Chapter 6 — Ethics of Consumer Production & Marketing

Page 1: Copyright & Chapter Context

• Administrative details: Copyright © 2007, 2013, 2018 Pearson Education, Inc.
• Textbook & edition: Velasquez, 8th Edition, Chapter 6
• Core topic: Ethics of Consumer Production and Marketing
• Implied significance: The chapter frames ethical responsibilities of companies toward consumers, covering production quality, marketing truthfulness, and respect for consumer rights.

Page 2: Learning Objectives (LO)

• LO 6.1 – Identify everyday risks linked to consumer products.
• LO 6.2 – Evaluate pro- and anti-market arguments for consumer protection.
• LO 6.3 – Explain moral duties of a firm under the contractual view.
• LO 6.4 – Describe manufacturer responsibilities under the due-care view.
• LO 6.5 – Examine broader manufacturer responsibilities in the social-costs view.
• LO 6.6 – Assess ethical issues in advertising (information vs. persuasion).
• LO 6.7 – Outline ethical and unethical business practices regarding consumer privacy.

Page 3: Chapter Introduction—Costs & Risks

• Annual product-related injuries (excluding autos): $15.6\text{ million}$.
• Product-related deaths: $4{,}000$.
• Estimated yearly cost of non-fatal injuries: $\$900\text{ billion}$.
• Frequent consumer harms:
  • Deceptive advertising – misleading messages, hidden fees, exaggerated claims.
  • Shoddy products – poor materials or workmanship.
  • Malfunctions – design or production flaws causing injury or loss.
  • Unhonored warranties – breach of manufacturer promises.
• Chapter focus: Ethical questions in advertising, producer–consumer obligations, and data privacy.

Page 4: LO 6.1 — Everyday Consumer Risks

• Motor vehicles (incl. pedestrians): kill $30{,}000$ Americans/year; incapacitate $260{,}000$; injure $2.2\text{ million}$.
• Firearms: kill $32{,}000$; injure $65{,}000$.
• Prescription painkillers: $14{,}000$ deaths; $300{,}000$ hospitalizations.
• Playground equipment: $200{,}000$ child injuries.
• Ethical implication: Even “ordinary” products embed significant risk; moral duty arises to reduce preventable harm.

Page 5: LO 6.2 — Markets & Consumer Protection (1/2)

Criticisms of Advertising

• Often uninformative (fails to convey real product facts).
• Can misrepresent facts.
• Viewed as wasteful—adds marketing cost passed to consumers.

6.2.1 Market Approach (Free-Market Defense)

• Assumes competition guarantees safety & quality because:
  • Consumers seek best value; unsafe firms lose sales.
  • Government intervention considered unnecessary or economically distorting.

6.2.2 Critiques of Market Approach

• Information asymmetry – consumers lack technical knowledge.
• Consumer irrationality – biases, heuristics, emotional buying undermine perfect choice.
• Monopoly / oligopoly power – limited choices weaken competitive discipline, raising need for regulation.

Page 6: LO 6.2 — Markets & Consumer Protection (2/2)

6.2.3 Beyond Market Forces—Three Ethical Frameworks

1. Contractual View – obligations arise from the purchase “contract.”
2. Due-Care View – producer must exercise reasonable foresight & care to prevent harm.
3. Social-Costs View – producer should internalize all costs of product-caused harm, foreseen or not (strict liability).

Page 7: LO 6.3 — Contractual View (1/3)

• Purchase establishes a voluntary contract between buyer & seller.
• Four moral duties of the firm:
  1. Comply with explicit & implicit terms of sale.
  2. Disclose essential product information.
  3. Avoid misrepresentation—no false claims, half-truths, or deceptive omissions.
  4. Avoid coercion/undue influence—no exploiting vulnerabilities or using duress.
• 6.3.1 Duty to Comply: Provide performance & quality exactly as marketed.

Page 8: Contractual View (2/3)

• 6.3.2 Duty of Disclosure: Reveal any material fact that might influence purchase decision (e.g., side effects, limitations, incompatibilities).
• 6.3.3 Duty Not to Misrepresent: Any deception coerces choice because consumer would have acted differently with correct info.
• 6.3.4 Duty Not to Coerce: No high-pressure tactics that override rational autonomy (e.g., threats, manipulation of urgent fears).

Page 9: Contractual View (3/3) — Limitations

• Assumes equality of bargaining power & full information—often unrealistic.
• Places heavy responsibility on consumers to investigate; ignores complexity of modern products.
• Cannot fully address externalities (harms to third parties) or unforeseen dangers.

Page 10: LO 6.4 — Due-Care View (1/2)

• Moves beyond contract; embraces specialist knowledge asymmetry: manufacturers know more, so owe “due care.”
• Supported by implicit societal expectation that producers will protect users from unreasonable risk.
• 6.4.1 Components of Due Care:
  1. Design – minimize inherent hazards; build in safety factors.
  2. Production – quality control to prevent defects.
  3. Marketing – proper instructions, warnings, and truthful promotion.

Page 11: Due-Care View (2/2) — Difficulties

• Degree of “reasonable” care unspecified; may vary across industries & cultures.
• No clear system for allocating cost of unforeseen injuries.
• Potential paternalism—producers decide what risks consumers may take, possibly limiting autonomy.

Page 12: LO 6.5 — Social-Costs View

• Strong caveat vendor (“let the seller beware”).
• Manufacturer pays for all injuries linked to product, foreseen or unforeseen.
• Basis for strict liability legal doctrine: victim need not prove negligence.
• Utilitarian rationale: Shifts costs to producer, incentivizing most efficient overall risk reduction & pricing.
• 6.5.2 Criticisms:
  • Potentially unjust—producer pays even if used improperly.
  • Assumption that higher prices fully compensate injuries may be false.
  • May impose undue burden on innovation & small firms.

Page 13: LO 6.6 — Advertising Ethics (1/3)

• Key concerns: Cost pass-through to consumers, resource waste, paucity of reliable information.
• 6.6.1 Two-Step Persuasion Model:
  1. Create desire (often through emotional imagery, social status appeals).
  2. Create belief that product satisfies that desire.
• Ethical tension: Shifts from informing to shaping wants.

Page 14: Advertising Ethics (2/3)

• 6.6.2 Social Effects:
  • Psychological – fosters materialism, insecurity, stereotyping.
  • Waste – encourages over-consumption & disposal.
  • Market power – reinforces dominance of big brands.
• 6.6.3 Galbraith’s Dependence Effect:
  • Ads create desires that are “pliable and unlimited.”
  • Manipulation treats people as means, not ends (Kantian critique).

Page 15: Advertising Ethics (3/3)

• 6.6.4 Deceptive Advertising Requirements:
  1. Intent to deceive by advertiser.
  2. Transmission via willing media/intermediaries.
  3. Existence of a vulnerable audience (children, elderly, financially stressed, etc.).

Page 16: LO 6.7 — Consumer Privacy (1/2)

• Growing risk: corporate misuse of personally identifiable information (PII).
• Right to privacy: Control both what and how much data others possess.
• Values served: Autonomy, intimacy, reputation, and freedom from manipulation.

Page 17: Table 6.1 — Ethical Evaluation of Ads

1. Social effect – Intended vs. actual societal outcomes.
2. Effect on desire – Merely informative or does it trigger irrational wants?
3. Effect on belief – Truthfulness & likelihood of misleading claims.

Page 18: Consumer Privacy (2/2)

• 6.7.2 Business Strategies for Privacy Protection:
  • Relevance – collect only data necessary for stated aim.
  • Opt-out / Opt-in – empower consumer choice.
  • Consent – explicit agreement for data usage.
  • Accuracy – maintain correct records.
  • Security & limited access – safeguard data from unauthorized parties.

Page 19: Table 6.2 — Business Efforts to Respect Privacy

• Emphasizes legitimate business purpose: data collection justified only if it produces generalizable consumer benefits (e.g., reliable credit systems).
• A single individual may not benefit in every case, but systems rely on accurate data pools.

Page 20–22: Case Study 6.1 — Infant Formula Marketing

Background

• Breast milk proven healthier; formula intended as alternative for those unable to breastfeed.
• Rise of formula: By 1970s, $75\%$ of U.S. infants formula-fed; market saturated, so firms targeted developing nations.

Ethical Issues in Developing Countries

• Health risks magnified by contaminated water & illiteracy (improper preparation).
• Deceptive marketing: Idealized images, free samples, downplaying breastfeeding benefits.

NGO & Global Response

• NGOs exposed aggressive tactics; companies defended by citing consumer freedom of choice and external factors (poverty, water quality).
• 1981: International Code of Marketing of Breast-milk Substitutes adopted by $118$ countries (U.S. opposed).
• Ongoing debate (2016): Breast milk superiority confirmed; ethical scrutiny global, not just developing nations.

Page 23–24: Case Study 6.2 — Credit Solutions of America (CSA)

Business Model

• Debt-settlement service; clients with $\geq \$6{,}000$ unsecured debt.
• Charged 15\% of enrolled debt.
• Employed aggressive, coercive tactics toward creditors & customers (e.g., pressuring to stop payments, damaging credit to leverage negotiations).

Ethical Complaints

• Program failed to reduce debt; in some cases client debt increased from fees and accruing interest.
• Accusations: Fraud, misrepresentation, exploitation of financially vulnerable consumers.

Page 25: Chapter Summary

• Consumer products impose tangible costs: deceptive ads, low-quality goods, malfunctions, unhonored warranties.
• Three ethical frameworks for producer obligations:
  1. Contractual – honor explicit promises; minimal view.
  2. Due-Care – exercise reasonable foresight and care; middle view.
  3. Social-Costs – internalize all harms; strictest view.
• Advertising & privacy issues broaden ethical landscape, demanding transparency, respect for autonomy, and data stewardship.