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1. 6-1 Chapter 6 Discussion: Ethics of Consumer Protection and Marketing Paul L. Schumann, Ph.D.
© 2004 by Paul L. Schumann. All rights reserved.
2. 6-2 Markets & Consumer Protection What is the free market argument for why the free market will automatically provide the appropriate level of product safety?
How do the critics respond to the free market argument by pointing to information problems?
Why doesn’t the market provide product information?
3. 6-3 Contract Theory What is the duty to comply?
All products involve some risks. How can we decide if it is a “reasonable risk” for consumers to bear?
Does the following violate the duty to comply?
Some hamburgers sold by a fast food restaurant are contaminated with E. coli bacteria. People who eat the hamburgers get sick: stomach cramps, vomiting, fever, and watery or bloody diarrhea. Some people experience life-threatening symptoms, including kidney failure, seizures, and stroke. Some recover completely, others suffer permanent health effects, such as kidney damage, and some die.
4. 6-4 Contract Theory What is the duty of disclosure?
Does the following violate the duty of disclosure?
Some people are very allergic to peanuts or things derived from peanuts. A food company uses peanut oil in its products. On the ingredient list, the company only lists “vegetable oil” without specifying “peanut oil.”
5. 6-5 Contract Theory What is the duty not to misrepresent?
Does the following violate the duty not to misrepresent?
An insurance salesperson rents a desk in a bank lobby; the salesperson does not work for the bank. The bank doors have decals that say “Deposits guaranteed by the FDIC.” The insurance salesperson is selling insurance that is not a bank account, and so is not guaranteed by the FDIC. The insurance salesperson puts up a sign on the desk that says “Investments 5% Guaranteed.” The “guarantee” is being made by the insurance company.
6. 6-6 Contract Theory What is the duty not to coerce?
Give an example of a high-pressure sales tactic that would cross the line and become coercion.
7. 6-7 Due Care Theory What is the basis of due care theory?
What is a violation of due care theory?
How can a company exercise due care?
8. 6-8 Examples Does the following violate contract theory, or due care theory, or both?
A person is using a lawnmower. The grass gets plugged up in the discharge chute. The person reaches into the discharge chute to clear the grass, the blade is still spinning, and cuts off several fingers.
9. 6-9 Examples Does the following violate contract theory, or due care theory, or both?
An 81-year-old woman buys a cup of coffee from McDonald’s. It spills on her lap. She suffers third-degree burns, spends 8 days in the hospital, and undergoes skin graft operations. McDonald’s kept its coffee at 180-190 degrees; most coffee at home is 135-140 degrees. Serious burn hazards exist at 140 or higher.
10. 6-10 Examples McDonald’s coffee case outcomes:
Compensatory damages = $200,000 but reduced to $160,000 because jury decided customer was 20% at fault
Punitive damages = $2,700,000
Total = $2,860,000
Compensatory damages = $160,000
Punitive damages = $480,000
Total = $640,000
Final settlement: secret
11. 6-11 Social Costs Theory What is social costs theory?
What is the utilitarian argument in favor of social costs theory?
What are the criticisms of social costs theory?
12. 6-12 Marketing Ethics What guidelines can we use to draw the line between “hype” (“puffery”) and deception?
Example: A car company runs TV ads that emphasize that a car can be leased for “zero down.”
On the basis of the ad, would you expect to have to write a check on the day you sign the lease contract?
In fact, you would have to write a check for a $450 “acquisition fee” plus a security deposit plus the first month’s lease payment. Is the “zero down” claim in the ad deceptive?
13. 6-13 Consumer Privacy What guidelines can we use to balance a consumer’s right to privacy against the needs of business to use information about consumers?
14. 6-14 Case: AIDS and Needles How common are needle-stick injuries in healthcare settings?
What are the possible adverse health effects of a needle-stick injury?
What is the Safety-Lok Syringe?
Why didn’t more hospitals adopt the Safety-Lok Syringe?
What caused Becton Dickinson eventually to begin selling the Safety-Lok in all sizes and at lower prices?
15. 6-15 Case: AIDS and Needles In general, what are the duties of manufacturers and sellers according to Contract Theory?
What would be a hypothetical example of Becton Dickinson violating Contract Theory?
Did Becton Dickinson violate Contract Theory?
16. 6-16 Case: AIDS and Needles In general, what is required of manufacturers and sellers according to Due Care Theory?
How can companies exercise due care?
Did Becton Dickinson violate Due Care Theory?