What is it all about?Consumers are exposed to high levels of risk simply by using consumer productThe risk - injury, death & high costs

Consumers must bear the costs ofproduct injuriesdeceptive sellingshoddy product constructionproduct breakdown (immediately)warranties that are not honoredDeceptive and unpleasant advertising

Theoriesthe market view consumer safety is seen as a goodthe contract view - place greater responsibilities on the consumerthe due care view - place larger measure of responsibilities on the manufacturerthe social cost view - place larger measure of responsibilities on the manufacturer

Markets & Consumer Protectionconsumers automatically will be protected by the operations of free and competitive markets consumer safety is seen as a good that is most efficiently provided through the mechanism of free marketIn a market, the price of safety and the amount sellers provide will be determined by the costs of providing it and the value consumers place on it.responsibilities for consumer injuries must rest on consumer themselves

Characteristics of Free Marketthere are numerous buyers & sellersfree to enter and exit the marketfull & perfect informationall goods are exactly similarno external costsrational utility maximizersmarket is unregulated

Critics

Consumers are not well informed, unwilling to pay for information, free riders. Buyers do not have adequate information when products are complex and information is costly and hard to find.Buyers are often not rational about product risk or probabilities and are often inconsistent.market fail to incorporate the most fundamental characteristics - numerous buyers & sellers => some markets are monopolies or oligopolies

2. The Contract Viewwhen you buy a product you enter into a sales contract with the business firma contract is a free agreement that imposes on the parties the basic duty of complying with the terms of the agreement

Pre-requisite (secondary moral constraints)both parties must have full knowledge of the nature of the agreementneither party to a contract must intentionally misinterpret the facts of the contractual situationneither party to a contract must be forced to enter the contract under duress or undue influence.

Four moral dutiesDuty to comply - provide consumers with a product that lives up those claimsDuty to disclosure - seller has a duty to disclose what the consumer is buyingDuty not to misrepresent - intentionally misled acts, deceive (menipu)Duty not to coerce (memaksa) - seller is using duress to coerce

The Contract View - Objectionsmanufacturers do not make direct agreement with the consumersa contract is a two-edged swordsellers and buyers do not exhibit the equal skills at evaluating the product - caveat emptor (let the buyer take care of himself)

3. The Due Care Theorymanufacturer have a duty to take a special care to ensure that consumers interests are not harmedcaveat vendor - let the seller take careethic of care - care must be tailored to that persons particular needs

Due Care - Problemsthere is no clear method for determining when one has exercised enough due caremanufacturer can discover the risks before the consumer buys and uses itpaternalistic - manufacturer should be the one who makes important decision for the consumer

Manufacturer should pay the cost of any injuries sustained through any defects in the product, even when the manufacturer exercised all due care in the design and manufacturer of the product and has taken all reasonable precautions to warns users of every foreseen danger.

Problem with Social Costs Viewunfair - a person could not be forced to compensate an injured party is one could not have prevented injurywill not reduce the numbers of accidents (may encouraging carelessness)impose heavy losses on insurance companies

Advertising EthicsAdvertising should be banned because it diminishes a consumers freedom of choice - Do you agree?a waste or a benefit?harm or help the consumer?

Advertising EthicsIts social effectsIts creation of consumer desiresIts effects on consumer beliefs

Social Effects of Advertisingpsychological effects of adv - degrades peoples tastes - vulgar, offensive, insult the intelligence, tastelesswastes valuable resources - not used to improve the product but to persuade people to buycreates monopoly power - massive ad campaign can drive monopoly or oligopoly

Creation of Consumer DesiresAdvertising is manipulative (Galbraith)The creation of psychic wan did not originated with modern advertising but by the invention of novel and attractive products (F.A. von Hayek)

Its Effects on Consumer BeliefsThe deceptive aspects of modern advertising (misrepresent the nature of the product, untrue paid testimonials, inserting word guarantee where nothing is guaranteed, quoting misleading prices, stimulating well-known brand names)

Characteristics of Advertising

A public communication aimed at a large social group intended to induce members of this audience to buy the sellers products.

It succeeds by creating a desire for the sellers product or a belief that a product will satisfy a preexisting desire.

Criticisms of Advertising Based on Social EffectsIt debases/humiliates the tastes of the public.

Response: this criticism is not a moral criticism.

It inculcates materialistic values.

Response: this criticism ignores the lack of evidence that advertisements can change peoples values.

Criticisms of Advertising Based on Social EffectsIts costs are selling costs that, unlike production costs, do not add to the utility of products and so waste resources.Response: this criticism ignores how advertising can increase consumption which is good.

It is used by big firms to create brand loyalties which let them become monopolies or oligopolies.Response: this criticism ignores studies showing big monopoly or oligopoly firms do not advertise more than little firms.

Criticisms of Advertising Based on Its Effects on DesiresAdvertising creates psychic desires which, unlike physical desires, are pliable and unlimited.Psychic desires are created so firms can use us to absorb their output.Using us this way treats us as means and not as ends and so is unethical.Response: this criticism ignores studies which suggest non-subliminal advertising cannot create and manipulate desires in adults.

Requirements of Deceptive AdvertisingAn author who (unethically) intends to make the audience believe what he or she knows is false by means of an intentional act.Media or intermediaries who communicate the false message of the advertisement .An audience who is vulnerable to the deception and who lacks the capacity to recognize the deceptive nature of the advertisement.

Importance of Consumer PrivacyProtects individuals from disclosures that can shame, interfere in ones private life, hurt loved ones, and lead to self-incrimination.Enables the intimacy that develops personal relationships, the trust and confidentiality that underlies client-professional relationships, the ability to maintain distinct social roles, and the ability to determine how others will see us.