Chapter 8 - Consumers and Business Ethics

If businesses claim they are best served by treating customers well, why do ethical abuses of consumers still occur?

Because short-term profit motives, competitive pressure, and weak regulation can tempt firms into deceptive, manipulative, or harmful practices despite long-term benefits of fair treatment.

What are Consumer Rights in a business ethics context?

The idea that sellers must treat consumers as ends in themselves—not merely tools for profit—by respecting their dignity, autonomy, and right to safe, fair, and honest treatment.

Why are Consumer Rights important in judging whether behaviour toward customers is ethical?

Because they provide a standard for assessing if a company respects consumer dignity, avoids exploitation, and protects consumers from harm or deception.

According to the concept of Consumer Rights, what duty do sellers have toward consumers?

DUTY OF CARE/ETHICS. Sellers must treat consumers with respect, honesty, and fairness, ensuring they are not used solely as a means to profit but as stakeholders whose well-being matters.

What ethical assumption is the idea of Consumer Rights based on?

The assumption that consumers possess inherent dignity and deserve to be treated as individuals with rights—not simply as revenue sources.

Why are consumers important stakeholders and what principle guides ethical treatment?

Consumers must be treated as ends in themselves (Consumer Rights). Firms have a duty to respect consumer dignity, honesty, safety, and fairness.

What three main areas create ethical issues between marketing and consumers?

Marketing management, marketing strategy, and market research.

what are the four components in marketing management

1. product policy

2. marketing communications

3. pricing

4. distribution 

What are the main ethical issues in product policy, marketing communications, pricing, and distribution?

• Product policy: Safety, fitness for purpose, due care

• Marketing communications: Misleading claims, deception, artificial wants, materialism

• Pricing: Excessive pricing, predatory pricing, deceptive pricing

• Distribution: Power imbalances, gifts/bribes, slotting fees

What consumer rights correspond to the major ethical problems in marketing?

• right to Safe products

• Honest, fair, non-deceptive communications and privacy

• Fair prices

• Fair choice (no bribery/power abuse)

• Freedom from discrimination and access to essential goods/services

• right to privacy

What basic rights do consumers have regarding products?

The right to products that are safe, effective, and fit for their intended purpose.

What is the manufacturer’s ethical duty regarding product safety?

To exercise due care—taking all reasonable steps to ensure products are free from defects and safe to use 

What does “due care” mean in product ethics?

A duty to prevent foreseeable harm by checking for defects, ensuring safe design, and properly testing products.

Is the consumer’s right to product safety unlimited?

No—it is limited because safety also depends on the consumer’s own actions and precautions.

What makes marketing deceptive and why is it unethical?

It interferes with consumers’ ability to make rational choices by creating false beliefs (Boatright). Violates honesty, fairness, and manipulates vulnerable consumers + harms public trust. Ads must be legal, decent, honest, and truthful.

What two levels of advertising criticism exist?

1. Individual level – Concerned with misleading or deceptive practices

2. Social level – Concerned with cultural impacts like promoting materialism

What are the two aims of marketing communications?

To inform consumers about goods/services and persuade them to purchase.

When does marketing communication become deceptive?

When it interferes with rational consumer choice by creating false belief

What are major social and cultural criticisms of marketing communications?

hey can be intrusive, create artificial wants, reinforce materialism, cause insecurity, fuel constant dissatisfaction, and perpetuate stereotypes.

Why are pricing issues ethically important in marketing?

Because pricing is central to fair exchange and consumers' right to a fair price.

Four types of pricing practices where ethical problems may arise:

• Excessive pricing

• Price fixing

• Predatory pricing

• Deceptive pricing

What is excessive pricing?

Charging unreasonably high prices that take unfair advantage of consumers.

What is price fixing and predatory pricing?

• Price fixing: Competitors secretly agree on prices → eliminates fair competition.

• Predatory pricing: Deliberately setting prices below cost to drive competitors out.

What is deceptive pricing?

Misleading consumers through false price claims, fake discounts, or hidden charges.

What is consumer vulnerability, and why is it an ethical issue?

It refers to consumers who are more easily harmed (children, elderly, low-income). Marketing can exploit them, violating the duty of care and the right to be treated fairly.

What is consumer exclusion, and why is it ethically problematic?

When certain groups are not targeted or included, causing them to lose access to essential goods/services needed for a reasonable quality of life.

What are the main forms of customer exclusion?

Access exclusion, condition exclusion, price exclusion, marketing exclusion, and self-exclusion.

What is the main ethical issue in modern market research?

hreats to the consumer’s right to privacy.

What idea underlies truly ethical marketing?

Consumer sovereignty—the belief that consumers direct the market under perfect competition

Why do real markets fail to achieve true consumer sovereignty?

Consumers often lack information, capability, or choice, preventing informed decisions.

Why is the “consumer is king” idea often unrealistic?

Because market imperfections limit consumer power and decision-making ability.

What are the two ethical issues linked to consumers’ limited ability to make informed choices?

• Individual transactions may be unfair to some consumers.

• Without consumer sovereignty, markets allocate resources unfairly (serving business interests over consumers).

Why does increasing consumer sovereignty shift power to consumers?

Because consumers can make informed choices, forcing firms to act ethically rather than exploiting information asymmetry.

What is the purpose of the Consumer Sovereignty Test?

To measure whether consumers truly have the power to make informed, rational choices in a market.

What are the three elements of consumer sovereignty?

• Consumer capability

• Information

• Choice

What does “consumer capability” mean in the consumer sovereignty test?

Freedom from limitations that affect rational decision-making (e.g., age, education, health).

What does “information” mean in the consumer sovereignty test?

Consumers must have adequate, unbiased, comparable, and understandable information.

What does “choice” mean in the consumer sovereignty test?

Consumers must have real opportunities to switch—enough competition and low switching costs.

In the scenario where you manage a small high-street shoe store and your new salesperson Lola lies to customers by falsely claiming a shoe is “the last pair,” what are the arguments FOR Lola’s actions?

• Her tactics help close sales in a highly competitive retail environment.

• Customers ultimately left satisfied with their purchases.

• The commission-based pay system rewards high sales, which may justify her actions in her mind.

• She may believe creating urgency is a harmless sales technique.

In the shoe-store scenario where Lola lies about available stock and uses insoles to sell the wrong shoe size while charging the customer extra, what are the arguments AGAINST Lola’s actions?

• She intentionally deceived customers about stock availability and sizing.

• Charging extra for insoles under false pretenses is exploitative.

• Violates consumer rights to truthful, transparent information.

• Risks damaging the store’s reputation and customer trust.

• Could create legal liability for misrepresentation or unfair trading.

In the scenario where Lola uses deceptive sales tactics (false urgency, misleading information, unnecessary add-ons), are these practices common in real retail and sales environments?

Yes — tactics like fake scarcity, pressure selling, or pushing unnecessary extras are common in many commission-driven sales fields. However, being common does not make them ethical or acceptable for long-term business relationships.

In the shoe-store scenario, how might the 5% commission incentive system you introduced have contributed to Lola’s dishonest behaviour?

• Commission rewards closing sales, not honesty, creating pressure to do “whatever it takes.”

• Employees may prioritize personal earnings over customer welfare.

• The incentive may unintentionally encourage exaggeration or deception.

• New employees like Lola may feel the need to prove themselves quickly by boosting sales numbers.

As the manager in the scenario where Lola lies to customers about stock and shoe sizes to secure sales, what should you do in response to her behaviour?

• Speak privately with Lola and clearly address the dishonest behaviour you observed.

• Re-establish expectations: honesty, transparency, fairness to customers.

• Provide training on ethical selling practices.

• Review and possibly adjust the commission system to reduce pressure for unethical sales.

• Issue a formal warning if necessary and document the conversation.

• Reinforce a store culture where ethics matter as much as revenue.