what they
buy. But rights carry with them responsibilities. When consumers choose to buy risky products
rather than safe ones (both of which businesses may offer in a free market) or when they
choose not to inform themselves about products, they must accept the consequences, including
the responsibility for any injuries resulting from those choices.
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Business Ethics ­MGT610
VU
Should Manufacturers Bear More Responsibility?
Those who hold that manufacturers should bear more of the responsibility for product injuries
argue that the benefits of holding companies liable for these injuries outweigh the costs. In a
recent year, more than 200,000 infants were hospitalized for injuries resulting from the use of
toys, or nursery or recreational equipment. About 1,777,000 people required emergency
treatment because of injuries involving home furnishings; more than 1,200 of these injuries
were fatal. An additional 1,782,000 individuals required treatment for injuries involving home
construction materials; 1,300 of them died from the injuries. Society has an obligation to
minimize such tragedy and suffering. Without the threat of liability, manufacturers would have
little incentive to ensure product safety, and the number of product-related injuries would
escalate.
The costs of holding manufacturers responsible for product injuries are not as great as company
representatives would have us believe. For example, the so-called "explosion" in product
liability suits, "crippling American business," is a myth. A recent study by the RAND
Corporation found that although the number of product liability lawsuits had increased nearly
eight-fold during the last decade, more that half of these lawsuits involved only a handful of
companies, reflecting mass litigation against a few asbestos and pharmaceutical companies. A
report by the Government Accounting Office also concluded that, except for cases involving a
few drug or asbestos companies, product liability suits "do not appear to have been rapidly
accelerating or explosive." Furthermore, it cannot be claimed that product litigation makes
domestic companies any less competitive internationally. Foreign companies that sell in the
U.S. have to abide by the same product liability laws that American companies face. And when
American companies compete abroad, they have the same advantages that foreign companies
have.
Those who hold manufacturers liable for product-related injuries also claim that justice is on
their side. Since the defective product that caused the injury was produced by the manufacturer,
it is fair that the manufacturer bear the costs of that injury. Moreover, they argue, justice
requires that the party that is most able to pay for an injury be the party that bears most of the
financial burden. Manufacturers know in advance that there is always a risk of liability in
introducing new products, and can therefore build the cost of potential lawsuits into the price of
those products. Manufacturers also have the research expertise and laboratories, the
engineering and technical knowledge, and the budgets to assess the risks of product use and to
ensure that these products are safe. Consumers lack these. It is just to place greater burdens on
those who are better able to bear these burdens.
Consumer activists also challenge the corporate claim that consumers "freely" choose to buy
unsafe products. Consumers, they argue, are woefully uninformed about the products they buy
because they don't have access to information about the products. Others lack a comprehensive
understanding of the seriousness of the printed warning. Still others may be functionally
illiterate or too young to make informed choices. It is manufacturers, not consumers, who make
the "free" choices to compromise product safety and it is manufacturers who must therefore
accept the consequences.
As long as products are produced, product injuries will occur. Who should bear the costs of
those injuries? Our answer requires that we weigh the claims of consumers against those of
manufacturers--claims which appeal, in different ways, to our desire to minimize harm, our
ideal of justice, and our commitment to taking responsibility for the choices we make.
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Table of Contents:
  1. INTRODUCTION:Business Issues
  2. INTRODUCTION (CONTD.)
  3. THEORY OF ETHICAL RELATIVISM
  4. MORAL DEVELOPMENTS AND MORAL REASONING
  5. MORAL REASONING:Arguments For and Against Business Ethics
  6. MORAL RESPONSIBILITY AND BLAME
  7. UTILITARIANISM:Utilitarianism: Weighing Social Costs and Benefits
  8. UTILITARIANISM (CONTD.):rule utilitarianism, Rights and Duties
  9. UNIVERSALIZABILITY & REVERSIBILITY:Justice and Fairness
  10. EGALITARIANS’ VIEW
  11. JOHN RAWLS' THEORY OF JUSTICE:The Ethics of Care
  12. THE ETHICS OF CARE:Integrating Utility, Rights, Justice, and Caring
  13. THE ETHICS OF CARE (CONTD.):Morality in International Contexts
  14. MORALITY IN INTERNATIONAL CONTEXTS:Free Markets and Rights: John Locke
  15. FREE MARKET & PLANNED ECONOMY:FREE TRADE THEORIES
  16. LAW OF NATURE:Theory of Absolute Advantage, Comparative Advantage
  17. FREE MARKETS AND UTILITY: ADAM SMITH:Free Trade and Utility: David Ricardo
  18. RICARDO & GLOBALIZATION:Ricardo’s Assumptions, Conclusion
  19. FREE MARKET ECONOMY:Mixed Economy, Bottom Line for Business
  20. COMPETITION AND THE MARKET:Perfect Competition
  21. PERFECT COMPETITION
  22. MONOPOLY COMPETITION:Oligopolistic Competition
  23. OLIGOPOLISTIC COMPETITION:Crowded and Mature Market
  24. OLIGOPOLIES AND PUBLIC POLICY:Ethic & Environment, Ozone depletion
  25. WORLDWATCH FIGURES:Population Year, Agriculture, Food and Land Use
  26. FORESTS AND BIODIVERSITY:The Ethics of Pollution Control
  27. THE ETHICS OF POLLUTION CONTROL:Toxic Chemicals in Teflon
  28. THE ETHICS OF POLLUTION CONTROL
  29. THE ETHICS OF POLLUTION CONTROL:Recommendations to Managers
  30. COST AND BENEFITS:Basis of social audit, Objectives of social audit
  31. COST AND BENEFITS:The Ethics of Conserving Depletable Resources
  32. COST AND BENEFITS:The Club of Rome
  33. THE ETHICS OF CONSUMER PRODUCTION AND MARKETING:DSA Comments
  34. THE ETHICS OF CONSUMER PRODUCTION AND MARKETING:Should Consumers Bear More Responsibility?
  35. THE CONTRACT VIEW OF BUSINESS' DUTIES TO CONSUMERS
  36. THE CONTRACT VIEW OF BUSINESS' DUTIES TO CONSUMERS:The Due Care Theory
  37. THE SOCIAL COSTS VIEW OF THE MANUFACTURER’S DUTIES
  38. ADVERTISING ETHICS:The Benefits of Advertising, The harm done by advertising
  39. ADVERTISING ETHICS:Basic Principles, Evidence, Remedies, Puffery
  40. ADVERTISING IN TODAY’S SOCIETY:Psychological tricks
  41. ADVERTISING IN TODAY’S SOCIETY:Criticism of Galbraith's Work
  42. ADVERTISING IN TODAY’S SOCIETY:Medal of Freedom
  43. ADVERTISING IN TODAY’S SOCIETY:GENERAL RULES, Substantiation
  44. ADVERTISING IN TODAY’S SOCIETY:Consumer Privacy, Accuracy
  45. THE ETHICS OF JOB DISCRIMINATION:Job Discrimination: Its Nature