Marketing, Advertising and Product Safety

De Vee E. Dykstra, J.D. 2005

Marketing and Consumer Movement

Marketing business activity directing flow of goods and services
Product development Distribution Pricing Promotion and sales

Marketing Concept consumer satisfaction Consumerism balance rights

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Manufacturer Rights
Product Decisions Pricing Promotion Method of Distribution/Availability

De Vee E. Dykstra, J.D. 2005

Consumer Rights
Product Information Choice Protection from Harm Voice

De Vee E. Dykstra, J.D. 2005

Consumer Information Needs

Packaging and Labeling Purpose
provide information so that consumers can make rational choices Fair Packaging and Labeling Act Nutrition Labeling and Education Act

Pricing provide true cost information

Using standard measures, uniformity

Other information
Tradition - truthful, fulfill warranties Alternative is there an obligation to provide info consumers cant reasonably obtain themselves
De Vee E. Dykstra, J.D. 2005

Deception and Manipulation

Deception creating and taking advantage of false perceptions interfering with ability to make rational choices
E.g., bogus clearance sales

Manipulation non-coercive shaping of alternatives results in depriving of choice

E.g., bait and switch - FTC prohibits advertising cheaper product then getting customers to buy more expensive product

Impairs ability to make rational choices; leads to choices not otherwise made
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Advertising Criticisms
Exaggerated claims Irritating repetition Objectionable products Creation of consumerism culture Wasteful and inefficient Stifles competition Leads to monopoly conditions Creates wants Behavior control
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Persuasion and Behavior Control

Traditional Economic Argument & Principle of Consumer Sovereignty
Process of production is to satisfy needs and wants Consumers are best judges of this

Dependence Effect (Galbraith)

Wants are created by production Concern is how advertising subverts ability to want the right things Imbalance results (private goods v. public)

Advertising is effective with those who dont really know what they want; they are open to persuasion
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Marketing in Kidspace
Children/youth have greater purchasing power and influence Do advertisements create the wants for children, or do they inform the children about products filling wants children already have? Utilitarian Deontology/Kant
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Advertising that Exploits Stereotypes

Utilitarian
Consumption is worth distortions

Deontology
Truth telling is a duty

Milton Friedman
If its legal, its ethical

Virtue Ethics
What type of community is created? What type of life is being held up as virtuous?
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Market Research
Collecting data about consumers Is it unethical??
If so, when?

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Anticompetitive Marketing Practices

Practices that can lead to monopolies, reduce competition, distort markets and lead to price increases Price fixing Price discrimination Resale price maintenance Reciprocal dealing Tying arrangements Exclusive dealing
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Product Liability
Emptor Let the Buyer Beware Strict Tort Liability Manufacturers and sellers liable for injuries resulting from their products regardless of whether they knew of the danger that cause the injury
Caveat
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Product Liability
Contract Theories
Express Warranties Implied Warranties Merchantability Fitness for Particular Purpose

Tort Theories
Negligence Strict Liability
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Express Warranties
Express promise by seller as to quality, abilities or performance Statements are made by seller before the sale and are the basis or part of the basis of the sale Can arise from a description, sample, model, words Sellers intent to warrant is not necessary Opinions are not warranties
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Implied Warranty of Merchantability

Promise that the goods are fit for their ordinary purposes and are of average quality with adequate packaging Given in every sale by a merchant seller those sellers engage in the business of selling the goods that are the subject of the contract
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Implied Warranty of Fitness for a Particular Purpose

Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the sellers skill or judgment to select or furnish suitable goods, there is ... an implied warranty that the goods shall be fit for such purpose.
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Implied Warranty of Fitness for a Particular Purpose

Seller has skill or judgment in use of the goods, Buyer relies on the skill or judgment, Seller makes a recommendation, and Seller knew or had reason to know of buyers reliance, use & purpose
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Strict Liability
Give consumers maximum protection from defects Only manufacturer can prevent defective and dangerous products Allow plaintiff direct access to manufacturer without going through the retailer, wholesaler, etc.. Manuf. derives profit and should bear the burdens Manuf. is in best financial position to cover injury costs
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Strict Liability
Duty to manufacture a reasonably safe product (& in the business of selling or manufacturing the product) Duty was breached - show a defect Breach caused plaintiffs injury & foreseeable that defect will cause injury Physical or property damages Product reaches the user or consumer without substantial change, (no liability if product has been modified or changed)
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Unreasonably Dangerous Defect

Condition of danger such that a reasonable ordinary person would not contemplate using the product Most common types of defects (breaches): Design defects Improper warnings or insufficient instructions Negligent packaging, manufacturing or handling
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Defects - How to Avoid

Design Defects: Design with all foreseeable uses in mind Comply with all federal and state regulations Use latest technology and designs available in the industry and meet or exceed industry standards
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Defects - How to Avoid

Warnings and Instructions:
Warn if foreseeable use is dangerous and not likely to be realized by buyer/user Supplement warnings where needed Adequate instructions on proper use

Packaging, Manufacturing, Handling:

Protect against foreseeable dangers, such as tampering Very difficult to prove these defects
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Negligence
Same as Strict Liability except: Knowledge of the defect before sale or sales were allowed to continue with knowledge the product had a defect

Punitive damages if plaintiff can show manufacturer/seller knew of defect

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