An Introduction to Business Ethics

1
An Introduction to Business Ethics

• Chapter 7
• Marketing Ethics Product Safety and Pricing

2
Marketing and Ethics

• Desjardins treatment of the ethics of marketing
  is somewhat unusual.
• Rather than focus exclusively on advertising, he
  includes product safety and pricing issues as
  well.
• This expanded focus seems justified by reference
  to the 4 Ps of marketing Product, Placement,
  Pricing, Promotion.
• What ethical issues arise in connection to these
  4?

3
Some General Concerns

• For all of the different elements of marketing, a
  set of general concerns constantly recur.
• Is the technique or practice consistent with our
  duty of respect to other people?
• Do the techniques or practices encourage or
  produce real benefits?
• What values beyond the immediate focus of the
  technique or practice are at stake?

4
Marketing and Respect

• Traditional analyses of respect emphasize the
  autonomy of others.
• The minimum conditions for autonomy are freedom
  and knowledge.
• What counts as freedom?
• Its not an all or nothing situation. Practical
  freedom admits of degrees.
• Under what conditions is the knowledge of others
  our responsibility?

5
The Benefit of Desire Satisfaction

• There is a common assumption among economists
  that satisfying desires is always beneficial.
• However, it is easy enough to identify instances
  where such satisfaction is not a good thing.
• Impulse buying Affluenza Illegal drugs
• Thus, we need the capacity to distinguish between
  marketing goals and techniques that produce real
  benefits and those that dont.

6
The Significance of Contextual Values

• Choices about marketing do not occur in a vacuum.
  
• In addition to the values served by the exchange
  itself, common contextual values that can be
  supported or undermined by marketing choices
  include fairness, justice, health and safety.
• In analyzing the ethical dimensions of marketing
  choices we need to assess the impact of these
  choices on these contextual values.

7
Product SafetyThe Changing Legal Landscape

• Prior to 1916, the ruling legal principle
  governing product liability was caveat emptor.
• The assumption was that the consumer was in the
  best position to protect themselves.
• In 1916 the case of MacPherson v. Buick produced
  a new ruling principle negligence.
• The court recognized that the increasing
  complexity of goods, their manufacture, and
  distribution rendered the old standard
  insufficient.
• In 1960 the Henningsen v. Bloomfield Motors case
  enunciated yet another principle strict products
  liability.
• SPL assumes that marketing a good implies a
  warranty guaranteeing safe use.

8
Product SafetyThe Ethical Foundations

• The changing legal landscape mirrors changes in
  the ethical principles thought to govern
  businesses responsibility for product safety.
• Increasingly, philosophers have moved away from
  an account of that responsibility grounded in
  liability (fault) towards an account that doesnt
  require a finding of fault.
• This is essentially the move seen in the
  development of the Henningsen case.

9
Product Safety and LiabilityMarketing as Contract

• One assumption governing the liability approach
  to responsibility for product safety is that a
  purchase is like a contract.
• On this assumption, the producer of a good is
  responsible for every explicit claim they make
  regarding their product, but no more.
• The problem that arises concerns the presumption
  of knowledge on the part of the consumer.

10
Product Safety and LiabilityNegligence

• Another approach expands the contract account to
  address the possibility of negligence.
• Negligence as an ethical concept refers to
  instances of failure to exercise reasonable care
  to avoid harming others or ourselves.
• We can be negligent both in what we do and what
  we dont do.
• Negligence requires the capacity to accurately
  foresee possible harms, where such foresight is
  constrained by a principle of reasonableness.
  Failure to foresee things that a reasonable
  person should have foreseen is no defense.
• McDonalds coffee example?

11
Strict Products Liability

• SPL focuses on product performance rather than on
  the actions of producers and consumers.
• SPL is a response to the question, If harms
  follow from the use of a product, who should bear
  the costs?
• In some instance the answer is relatively
  straightforward, but those instances are
  increasingly rare.
• DES (diethylstilbestrol)harms of use not seen
  for a generation.

12
Who Should Bear the Cost?

• Tough Luck Standard Consumers should bear the
  costs (in addition to the harm itself).
• Taxpayer Funding Society should bear the costs,
  requiring some sort of socialized insurance
  system.
• Indeed, why draw the line at the harms caused by
  the use of consumer goods? Society should pick up
  the tab for all of our health care.

13
Who Should Bear the Cost?

• The producer of a good should bear the cost.
• Criticisms
• Unfair businesses would be held responsible for
  things they have no control over.
• Costly would add significant costs to producers
  and consumers.
• Unwise would discourage innovation and encourage
  lawsuits.
• In response, advocates have pointed out that it
  is no more unfair than to ask consumers to bear
  the cost, and it may be much less, in as much as
  it is the business that benefited from the sale
  of the good.
• It is also unclear if the costs would exceed the
  price already paid by society for these kind of
  harms.

14
Ethics and Pricing

• In the abstract, the principle governing pricing
  is the agreement of the parties to the
  transaction.
• The agreement seems to encompass the autonomy and
  benefits of the parties.
• We should not fail to note that pricing
  strategies often affect third parties, and thus
  contextual values may be at issue.

15
Concerns about Pricing

• In an idealized economic analysis, a fair price
  is achieved when buyer and seller come together
  in a competitive market to exchange goods.
• Of course, this is an ideal. The reality is that
  consumers frequently choose with a knowledge
  deficit (raising concerns about autonomy) and on
  occasion sellers knowingly take advantage of
  vulnerable consumers.
• Some examples of the latter include Price
  gouging, monopolistic pricing, and price-fixing.

16
Benefiting from Low Prices?

• The idealized pricing analysis takes as a given
  the consumer desire for low prices and the
  coordinate idea that low prices always benefit
  the consumer.
• These assumptions also fail to address the
  complex reality of pricing decisions.
• The example of Wal-Mart
• http//edworkforce.house.gov/democrats/releases/re
  l21604.html

17
Pricing and Contextual Values

• The Wal-Mart case also highlights the
  significance of a range of contextual values to
  the ethical analysis of pricing.
• Fairness and Predatory Pricing
• Another value commonly at issue in pricing
  choices is justice.
• Price discrimination (auto dealers)
• Government subsidies