Ethics Test Chapter 6

Example of Ambiguity

-Continental Baking Company's ad for Profile bread implying that eating their bread would lead to weight loss -even though Profile had the same number of calories, but it was sliced thinner than most bread

psychological appeal

-persuasive effort aimed primarily at emotion, not reason -potentially the advertising technique of greatest moral concern

6 things business should do to increase product safety

1) give safety the priority necessitated by the product 2) abandon the misconception that accidents are solely the result of consumer misuse 3) monitor closely the manufacturing process 4) review the safety implications of their marketing and advertising strategies 5) provide consumers with full information about product performance 6) investigate consumer complaints

2 arguments in favor of strict product liability

1) policy will make firms bend over backward to guarantee product safety because they know they will be held liable for injuries no matter what 2) the manufacturer is best able to bear the cost of injuries due to defects

3 points to keep in mind about paternalism

1) the safety of some products or some features of products affects not only the consumer who purchases it but 3rd parties as well 2) anti-paternalism gains plausibility from the view that individuals know their own interests better than anyone else does and that they are fully informed and able to advance those interests 3) controversy over legal paternalism pits the values of individual freedom and autonomy against social welfare

why do critics of strict product liability believe its unfair?

A firm that has exercised due care and taken reasonable precautions to avoid or eliminate foreseeable dangerous defects should not be held liable for defects that are not its fault

subliminal advertising

Advertising that communicates at a level beneath conscious awareness, where, some psychologists claim, the vast reservoir of human motivation primarily resides.

weasel words

Aid and abet ambiguity. Words that are used to evade or retreat from a direct or forthright statement. "Part of" "Helps to"

Types of Price Fixing

Horizontal Price Fixing Vertical Price Fixing

Implied Warranties

Include the claim, implicit in any sale, that a product is fit for its ordinary, intended use

Example of Concealment of Facts

Shell claiming that its gasoline had "platformate" but didn't mention that all other brands did too

concealment of facts

Suppress information that is unflattering to their products. they neglect to mention or they distract consumers' attention away from information, knowledge of which would probably make their products less desirable

Due Care

The idea that consumers and sellers do not meet as equals and that the consumer's interests are particularly vulnerable to being harmed by the manufacturer, who has knowledge and expertise the consumer does not have.

consumer sovereignty

The idea that consumers should and do control the market through their purchases

quantity surcharges

This occurs when larger size items cost more per unit price then their smaller package size counterparts

Price Gouging

a seller's exploiting a short-term situation in which buyers have few purchase options for a much-needed product by raising prices substantially

Ambiguity

ads that can be understood in 2 or more ways-- can be deceiving

How almost all advertising fails to provide full information

advertisements never point out the products flaws or anything negative

dependence effect

as a society becomes increasingly affluent, wants are increasingly created by the process by which they are satisfied

Example of Psychological Appeals

automobile ad that presents the product surrounded by people who look wealthy and successful taps into our need and desire for status

Example of Exaggeration

claims that a pain reliever provides "extra pain relief" contradict evidence that all analgesics are effective to the same degree

Express Warranties

claims that sellers explicitly state-- for example, that a product is "shrink proof" or will require no maintenance for 2 years

Lives saved vs costs of different regulations

economist can now estimate how many lives a regulation saves and then compare that number with the cost of implementing the rule Ex: cost of requiring labels showing trans fat content of foods is only $3,000 per life saved whereas the cost of insulation to protect against fire in airplane cabins is $300,000

Economic and philosophical worries about safety restrictions on consumer choice

economists worry that preventing individuals from balancing safety against price is inefficient philosophers worry about interfering with peoples freedom of choice

examples of misleading labeling and packaging

energy drinks not listing their caffeine content cigarettes not labeling the additives they use in their product

MacPherson v. Buick

expanded the liability of manufacturers for injuries caused by defective products

Strict Product Liability

holds that the manufacturer of a product has legal responsibilities to compensate the user of that product for injuries suffered because the product's defective condition made it unreasonably dangerous regardless of whether the manufacturer was negligent in permitting that defect to occur

caveat emptor

let the buyer beware

exaggeration

making claims unsupported by evidence

Horizontal Price Fixing

occurs when competitors agree to adhere to a set price schedule, not to cut prices below a certain minimum, or to restrict price advertising or the terms of sales, discounts, or rebates

reasonable consumer standard

prohibit only advertising claims that would deceive reasonable people

gullible-consumer standard

prohibits an advertisement that might mislead someone who is ill informed and naive

Consumer Product Safety Commission

protect the public "against unreasonable risks of injury associated with consumer products" 5 member commission that: -sets standards for products -bans products presenting undue risk of injury -in general polices the entire consumer product marketing process from manufacture to final sale

Vertical Price Fixing

takes place when manufacturers and retailers - as opposed to direct competitors - agree to set prices

Legal Paternalism

the idea that the law may justifiably be used to restrict the freedom of individuals for their own good

Puffery

the supposedly harmless use of superlatives and subjective praise in advertisements

FTC v. Standard Education

this case moved the law away from the reasonable person standard

Federal Trade Commission (FTC)

was originally created in 1914 as an anti-trust weapon, but its mandate was expanded to include protecting consumers against deceptive advertising and fraudulent commercial practices