9 Jupiterimages/.Getty Images/Thinkstock Product Liability and Corporate Responsibility Learning Objectives After reading this chapter, you should be able to: • Summarize the different ethical perspectives surrounding the issue of product liability. • Identify the concerns regarding labor conditions, particularly in foreign manufacturing plants. • Describe marketing practices that raise ethical concerns. • Discuss concerns involving customer tracking and profiling. • Apply ethical theories to the issue of corporate responsibility. mos85880_09_c09.indd 247 10/28/13 1:36 PM Section 9.1  The Issue: Design Flaws in Products CHAPTER 9 Introduction T he economy is driven by the exchange of goods and services—the purchase and sale of products. In some cases, these products are tangible items that we can see and feel, like cell phones, medications, vehicles, and baseballs. In other situations, the product might be a service—such as lawn care, massage therapy, or a legal consultation. The American economy, in 2012, showed a gross domestic product (the value of goods and services produced) of $13.5 trillion (Federal Reserve Bank of St. Louis, 2013). A number of laws govern business practices, including everything from marketing and advertising to packaging to liability issues regarding consumer harm. Regulatory agencies also exist to oversee commerce: the National Transportation Safety Board (NTSB); the Federal Trade Commission (FTC); the Federal Communications Commission (FCC); and the Bureau of Alcohol, Tobacco, and Firearms (ATF) are examples. Product liability—determining who is responsible when a consumer is harmed—is a primarily legal issue. This chapter will focus more directly on the ethical issues that arise in business practices. Because trade ultimately occurs between individuals (companies are made up of people, just as consumers are persons), moral reasoning is clearly applicable in guiding decisions and actions. This chapter will explore several moral concerns that arise in the relationship between businesses (producers and sellers) and their customers. 9.1  The Issue: Design Flaws in Products I n 1968, the Ford Motor Company began producing a new subcompact car called the Pinto. This vehicle was designed and developed on an abbreviated timeline in order to get to market as quickly as possible. The Volkswagen Beetle was extremely popular, and Ford executives also feared that Japanese manufacturers would dominate the subcompact market if they did not get something on the market soon. With this in mind, the Pinto was designed and developed in about half the time that is spent on most vehicles. During its 10-year production, Ford sold over 2.3 million Pintos. The vehicles had safety problems, however. In May 1972, the problem Associated Press was first identified when a Pinto driven by Lily Gray was struck from The Ford Pinto is a classic example of a product with a the rear by another car. The fuel design flaw. tank in the Pinto exploded, killing Gray and severely injuring her passenger, Richard Grimshaw. Several other instances of fuel tank explosions involving Pintos were reported; in one such case, a van traveling at about 55 miles per hour rear-ended a Pinto stopped on the side of the highway. The Pinto mos85880_09_c09.indd 248 10/28/13 1:36 PM Section 9.1  The Issue: Design Flaws in Products CHAPTER 9 exploded, killing all three women inside as well as the van’s driver. In total, the National Highway Traffic Safety Administration (NHTSA) determined that 27 people died as a result of the faulty fuel tank design in the Pinto; another 24 suffered severe burn injuries. The Manufacturer Perspective Without minimizing the seriousness of injury and death, it must be recognized that new technologies introduce new risks. Any product can cause harm, especially when that product is misused in some way. This is why products have warning labels that remind consumers not to use an electrical appliance near water (in the sink or the bathtub, for example), why ladders and elevators list the maximum weight they are designed to safely support, and so forth. The only way to completely avoid being harmed by a product is to avoid the use of that product. The point here is not to be overly simplistic, but to recognize that benefits are offset by risks. I could walk to work (approximately 7 miles), but it would take a long time, it would be tiring, and it would be especially inconvenient when the weather isn’t ideal (too hot, too cold, too wet, etc.). In order to complete the journey more quickly and in greater comfort, I can drive my car. When I choose to do so, I must accept the risks involved in driving. To put it simply: To receive the benefits of personal transportation, consumers assume the risk. Additionally, 27 deaths among 2.3 million vehicles (the number of Pintos sold by Ford) is far lower than the number of deaths caused by rear-end collisions in other car models where the fuel tank did not explode (rear-end collisions account for nearly one-third of all motor vehicle collisions.) The specific design of the Ford Pinto may have introduced a new risk, but there is no clear indication that it increased the likelihood of death from a rear-end collision. To put a different way, had Ford corrected the fuel tank issue, it might have prevented explosions but would not necessarily have increased the chances of its passengers surviving a rear-end collision. None of these arguments are intended to suggest that the fuel tank design was not an important factor. They do, however, suggest that the design issues may not be as important in overall passenger safety as they initially appear. This point is underscored by the fact that in many of the accidents involving a Ford Pinto, the driver of the vehicle that struck the Pinto was under the influence of alcohol or drugs. For example, consider an accident in August 1981, which killed three women in a Pinto. In that case, the victims were struck by a vehicle driven by a man with open beer bottles, marijuana, caffeine pills, and other illegal drugs in the car with him. When these factors are taken into consideration, the bulk of the fault lies not with the design of the Pinto itself, but with those who caused the collisions (especially if they were illegally operating their own vehicle). Had those people never rear-ended the Pintos, the fires would not have occurred. Should liability fall on the company for a possible design flaw in the car when the driver directly responsible for the collision is at fault? A company should be responsible for a product that harms consumers when used as intended. When a product meets existing safety regulations, it is not clear that it is fair to hold the manufacturer responsible for harm caused when the product is misused (in mos85880_09_c09.indd 249 10/28/13 1:36 PM Section 9.1  The Issue: Design Flaws in Products CHAPTER 9 the case of the Pinto, the misuse stemmed from the drivers of the cars who collided with Ford’s product). The Consumer-Safety Perspective Products should be safe to use under normal conditions. We might grant that an injury caused by a misuse of the product is not necessarily a flaw in the product’s design. However, consumers can appropriately demand that products be safe in all situations in which their use might be reasonably expected. In the case of the Ford Pinto, those who argue for the consumer’s rights acknowledge it is true that vehicles are not designed to be run into from the rear. (It isn’t clear that any automobile manufacturer specifically sells cars designed to be used in a demolition derby!) But, given that nearly one-third of all vehicle crashes involve rear-end collisions, it is reasonable to expect that cars will be involved in those accidents. Because of this, manufacturers do have an obligation—to public safety—to ensure that their vehicles are as safe as possible when such collisions occur. The fact that the Ford Pinto was designed and produced far more quickly than other vehicles suggests, at the very least, that thorough safety testing was not conducted. For this reason, it is appropriate to hold the manufacturer liable for a defect that should have been foreseen. The claim that deaths caused by the faulty fuel tank design were no greater than those involving rear-end collisions in other vehicles may also be challenged. The use of a product does involve the acceptance of risk. The question, however, is whether otherwise avoidable risks were introduced because of the product itself. In the post-Pinto era, the discovery of such a defect often results in a product recall. Sometimes one of the regulatory agencies demands it; frequently, a manufacturer will issue a voluntary recall when a problem has been identified. For example, in July 2013, Mitsubishi Motors issued a recall on 2013 Outlander Sport vehicles manufactured during a single week in January 2013; the stabilizer link on the front of the vehicle was found to be welded incorrectly, increasing the likelihood that it would become detached. The result of such a failure could be damage to the tire (resulting in a loss of control) or to the brake line (meaning that the driver would have difficulty stopping). The manufacturer agreed to perform repairs on these vehicles free of charge (Safercar.gov, 2013). Product Recalls Products are recalled by manufacturers either voluntarily, at the request of a regulatory agency, or by order of such an agency. Examples of product recalls include: • medications that have adverse side effects; • foods that are found to cause health problems or that contain previously unidentified allergens; • products (such as vehicles or toys) that have been shown to break and cause physical harm to the user; and • products whose design reveals that unintended harm may be caused to consumers (for example, clothing that presents a choking hazard for children). mos85880_09_c09.indd 250 10/28/13 1:36 PM Section 9.1  The Issue: Design Flaws in Products CHAPTER 9 In some cases, a company may choose to recall a product because of other reasons, related to moral issues or to the company’s image. For example, in January 1999, Disney recalled approximately 3.4 million copies of the home video version of The Rescuers because a background image, showing a topless woman, had been inserted into two frames of the movie. While Disney maintains that the image was not inserted by one of its own animators— but was introduced in postproduction processing—Disney issued the recall because of its commitment to provide trustworthy family entertainment. Companies generally issue recalls on products—to either repair or replace the product, or to issue a refund to the consumer—whenever dangers are recognized. In the case of the Ford Pinto, the company was faulted for failing to exercise such diligence for financial reasons. Ford estimated that the costs of recalling and repairing all of the vehicles (11 million cars, 1.5 million light trucks—not exclusive to the Ford Pinto) with questionable fuel tank designs would have topped $137 million, whereas the costs associated with deaths and injuries in those vehicles (recognizing that not all of them will be involved in rear-end collisions) was closer to $50 million. Thus, this widely publicized cost analysis suggested that for the company, it was less expensive to leave potentially unsafe vehicles on the road than to attempt a recall. From a safety standpoint, the cost of a recall should not be a deciding factor, because human lives cannot be reduced to a monetary value. Consumers should be able to trust that the products they purchase and use are designed in such a way that will not pose a threat under conditions that, while not “normal,” should nevertheless be expected as reasonable occurrences. (That is, while it is not expected that drivers will seek to be involved in rear-end collisions, it is known that such accidents occur relatively frequently, so a reasonable expectation exists that a vehicle would be safe in such a “reasonably expected” event.) Thus, in the consumer advocate view, companies bear the moral responsibility to ensure that their products may be safely used. A failure to design a safe product—or to recall and repair or replace a defective product once a safety hazard is known—represents a failure of the company to uphold its ethical obligations to both individual consumers and to society as a whole. While manufacturers are not responsible if a person intentionally misuses a product, it is their job to make sure that consumers understand how a product can be used safely. Product Tampering Thus far this chapter has examined two views of manufacturer liability with respect to defective products. There is one more aspect of this issue to consider: product tampering. Who is responsible if an otherwise safe product was tampered with after its manufacture, but before its purchase by a consumer? Further, how should liability be divided between the manufacturer of the product (who created a product that could be tampered with before its sale) and the distributor (the store in which the product was sold, which placed compromised products on its shelves)? Product tampering arises most often with foods and medications. This might seem strange, in light of the packaging that we now find, particularly with medicines. The bottle of medicine is sold inside a sealed box; the cap of the medicine bottle itself is covered by a clear plastic film which must be removed; once the cap is removed, the opening of the bottle is covered by a seal, generally made of cardboard or foil. mos85880_09_c09.indd 251 10/28/13 1:36 PM Section 9.1  The Issue: Design Flaws in Products CHAPTER 9 Not long ago, this was not the case. Bottles of aspirin were on display on the shelves, not enclosed in boxes. The cap of the bottle might have had a child safety device but there was no seal once that childproof cap had been removed, only a piece of cotton stuffed into the neck of the bottle. Safe packaging became a concern in the early 1980s, fueled by a situation involving Tylenol pain relievers. In September 1982, parents gave a Tylenol capsule to a 12-year-old girl living in the Chicago area. Hours later, the girl, Mary Kellerman, was dead. That same morning, in another Chicago suburb, Adam Janus died. While the family was still mourning his loss, Janus’s brother and brother-in-law both died. What was the connection between these deaths and three others (a total of seven in the Chicago area)? Each victim had taken Extra Strength Tylenol. A police investigation revealed that the victims’ capsules had been laced with potassium cyanide. The capsules came from bottles of Tylenol produced at different plants and purchased at different drug stores, a fact that prompted the suspicion—still believed to be true, though the case remains unsolved—that someone had tampered with the product after it reached the store shelves. A direct consequence of the Tylenol poisonings was that companies introduced tamperevident packaging. The Food and Drug Administration now requires such packaging, especially for over-the-counter medications. The goal of such packing is not to guarantee that tampering cannot occur: The packaging is not referred to as tamper-proof, or even tamperresistant. Instead, the goal of tamper-evident packaging is to help consumers identify products that may have been compromised, so that potential buyers can avoid those items. The ethical claim in situations like this is that manufacturers should be responsible not simply for creating safe products, but also for safely delivering those products to consumers. If a manufacturer fails to package a product in such a way that the customer cannot be reasonably assured that the product has not been made unsafe after the manufacturing process was completed, then it could be argued that the company bears at least some of the responsibility for enabling such tampering to occur. T-Pool/Getty Images On the other hand, companies are themselves victims when product tampering occurs because the product (and brand name) will be affected by adverse publicity. Corporate executives will be seeking to determine how to protect themselves (against potential legal liability) and save the product. Apart from these legal considerations, the company bears a moral responsibility to act in the best interests of the consumers. Instead of simply identifying themselves as victims, companies have the ability—and the obligation—to take positive steps to ensure public safety. The packaging used for over-the-counter medication is designed to alert consumers if the product has been tampered with. mos85880_09_c09.indd 252 10/28/13 1:36 PM Section 9.2  The Issue: Working Conditions CHAPTER 9 Johnson & Johnson reacted quickly after the Tylenol tampering in Chicago. Once a connection was made between the deaths and Extra Strength Tylenol capsules, the company issued a national recall of the medication, with some estimates suggesting a cost of over $100 million to the company. Many would argue that this is one of the best examples of appropriate ethical conduct by a company, because this recall was issued voluntarily, before the Food and Drug Administration was even involved in the case. Case Study Alternative Medical Practices Americans are turning to complementary and alternative medicine (CAM) in increasing numbers (NCCAM, 2008). While several reasons may contribute to this trend, some research indicates that this is largely fueled by the increasing health care costs in the United States; consumers are searching for affordable alternatives to traditional medicine (Rettner, 2011). However, the Food and Drug Administration does not regulate CAM therapies in the same way that medications are controlled (whether those are available over the counter or prescription) because most herbs are classified as dietary supplements. Companies marketing herbs and other natural treatments are simply prohibited from making claims that their products “treat, mitigate, or cure a disease” (Clark, 2013, para. 4). 1. When public safety is a concern, what guidelines would be appropriate for determining whether governmental regulation of an industry is appropriate? What moral reasons would justify regulating one industry (like pharmaceuticals), when another closely related industry is unregulated? 2. Just as medications can interact with each other, sometimes creating harmful side effects, CAM therapies can sometimes interact negatively with prescribed drugs. Do companies marketing alternative treatments have a responsibility to research possible interactions, and to warn consumers when those might occur? To what extent is the company’s responsibility offset by the consumer’s choice to “self-medicate” using these products? 3. One of the issues raised in the Ford Pinto case was whether rear-end collisions should be reasonably expected. How do reasonable expectations impact the degree to which a company is responsible for the safe use of a product? How does this impact companies offering CAMs, since these products might be reasonably expected to be used by consumers for health-related purposes? 9.2  The Issue: Working Conditions C ompanies exist to make a profit. That is, simply stated, the primary purpose for which a company is founded. The owners of the company are providing some type of product or service designed to meet a need in the marketplace; by meeting that need, the company receives income. Economically, the profit earned by a company consists of revenue (income) minus expenses (including the costs of raw materials, labor, packaging, shipping, and so forth). To increase profits, the company must increase revenue (by charging a higher price or selling more products—or both), or decrease expenses (by finding cheaper raw materials, streamlining mos85880_09_c09.indd 253 10/28/13 1:36 PM Section 9.2  The Issue: Working Conditions CHAPTER 9 production, or lowering labor costs). What limits, if any, should exist on what a company might ethically do to increase its profits? The first section of this chapter discussed the ethics involved in changes to product safety (whether in the design of the product itself or in safe packaging practices). In recent years, a cost-cutting measure that has come under intense scrutiny concerns the use of cheap labor in developing countries. Often referred to as sweatshops, these factories may place workers in unsafe environments and fail to pay decent wages. This practice enables companies to keep manufacturing costs extremely low, substantially boosting profits. But at what cost? Price and Prestige When targeting customers, a company may employ different strategies. One, perhaps the most widely used method, is to keep prices low to sell more products. However, if the price is set too low, then the implication is that the product isn’t as valuable. Instead of being seen as a bargain, the product will be regarded as inferior. Because of this, companies may often opt for premium pricing, where the price of the product is set higher than that of similar products. This strategy targets a smaller segment of the consumer market—focusing on those willing and able to pay more—by offering them the prestige of owning a “top of the line” product. The premium-pricing strategy can create a competitive advantage for a company. After all, statistics show that the Android operating system is used by more people than the iOS (for iPhone) on their mobile devices and that Apple sells less than 25% of smart phones in the worldwide market (McCracken, 2013). Even so, the Apple iPhone continues to be the “standard” against which all other phones are measured. By using a premium-pricing model, most people think that the Apple iPhone is the most popular smartphone on the market. In the same way, many companies have tried to make their carryout coffee cups resemble those of Starbucks. Carrying a cup of Starbucks coffee is not a statement about one’s love of coffee so much as it is a status symbol (the fact that the individual can afford to splurge on Starbucks each morning) (Vanek-Smith, 2008). Starbucks has used the premium-pricing strategy successfully. Given that companies seek to maximize profits, is it misleading to create a brand image that justifies a higher price, when the product does not clearly offer features that justify the additional expense (compared to products offered by competitors)? Or is the marketplace driven solely by supply and demand, leaving companies free to price products at whatever level can sustain sales and profits? The Business Perspective From a business perspective, foreign labor represents a difficult but inescapable necessity. After all, consumers demand lower prices; to meet this demand, companies must keep manufacturing costs as low as possible. If production were moved back to domestic locations, labor costs and other expenses related to production would increase, meaning that the price of the product would have to go up in order to maintain profitability. As long as some companies choose to use foreign labor, all companies in the marketplace find themselves hard-pressed not to follow suit; to fail to do so means that they cannot compete in that market. mos85880_09_c09.indd 254 10/28/13 1:36 PM Section 9.2  The Issue: Working Conditions CHAPTER 9 The difficulty in maintaining profitability is compounded by the fact that some industries are vulnerable to changing trends. Perhaps fashion is the best example of one such industry. Styles change quickly from one season to the next, and a company’s ability to adapt quickly to a changing market will be evident in its profitability. It is expensive to reconfigure production lines and retrain employees. To keep pace with shifting customer desires, companies benefit by establishing production facilities in locations where equipment and labor are both cheap and where trainable workers are plentiful. Both of these reasons—competitive edge and speed to market—speak to the corporation’s market benefit. However, sweatshop labor is not just an isolated business decision based on productivity concerns. These corporations are owned by stockholders, investors who choose to invest in the company because of its profitability—meaning that they will share in those profits. And the more money these stockholders earn, the more money that flows through the economy—money that is spent on goods and services produced by other companies. Thus, it might be argued that keeping a company profitable is important on a social scale because the profitability of corporations affects the economy as a whole. Most importantly, however, the issue of sweatshops has to be understood in terms of cultures and regional conditions. Those who argue that sweatshops are unacceptable are basing their claim on the labor standards of a developed country. Those opposed to sweatshop labor point out that American workers, for example, would not be willing to accept the working conditions present in those factories. The wages paid to those workers do not represent a living wage that enables employees to provide even the most basic food, clothing, and shelter needed by their families. This argument, say those who support the foreign-labor model, is tempered by the fact that the demand for jobs in these regions is often so high that applicants line up outside these factories hoping to get hired. While the working conditions are not acceptable from the point of view of workers in more developed countries, for these people it is far better than anything else available. Working conditions should be judged against cultural standards within a region, not those of First World countries. When judged by the standards of the workers in these countries, so-called sweatshop conditions do more than measure up—they often exceed local standards. The argument might be framed in a different way. Local market conditions are expected to determine appropriate compensation for American workers; employees working in Dallas, Texas, for example, are able to maintain a particular standard of living for less than employees in New York, New York, would have to spend in order to maintain that same living standard. (See, for example, the cost-of-living calculator available at www.salary .com). Because the cost of living varies between locales, companies are justified in providing different rates of pay for employees working in those locations, enabling employees to enjoy comparable standards of living. If this is extended to the foreign workers, companies are able to provide a comparable standard of living for those employees at far less expense; the local economies are such that employees require significantly less compensation. By comparison to others in the area, the workers are not being unfairly compensated. Thus, from the company’s perspective, labor conditions, employment rates, and cost of living information are necessary to making an informed judgment about what might be considered appropriate. mos85880_09_c09.indd 255 10/28/13 1:36 PM Section 9.2  The Issue: Working Conditions CHAPTER 9 The Humanist Perspective The primary argument against sweatshops is based on human rights: People have a right to work in places that are clean, healthy, and safe. Furthermore, workers deserve a living wage in return for their labor. Workers employed in sweatshops are treated little better than slaves. They must work long hours and receive no paid leave, even for medical emergencies, which encourages them to continue working even when they pose a health hazard to other employees. These workers are paid a salary that often fails to represent even a basic subsistence. Those in favor of sweatshops argue that these workers are still better off than they would be with no source of income. This response belies the fact that the hardships of laborers are being exploited for the company’s benefit. It may be unrealistic to require that conditions be exactly the same as what would be expected in an American manufacturing plant, given cultural differences. But those who criticize sweatshops insist that workers deserve to be treated with appropriate respect and dignity, regardless of the culture in which they are employed. Just as a human life cannot be gauged by how much it costs to make products safer, neither can human dignity be measured in terms of labor conditions, especially when the laborers have no choice in the matter. This is particularly true, argue opponents of sweatshop conditions, when the profits earned by companies utilizing them continue to soar. The CEO of Nike—which has long been criticized for using sweatshops—made over $6 million in 2007; the company’s advertising budget that year was $678 million. Human rights advocates claim that just 1% of this advertising budget would be sufficient to pay a living wage to every one of the factory workers (DoSomething.org, n.d.). Clearly, the companies are making enough money to change the poor working conditions, if they wanted to do so. The fact that the companies continue to rake in massive profits at the expense of laborers who barely earn a living wage, say human rights supporters, indicates that the companies do not truly care about their employees. While companies exist to make money, they are designed to do so by providing for all of the employees involved in the production of those goods and services. To fail to provide adequately for the employees indicates that the company is failing to uphold the moral obligations it possesses with regard to its employees. The other argument often used against companies employing cheap foreign labor is the fact that American jobs are being sent overseas. It is true that U.S. workers would have to be paid more and be provided with better working conditions (as U.S. culture and law demands). These factors increase the company’s expenses and cut into its profits—potentially mos85880_09_c09.indd 256 Scout Tufankjia/Associated Press One argument against outsourcing is that it takes jobs away from Americans. 10/28/13 1:36 PM Section 9.3  The Issue: Marketing and Advertising Practices CHAPTER 9 resulting in job losses for those same American employees. But paying more American workers would boost the economy (and thereby enable companies to raise prices), as more people would have money to spend. Instead of isolating large profits in the hands of relatively few corporate stockholders, wealth would be distributed more equally, which, argue the proponents of domestic labor, would have a greater positive impact on the economy as a whole. Be the Ethicist To Outsource or Not? Hector works in a management position at Textiles Spun, a clothing company that has been gaining market share in the Midwestern United States. Manufacturing is currently located in three plants, which are in Detroit, Chicago, and Cleveland. Hector has learned that the company is considering closing two of those plants and moving the bulk of the manufacturing to a factory in Central America. According to the information he has been given, the workers will be expected to work 12-hour shifts 6 days each week; they will not be given any paid vacation; they will have no health insurance; and medical leave will be unpaid. The wages earned will be only 75% of the established minimum hourly wage for the area in which the manufacturing plant will be located. 1. What ethical arguments might Hector use to suggest that the increased profits are not justified, given the costs involved? 2. Is it stronger to base an argument on the rights of Central American workers and the conditions under which they will be employed? Or on the loss of jobs for American workers in the plants which will be closed? 3. What justification might Hector reasonably offer to support the company’s decision to move manufacturing to Central America? 9.3  The Issue: Marketing and Advertising Practices I n a 2011 Super Bowl advertisement, reality TV star Kim Kardashian is shown dumping her personal trainer for a pair of Shape-Up toning shoes, sold by Skechers. In other advertisements for this product, consumers were told that the shoes enabled them to shape and tone their bodies while going about their everyday tasks—losing weight and gaining muscle tone without ever actually exercising. The Federal Trade Commission (FTC) takes particular interest in claims made by companies selling products related to health and fitness. In this instance, as in many others, the FTC determined that the claims being made by Skechers were unproven, and in a May 2012 ruling, the company was assessed $40 million in fines (a record amount at that time). The Skechers case points to a particular problem with the marketing campaigns companies use to sell their products. Deceptive or misleading advertising practices raise concerns when companies suggest that products can deliver results or performance that goes beyond what the product is mos85880_09_c09.indd 257 10/28/13 1:36 PM Section 9.3  The Issue: Marketing and Advertising Practices CHAPTER 9 actually capable of producing. Marketing practices can be questionably ethical in other ways, however, including the following: • • • • the use of customer, celebrity, and expert (doctor or scientist) testimonials; dubious claims about pricing; fictitious customer reviews (especially for online retailers); and inappropriate humor or suggestive content. Companies may choose to risk using any of these methods for a variety of reasons. The ethical issues involved, however, demand investigation. The Marketing Perspective The goal of marketing, simply stated, is to help a company sell products. To achieve this end, advertisements are created with the hope of instilling in consumers a desire for a product or service. The greater the consumer demand for an item—whether it be a pair of shoes, a particular brand of spaghetti, a business service, or a certain person in a political office—the more effective the marketing campaign has been. In a competitive marketplace, this goal is achieved when the product is able to appeal to consumers in a way that no other product can match. But exactly how marketers may ethically pursue those goals presents some grounds for discussion. Beneficial Claims Wang qiming - Imaginechina/Associated Press Advertisements are used to create consumer demand, thereby helping a company sell products. Advertisers frequently rely on tactics like the Skechers fitness claim. If studies do in fact suggest that Skechers shoes help people lose weight and tone muscle while going about their everyday routines, such information represents a clear benefit—one that no other shoe manufacturer can claim. When a company finds experts—doctors or scientists, for example—who are able to support these claims, it helps customers recognize the benefits that are available from the product. Good marketing strategies do not involve intentional deception. And because the Federal Trade Commission is quick to ban advertising that contains obviously false claims once they are identified, companies generally do not make claims without some basis in fact. Marketers contend, however, that customers potentially benefit by knowing about a product’s advantages as early as possible so that those customers can reap the benefits. In other words, from a marketing viewpoint, using the results of a study—even when the results might still be murky or not fully substantiated—to show the link between a product and potential benefits is just good business. mos85880_09_c09.indd 258 10/28/13 1:36 PM Section 9.3  The Issue: Marketing and Advertising Practices CHAPTER 9 Testimonials and Endorsements Along these same lines, advertisements often feature testimonials from satisfied customers as a means of convincing like-minded consumers of the advantages of buying. FTC guidelines require customer testimonials to come from actual consumers who are giving their honest opinion about the product; additionally, the customers included in advertising should be representative of customer views as a whole. (That is, if a company sells a new product to 500 customers, 495 of whom were displeased with the product but five of whom really liked it, the company would be violating FTC guidelines with a commercial that showed only the five customers who liked the product, because those five individuals do not fairly represent the customer base.) Celebrity spokespeople are often used in advertising, as well. People admire celebrities, adopt them as role models, and want to be like them. Learning that a particular celebrity uses a product and finds it beneficial gives consumers a reason to use the product as well—to become more like the person they admire. In all types of customer testimony— whether from typical customers or celebrity endorsers—marketers are seeking to help consumers achieve their own goals. From the marketing perspective, then, no ethical lines are crossed when a company truthfully shares information about a product that has helped other people achieve similar goals. As society becomes increasingly technological, advertising that is clearly deceptive is on the decline. After all, more consumers check the content of advertisements, even using mobile devices to verify claims while they are standing in a store. Thus, consumers themselves serve as watchdogs when it comes to advertising—and they share the information they find (concerning both good products and those that fail to live up to their claims) widely through their social networks. In such an environment, marketers are careful to only make claims that can be substantiated, giving consumers a reason to believe that advertising claims are reliable and trustworthy. Emotional Responses Another widespread practice in marketing campaigns is the use of humor or sentimentality, seeking to create an emotional reaction. In the United States, commercials for beer often utilize humor in an attempt to make a connection between the brand and the fun that people will have while using those products. Other products might use humor simply as a way to make a brand name stick in a consumer’s mind. A notable example of this approach (which has drawn mixed reviews) is Kmart’s advertising campaign, launched in April 2013. To let customers know about the free shipping available from Kmart’s online store, the company commissioned a commercial in which customers talk about the ability to “ship my pants” (as well as other items). Following this, another Kmart ad touted fuel savings (“big gas savings”) at their gas stations. The humor in these advertisements was intended to catch people’s attention and bring positive publicity to the brand. Sentimental messages aim to accomplish the same result. During the 2013 Super Bowl, carmaker Chrysler ran two separate 2-minute commercials. One focused on the American farmer and featured a voiceover by radio legend Paul Harvey. In the other commercial, an Oprah Winfrey narrative honored military personnel who were serving away from home. A third commercial, this time from brewing giant Anheuser-Busch, featured one of the mos85880_09_c09.indd 259 10/28/13 1:36 PM Section 9.3  The Issue: Marketing and Advertising Practices CHAPTER 9 famous Budweiser Clydesdale horses being reunited with the man who trained him as a colt. Each of these commercials sought to create an emotional attachment between the corporate brand and the consumer. All three received high marks in consumer rankings; the commercials were effective in creating favorable emotional responses. From a marketing perspective, no ethical lines are being crossed through these practices. Product claims that can be supported are offered; testimonials help customers understand the benefits of the product for people to whom they can relate; and humor or sentiment may be used to convey feelings that the consumer can expect to enjoy when using the product. Thus, advertisers seek to create a demand for a product, which, from their perspective, does not rely on deception or misrepresentation. The Consumer Perspective Historically, the Latin phrase caveat emptor—”let the buyer beware”—ruled the marketplace. The idea contained here is that the purchaser of a product bears the responsibility for checking to be certain that the product is worth the expense. When it comes to marketing claims, is it in fact the consumer’s responsibility to determine whether the product will achieve the desired results? In modern law, the doctrine of caveat emptor still applies to most personal transactions. Most people who buy a used car from an individual (not a dealer), or a house, or something at a garage sale recognize that the sellers are not responsible for the condition of the purchase the same way that a manufacturer would be. They are selling the product “as is,” and it is the buyer’s responsibility to ensure that the product is worth what is being paid for it. From the point of view of a retail consumer, however, companies have a greater responsibility toward the buyer precisely because they have control over the design, production, manufacturing, and—most importantly—marketing of the products they sell. They know the product more fully than does the consumer. Because of this, companies are responsible for claims that are made concerning their goods and services. The fact that marketing claims are often based on information unavailable to the consumer serves as the basis for one of the chief criticisms of modern marketing. When a doctor or scientist endorses a particular product, the average consumer has no way of knowing whether that spokesperson is connected to the development of that product in some way. Is this an independent researcher, or did this person conduct research that was funded by the company? In the case of the Skechers advertisements, for example, it turned out that one of the studies the company used to support its claims came from a chiropractor who happened to be married to a Skechers marketing executive. Serious issues of complicity can arise when so-called expert testimony amounts to inside information that consumers are not able to substantiate on their own. Online retailers attempt to alleviate some of this concern by allowing for customer reviews on their websites. The difficulty, however, lies in the knowledge that the company has the power to remove any customer reviews it chooses; it can also post favorable reviews that mos85880_09_c09.indd 260 10/28/13 1:36 PM Section 9.3  The Issue: Marketing and Advertising Practices CHAPTER 9 sound like customer testimonials even though they were written by company personnel. The same sorts of issues arise with paid celebrity spokespersons; if they are paid for their endorsement, why should consumers be expected to believe that celebrities are truly endorsing the product based on their own experience? All of these are concerns for the consumer, who has no means of verifying the content being encountered through the advertisement. Without more information, customers are at the mercy of what marketers want them to hear about a product, which increases the possibility that deception may occur. The same can be said for the use of emotional appeals—whether humorous or sentimental. Most people would agree that they don’t like it when someone gets them to do something by making them feel guilty if they refuse. This can occur between friends or family members quite easily. Because of the relationship we share with the person, we will often go along—even though we may resent being “guilted” into compliance. With marketing, emotional appeals—some would say manipulation—become even more suspect. The Chrysler Super Bowl auto commercials did not even appear to be advertisements until the very end. Nonetheless, the ads leave consumers feeling a sentimental attachment to the images in the commercial, which have little to do with the actual products or brands being advertised. Consumers often do make purchasing decisions based on a company’s image and reputation. In the case of sweatshop labor, many consumers choose to boycott clothing brands that engage in such practices. Since the company is using unethical employment practices, the customer chooses not to support the company through his or her purchases. In this respect, what the company represents does influence the buying decision. Some would point out that Chrysler Corporation does support American military personnel serving abroad, so associating the brand with that support is not problematic. Jeep (a Chrysler brand) has funded Operation SAFE Return, a program designed to generate community support for military personnel and their families (see http://www.chrysler​ groupllc.com/community/Pages/MilitarySupport.aspx and http://www.jeep.com/en/ operation_safe_return/). The commercials’ implied claim, however, is that Chrysler is more supportive than other automobile manufacturers; true patriots will drive Dodge Ram pickups and Jeeps. The company cannot substantiate such a claim. Critics would argue, then, that Chrysler’s commercials are misleading, playing on sentimentality and emotion that is not clearly connected to the product. In that regard, the message is deceptive. Marketing is big business. Some estimates are that about 10% of the cost of a product lies in the marketing and advertising budget. Companies do act wrongly, though, when they create advertisements that are deceptive in any way. This can happen through unsubstantiated claims, false testimony, or through emotional appeals that inaccurately depict the product and its contribution to society. Marketers can also easily offend consumers through the use of crude humor, harming the brand image through negative publicity. mos85880_09_c09.indd 261 10/28/13 1:36 PM Section 9.3  The Issue: Marketing and Advertising Practices CHAPTER 9 Be the Ethicist Subliminal Advertising In the late 1950s, an experiment was conducted in a New Jersey theater (although the patrons did not know they were involved in an experiment). Frames were inserted into the movie encouraging viewers to drink sodas and eat popcorn; these images where so brief and fleeting that they did not register in the conscious mind. However, they reached the subconscious (where messages are not filtered as thoroughly), and sales of sodas and popcorn increased. When the results of the experiment were revealed, a public outcry ensued. It is unsurprising that consumers would be concerned about being manipulated in such a manner. Subliminal messaging refers to practices, which may be visual or auditory, intended to get a message into the minds of the viewers or listeners without them being aware of it. Some department stores, for example, play subaudible messages along with music, encouraging shoppers to buy more products—and refrain from shoplifting. Not all subliminal messaging carries negative connotations, of course. Some company logos, for example, contain hidden meanings. The logo for Amazon, the online retailer, contains an arrow beneath the letters, pointing from A to Z. The implication is that consumers can find anything they need—from “A to Z”—at Amazon. Similarly, companies will pay for product placement in movies and television shows; for example, their advertisement might appear on a billboard in the background of a scene. In this way, advertisers continue to get their message in front of consumers in less-than-obvious ways. Critics argue it is the more sinister methods that are problematic, even as there continues to be debate as to whether subliminal messaging actually works. Many self-help techniques use subliminal messaging to deliver positive messages to the brain, but their effectiveness is not clear. Some online sources also point to images that creatively include the word sex, both in advertisements and in movies or television shows; the goal of the hidden message, supposedly, is to add sex appeal to the product. The Federal Communications Commission banned subliminal messages in advertising in the 1970s, although there continue to be examples where it seems to be incorporated. Of course, proving the presence of these messages is difficult, since the whole point of a subliminal message is to bypass the conscious mind. The broader concern, from an ethical perspective, is whether such practices constitute deception. Marketers might claim that such messages appeal to consumers, in much the same was as a celebrity endorsement, by promising good experiences that the consumer will enjoy when they use the product. Opponents argue that if this is true, then marketers should be more direct in their methods, rather than seeking to implant messages via covert means. If the product will make buyers feel sexy, say so; don’t subliminally suggest sexuality in a way that bypasses a customer’s rational ability to assess the claims being made. Exercise Jerome works for a marketing agency. One of the accounts he is currently working with is a cosmetics company. The company has received letters from some of their customers praising the fact that the makeup products have helped clear up acne on their customers’ faces. Jerome is planning a new advertising campaign including these customer testimonials, which will suggest that the cosmetics can help clear acne. The testimonials will be given by paid actors, and the testimonials will be scripted from what was contained in the customer letters. (continued) mos85880_09_c09.indd 262 10/28/13 1:36 PM Section 9.4  The Issue: Customer Tracking and Profiling CHAPTER 9 Be the Ethicist (continued) 1. Is Jerome acting unethically to include these testimonials? Are these claims just customer testimonials, or do they represent information that should be researched more carefully before it is presented in the advertisements? 2. Is it okay to use paid actors and scripted testimonials? Or should Jerome get actual customers to tell about their own experiences with the product? 3. Would it be okay to add a subaudible message to the television advertisements, stating, “This makeup will make you beautiful”? If subaudible or subliminal messaging is involved, does this mean that the advertisements are deceptive? Read more about subliminal advertising at http://subliminalmanipulation.blogspot.com. 9.4  The Issue: Customer Tracking and Profiling I n the fall of 2012, Seattle-based clothing retailer Nordstrom began using software called Euclid, which enabled the company to track customer movements through the store using the Wi-Fi signal on the customer’s cell phone. The data collected by the Euclid system told the store which items consumers looked at, how much time they spent at each counter, and whether the customer actually bought any of the items. (In May 2013, Nordstrom stopped using the Euclid software; they had posted signs in their stores notifying customers of their use of tracking software, and received a number of complaints. It was, at least in part, because of these complaints that the department store chose to stop trackiStockphoto/Thinkstock ing the in-store customers [Clifford & Hardy, 2013]). Using technology, retailers can determine which displays attract attention, how much time a person spends inside Other stores using similar technol- a store, what items are most popular, and other shopping ogy are going even further, coupling trends. this tracking data with video surveillance, which can relay additional information—gender, approximate age, and even customer moods via facial-recognition software. With this technology, the stores can target specific ads to customers at the point of sale, based on their gender and mood. This type of customer tracking and profiling is common online. (Most people who have done an online search have noticed how the pop-up advertisements on webpages they are visiting are for the same type of item for which they were searching.) The ability to profile customers and market directly to their interests and needs generates more revenue. The Euclid service, for example, seeks to help retailers generate sales by providing data that helps determine which window displays are most effective (drawing in more customers, mos85880_09_c09.indd 263 10/28/13 1:36 PM Section 9.4  The Issue: Customer Tracking and Profiling CHAPTER 9 as opposed to those who just walk by), as well as by providing data on the time a customer spends inside the store (because the longer a customer is in a store, the greater the likelihood that they will make a purchase) (Cohan, 2013). But at what point has the customer’s privacy been violated through the data that is being collected, stored, and analyzed? The Seller Perspective Online retailers have long used customer tracking on their websites. This enables them to know what products customers viewed, so they can watch customers shop. They have an understanding of which items are popular—or which items will lead customers to look at related items. The ability to track customers provides valuable information for the store in designing its website and the way it presents information to customers. Such tracking practices also enable a company to provide beneficial information to the customer, based on what the customer is doing. When someone views items on a store’s website, the site will sometimes offer “recommendations,” or links to items viewed by other customers who were looking at the same product. This information provides valuable assistance to consumers as they compare different products on the website. Thus, it benefits both customers and retailers. How Software Tracks Customers Online When an online customer visits a company’s website, the Internet protocol address is registered in the site database; often, the media access control address (which is unique to each device) is also recorded. This information enables the database to recognize when a customer returns to the online site, and it will remember items that the customer was looking at on previous visits. Profiles based on Internet searches are well established. (After all, how do companies like Google and Yahoo!, which offer a free search engine, make money? The bulk of their revenue comes through customer profiles, enabling companies to market their products to specific types of individuals.) Most online consumers accept the fact that their search history is being recorded and analyzed, whether or not they think about it. Without software like Nordstrom’s Euclid, physical (or brick-and-mortar) stores lack this ability. Understanding how customers travel through the stores, which displays catch customers’ eyes, and the amount of time that customers spend in stores represents valuable information to retail establishments. As just one example, floor managers can adjust their displays to attract more sales, and they can make sure that the store has more staff available during peak shopping times. This information is not merely helpful to the company; it benefits the customer as well. For example, suppose a customer visits a store and spends time looking at overcoats. Not finding exactly what she wants within her price range, she leaves the store without making a purchase. But the next day, she might receive a coupon on her phone that offers a 20% discount on overcoats at that store. The coupon targets the customer’s need, providing a mos85880_09_c09.indd 264 10/28/13 1:36 PM Section 9.4  The Issue: Customer Tracking and Profiling CHAPTER 9 direct benefit. If the practice results in positive benefits for the customer, does that help to justify the tracking? For some consumers, it might. Others may be suspicious, wondering about the “coincidence” of receiving a coupon (by text message) for the product they were considering the previous day. While some customers may feel as though they are being spied upon by these tactics, companies are quick to point out that they are shopping in a public place. They should expect that people are able to see where they are, which products they are considering, and what kinds of purchases they make. Stores already analyze purchase receipts to see what items are often bought together. (That is why grocers stock vanilla wafers next to the bananas, because there is a clear correlation between those two items, as sales have demonstrated.) The data gathered by tracking customer movements in the store simply adds an additional level of information, which is helpful to both consumers and companies alike. Case Study Free Coffee? Douwe Egberts is a Dutch coffee company. It recently set up special vending machines at the O. R. Tambo International Airport near Johannesburg, South Africa. Using facial-recognition software, the vending machine can detect when someone in front of the machine yawns. It then dispenses a free cup of coffee to the patron (Matheson, 2013). The point of this was to get people to try the product; it was a marketing ploy. And, as seen on the video footage of customers interacting with these machines, most customers thought that it was an inventive and fun way for the vending machines to interact with patrons. This raises interesting questions about the debate over consumer privacy, however. At what point is the use of something like facial recognition an invasion of privacy, compared to being a cute advertising gimmick? Is the customer’s awareness of what is happening (or their ability to figure it out) an important factor in determining the acceptability of such technology? Should customers be informed when any such methods are being used to analyze their behavior or shopping preferences? The Customer Perspective More consumers are turning to search engines (such as DuckDuckGo and Ixquick) that offer privacy. Independent research has found that a majority of users continue to use Google Search, but that an increasing number of online customers (nearly three-fourths) do not like their searches being recorded or having information targeted to them based on that history. Others are concerned that information available to them will be filtered according to their search history, meaning that they no longer have access to all of the content available. Only 28% of those surveyed like the targeted advertisements that are based on their searches (Burt, 2012). What all of this indicates is that, while online search histories are widely used, most consumers do not like them. In many cases, they feel that recording searches is a violation of privacy, especially since companies build complex profiles of individual consumers based on the data. In other cases, they fear that the information gathered might be used mos85880_09_c09.indd 265 10/28/13 1:36 PM Section 9.5  Applying the Theories CHAPTER 9 in unintended ways (for example, being scrutinized by potential employers as a part of a background check). In still other instances, customers are dissatisfied with the information being presented to them based on the profile that has been developed, and they wonder what information has been filtered out. Thus, online retailers might be thought to have an advantage in their ability to profile customers and determine habits. But this does not mean that the customers value the fact that data is collected in this way. They certainly do not want to be tracked in a physical store, where their movements are being recorded (including how much time they may have spent in the restroom). The complaints received by Nordstrom, mentioned earlier, are an example of this; the customer backlash against the use of tracking software was one of the reasons that led the department store to discontinue the practice. (Much of the discomfort consumers feel, however, may be based on expectations—they don’t expect their physical location to be tracked for marketing purposes [Greenfield, 2013]. From the consumer perspective, privacy issues may arise when stores are found to be doing something unexpected.) The heart of the issue, from a consumer perspective, is a concern regarding how personal information is utilized. When a company begins targeting customers based on gender, age, and other personal data, the concern is that the company knows more about the consumer than is needed; the only value is for the company to target specific advertisements to that customer in the hopes of selling products. When this kind of tracking goes to the level of analyzing mood, the company is seeking to know more about the consumer than many consumers feel that it should. At the very least, this tactic is similar to sentimental advertisements in that it wants to lure the customer into a purchase based on something that is unrelated to the product itself. At worst, this tracking represents a form of subliminal messaging, where the company is targeting messages that will appeal to customers—even if those customers are unaware of the impact their mood is having on their purchasing decisions. Thus, targeted marketing at this level borders on being deceptive and manipulative, raising questions as to whether it is ethical. 9.5  Applying the Theories W e have seen that there are a number of different areas in which corporations arguably should deal with customers responsibly. Most of these involve legal guidelines. All can be viewed from the economic perspective of the business— whose goal is to earn the greatest profit possible. But what would an ethical analysis of these issues reveal? Let us begin by recalling the first example explored in this chapter. The Ford Pinto was introduced in 1968 and was produced for 10 years. During that time, the Ford Motor Company sold over 2.3 million vehicles of this model. The design, however, was flawed, specifically in the rear of the car. The result was that the fuel tank would sometimes rupture, possibly exploding, when the car was hit from the rear. Since vehicles can be expected to be involved in rear-end collisions, this seems to be a significant design flaw, compromising the safety of the passengers. mos85880_09_c09.indd 266 10/28/13 1:36 PM Section 9.5  Applying the Theories CHAPTER 9 Ford ultimately recalled the cars, but only after pressure from the National Highway Transportation Safety Administration (NHTSA). It did not voluntarily recall the vehicle to make repairs, even as some estimated that those repairs would cost $11 or less per vehicle. Was Ford acting ethically in refusing to recall the model? Utilitarian Utilitarians always base ethical decisions on the end results, taking everyone affected into account. Thus, from this perspective, the economic impact on the company should be included in the deliberation. The cost of repairing all vehicles using the flawed fuel tank design, estimated at $367 million, is significant, especially considering the fact that only a handful of those should be expected to actually malfunction and cause harm to consumers. If we were to stop here, the utilitarian argument might seem to favor Ford’s decision. The argument needs to be more complete, however. It must take into account the psychological impact on Ford Pinto owners when they learn that the car they are driving might be defective—and won’t be repaired. This could easily spill over into consumer wariness toward Ford’s other models, as questions arise as to whether those cars share the same defective design. All of these potential consequences need to be considered in determining which actions will bring about the greatest good for everyone involved. When comparing outcomes, consider that no amount of corporate profit can offset the loss of a human life, especially when it could have been avoided. Utilitarianism is a hedonistic theory, measured in terms of pleasure and pain. Even those who stand to make profits by refusing the repairs cannot be pleased when their refusal results in the death of a consumer. The best outcome is not measured in dollars; this is not an economic decision. Ethics has to look at how the decision will ultimately affect individuals. Based on this reasoning, utilitarians will argue that Ford should have repaired the problem, despite the great financial cost to the company, and that it should have done so voluntarily (instead of waiting to be forced by the NHTSA). This would have meant lower profits for a few individuals, while providing safety and peace of mind to millions of consumers. The greater good, in this instance, demanded action. Deontological Deontologists ignore consequences; the financial cost of a decision certainly plays no part in determining whether the decision is morally right. Instead, logic and reason need to be applied, founded upon principles, to determine what should be done. Recall from Chapter 1 that deontologists will apply a “universal rule test”: Would it be morally acceptable for everyone, in similar circumstances, to act in this way? Another way of thinking about this principle would be to ask, “Would I want to be treated this way, were the situation reversed?” This is another way of assessing the respect for human dignity upon which the deontological perspective is founded. mos85880_09_c09.indd 267 10/28/13 1:36 PM Section 9.5  Applying the Theories CHAPTER 9 In this case, we can easily imagine that the owners and executives of Ford Motor Company would not want to drive vehicles made by another manufacturer, which had such a defect. Since they would not want to be treated in such a manner, they should not treat their own customers in that way. To refuse to correct the error amounts to violating the universal rule test. Instead of respecting the human dignity of their consumers, they are placing those customers in danger in order to enjoy more profits for themselves. Such a decision fails on principle. Conclusions Different ethical perspectives use different criteria for determining whether something is right or wrong. Utilitarians look at consequences, whereas deontologists look at the principles involved. These are very different ways of assessing a situation, with very little overlap in thinking. This does not mean, however, that utilitarians and deontologists will always disagree about what should be done. There will often be agreement—as in this case—but each perspective offers its own reasons for the decision. The point is that knowing what those utilizing a particular ethical perspective will say about a situation tells us nothing about the conclusion that will be drawn from a different viewpoint. Each viewpoint must reach a decision based on the types of reasons on which that theory is based. It is difficult to justify Ford’s reasoning from an ethical perspective. Their decision seems to have been based on financial considerations alone, and the ethical issues involved—the lives and well-being of their customers—were overlooked. With both the utilitarian and the deontological assessments (or with those of other moral theories that might be employed), it is important to note that these moral perspectives are not only useful in assessing past events. The primary point of moral reasoning is to help people understand which actions are right or wrong so that the correct action can be chosen. Thus, instead of simply assessing Ford’s actions after the fact, those involved in these decisions could have considered their decision from these moral perspectives before a decision was reached—allowing moral considerations to guide and shape their chosen course of action. Because it is impossible to see the future, seeking to apply moral theories in this way can sometimes be tricky. This is especially true, perhaps, with a utilitarian perspective, which is based on the consequences: While we might predict what will happen if a certain action is performed, it is impossible to know for certain what results will be realized. If the goal is to act ethically, though, this must be done as fully and accurately as possible. Failing to consider the likely outcomes (in the case of utilitarianism), or failing to think about the principles upon which a decision is based (in the case of deontology or duty ethics), means that the moral implications of a decision are being ignored—and acting ethically, when it happened, would be nothing more than a happy coincidence. mos85880_09_c09.indd 268 10/28/13 1:36 PM Key Terms CHAPTER 9 Chapter Summary B usinesses exist to earn a profit for their owners. Those businesses that are unprofitable are closed; to continue operating, a business has to be financially profitable. But this does not mean that a company can (or should) do whatever is necessary to earn money. In addition to legal guidelines, moral considerations establish boundaries within which businesses should operate. After all, consumers are individuals—with rights that must be respected and protected. This chapter has explored various areas in which companies must carefully consider the relationship they bear to the consumer. But a corporation’s relationship to its employees is also an important concern, one that can have a profound effect on the company’s image and performance in the marketplace. The goal is not simply to avoid those things that offend consumers. The goal of a business decision should be, first and foremost, to respond ethically. When this principle is followed, customer relations will be far easier to manage. Key Terms caveat emptor  Latin for “let the buyer beware,” this suggests that consumers are ultimately responsible for their purchasing decisions. Caveat emptor continues to prevail in private transactions between individuals. living wage  Compensation that is adequate for providing a living for a worker, including food, clothing, shelter, and health care—ideally for both the worker and his or her family. product recall  When a company (voluntarily or by force of regulators) notifies consumers that a product is defective; in a product recall, the product will be repaired or replaced at the company’s expense. product tampering  When a product has been altered by some third party after the manufacturing process has been completed. sweatshops  Manufacturing plants, typically in developing countries, which feature poor and unsafe working conditions and low rates of pay for employees. premium pricing  A practice where a company charges more for its product than competitors, in order to establish the brand tamper-evident packaging  Packaging— such as a plastic seal over the top of a as a leader in the field. bottle—which allows a consumer to avoid product placement  A marketing strategy products that may have been altered after where, for example, actors in movies or the manufacturing process was completed. television shows are seen using a particular product—or billboards in the background of a scene feature a particular product. This is a form of indirect advertising, keeping a product or brand in front of consumers. mos85880_09_c09.indd 269 10/28/13 1:36 PM Critical Thinking Questions CHAPTER 9 Critical Thinking Questions 1. Utilitarians base moral decisions on the consequences, seeking to consider everyone affected. In the vast majority of cases, the number of consumers of a product will be greater than the number of people who profit from its sale (the owners and employees of the company). Because of this, it would seem that utilitarians might always side with the consumers, due to the number of individuals who must be considered. In what way does utilitarianism prevent this from happening? How can a utilitarian assessment be fair to everyone involved? 2. The chapter explained that Johnson & Johnson—the makers of Tylenol— voluntarily recalled their product when it appeared that the medication had been tampered with. Is a company morally obligated to have a voluntary recall in a situation like this, or is that going above and beyond what morality requires? 3. In an instance of product tampering, the manufacturer of the product is clearly a victim. Why does the company have a moral obligation to take action, when the problem is not its fault? 4. What factors should a company use to determine what compensation is fair for its employees? How important are geographical or regional differences? If poor working conditions can be offered in a developing area, is it ethical for a company to take advantage of the situation by hiring cheap labor? 5. What would duty ethics say about a company choosing which customer reviews to allow on its website? Would a company be justified in removing some of the reviews, if it were using a deontological approach? 6. Do you think subliminal messaging works? Is it ethical for marketers to use this approach, whether it really works or not? Is subliminal messaging deceptive or manipulative? 7. Online stores can easily track customers as they navigate a website. Is it ethical for a company to store this information, creating a customer profile for that user? At what point would this data gathering violate the privacy rights of the user? 8. Most stores have some sort of surveillance equipment installed to help prevent (or prosecute) shoplifters. Do you feel as though this is an invasion of your privacy, since you are being watched while you shop? 9. Suppose you visited a store you have never been in before and looked at several items, but did not make a purchase. Would it bother you if you received a coupon for some of the merchandise you had been looking at on your cell phone the next day? Would you consider that to be an invasion of privacy? Would you go back to the store to use the coupon? What does your answer say about your ethical views? 10. Grocers have long used psychological tricks to move products. For example, if they need to sell chicken because they have a lot in stock and need to sell it before it goes bad, they will put out an advertisement in the newspaper—and signs in the display—indicating “limit 4 per customer.” Some customers will buy four, then return to buy four more. Is this deceptive advertising, or are the consumers being deceptive? mos85880_09_c09.indd 270 10/28/13 1:36 PM Suggested Resources CHAPTER 9 Suggested Resources The American Economy http://www.defeatthedebt.com/understanding-the-national-debt/millions-billions -trillions/ http://endoftheamericandream.com/archives/the-coming-collapse-of-the-u-s-dollar Ford Pinto http://users.wfu.edu/palmitar/Law&Valuation/Papers/1999/Leggett-pinto.html http://www.engineering.com/Library/ArticlesPage/tabid/85/ArticleID/166/Ford-Pinto .aspx http://www.carbuzz.com/news/2012/12/23/Famous-for-Catching-Fire-Ford-Pinto -7712165/ http://auto.howstuffworks.com/1971-1980-ford-pinto12.htm www.thebhc.org/publications/BEHprint/v027n2/p0390-p0401.pdf http://www.ntsb.gov/safety/safetystudies/SIR0101.html Product Recalls http://www.recalls.gov/recent.html http://www.fda.gov/Safety/Recalls/ucm165546.htm http://www.snopes.com/disney/films/rescuers.asp http://www.nytimes.com/1999/01/09/business/company-news-disney-recalls-video -over-objectionable-image.html Tylenol Poisonings http://www.time.com/time/nation/article/0,8599,1878063,00.html http://iml.jou.ufl.edu/projects/spring01/hogue/tylenol.html http://www.ou.edu/deptcomm/dodjcc/groups/02C2/Johnson%20&%20Johnson.htm http://www.investigation.com/articles/library/2009articles/articles11.htm mos85880_09_c09.indd 271 10/28/13 1:36 PM Suggested Resources CHAPTER 9 Pricing Strategy http://www.inc.com/articles/2003/07/pricing.html http://smallbusiness.chron.com/premium-pricing-strategy-1107.html Sweatshops http://www.laborrights.org/creating-a-sweatfree-world/sweatshops http://www.huffingtonpost.com/tag/sweatshops http://www.businessweek.com/stories/2006-11-26/secrets-lies-and-sweatshops http://www.mtholyoke.edu/~nshah/fashioncrimes/Sweatshops.html http://www.globalresearch.ca/modern-day-slave-trade-americas-offshore-industrial -sweat-shops/5338891 Advertising & Marketing http://www.pbs.org/newshour/businessdesk/2013/03/the-death-of-dishonest-adverti.html http://www.ethicsbasedmarketing.net/8.html http://www.ftc.gov/os/highlights/2013/topics/deceptiveAdvertising.shtml http://www.ftc.gov/speeches/starek/nima96d4.shtm http://www.adweek.com/news/advertising-branding/skechers-settles-deceptive-ad -case-ftc-40m-140577 http://smallbusiness.chron.com/types-deceptive-advertisement-22945.html http://soldin60secs.wordpress.com/2012/05/25/top-10-famous-deceptive-ads/ http://www.angieslist.com/companylist/us/ http://articles.latimes.com/keyword/joe-isuzu http://www.tvacres.com/admascots_joeisuzu.htm http://www.nytimes.com/2010/01/29/business/media/29adco.html?_r=0 http://www.theblaze.com/stories/2013/04/15/is-kmarts-new-ship-my-pants-viral-video -ad-over-the-line/ http://business.time.com/2013/05/24/big-gas-savings-kmarts-funny-followup-to-the -viral-ship-my-pants-ad/ mos85880_09_c09.indd 272 10/28/13 1:36 PM Suggested Resources CHAPTER 9 http://www.usatoday.com/story/money/business/2013/02/04/clydesdale-ad-wins-by-a -nose/1889693/ http://www.chicagotribune.com/news/chi-rolling-stone-boston-marathon-bombing -suspect-cover-20130717,0,7285782.story http://gawker.com/5910987/skechers-will-refund-your-money-since-it-tricked-you-into -buying-ugly-shoes Caveat Emptor http://www.investopedia.com/terms/c/caveatemptor.asp http://www.law.cornell.edu/wex/caveat_emptor http://www.translegal.com/legal-english-lessons/caveat-emptor-2 http://www.smallbusinessbranding.com/825/the-customer-is-always-right/ http://www.kristofermencak.com/2009/09/the-customer-is-always-right-what-does -it-mean/ http://money.msn.com/saving-money-tips/post.aspx?post=52cbc321-dafb-498e-8e7f -f3759b56e342 Subliminal Messages http://www.chron.com/business/gallery/15-corporate-logos-that-contain -subliminal-62330.php http://www.wisegeek.org/what-are-subliminal-messages.htm http://www.umich.edu/~onebook/pages/frames/legalF.html http://subliminalmanipulation.blogspot.com/2010/09/subliminal-messages-in -advertising-in.html Customer Tracking & Profiling http://lifehacker.com/how-retail-stores-track-you-using-your-smartphone-and-827512308 http://www.fastcolabs.com/3014365/future-of-retail/retail-stores-are-tracking-you -like-crazy http://smallbusiness.chron.com/businesses-use-search-engines-3277.html http://www.good.is/posts/a-machine-that-dispenses-free-coffee-when-you-yawn http://www.cbsnews.com/8301-505144_162-41541822/pricing-psychology-7-sneaky-retail -tricks/ mos85880_09_c09.indd 273 10/28/13 1:36 PM mos85880_09_c09.indd 274 10/28/13 1:36 PM
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