December 16th, 2010

TRM 409.01 BUSINESS ETHICS Assignment II: Ethics of Consumer Production and Marketing

Instructor: Perran Akan Student: Nee Roman Student ID: 2006104603

A manufacturer of electric coffee pots recalled the pots (through newspaper announcements) when he found that the handles would sometimes fall off without warning and the boiling contents would spill. Only 10 percent of the pots were returned. Does the manufacturer have additional duties to those who did not return the pots? Evaluate and discuss this situation on the basis of the three approaches related to the business firms duties to consumers. In your answers use the terminology related to the Ethics of Consumer Protection and Marketing: Manufacturers implied warranty, caveat emptor, caveat vendor, contractual theory (of sellers duties), social cost theory (of sellers duties), duty to comply, product safety, reliability, maintainability, reasonable risk, duty to disclosure, duty not to misrepresent, strict liability. Contractual theory of business firms duties to consumers claims that a business has four main moral duties: the basic duty of (a) complying with the terms of the sales contract and the secondary duties of (b) disclosing the nature of the product (c) avoiding misrepresentation, and (d) avoiding the use of duress and undue influence. To start with, I think regardless of the price, a manufacturer of electric coffee pots should produce qualified products. Time of heating or keeping the coffee warm can change according to price and quality of product but the handles should be durable at every price. According to the contract view, business firms duty the provide consumers with a product that lives up to those claims. But in this case, in terms of quality, there is a problem. The expected reliability, service life, maintainability is in terrible situation. In terms of product safety, any consumer can not accept the handles fall of. It is unreasonable and the risk of fall can be preventable by the firm. A consumer does not know the risk of bodily harm from the boiling contents and how to cope with it. It is the seller moral duty to provide a safe product that its attendant risks are known and judged to be acceptable or reasonable. From the point of implied warranty, the buyer of coffee pots has a reasonable expectation that the product will function as expected. The exception to this rule is when a seller explicitly

denies the implied warranty, as when products are sold as-is. For instance, an airline company could not say in its advertising We have safe flights. The flights must be safe and it is implied in meaning. But in this case, there is no mention about as-is. The product is not functioning in proper way. Todays world, the doctrine of caveat emptor replaced with caveat vendor. Caveat vendor means let the seller take care. Sellers have more expertise and experience than the consumers. They know their products and even competitors product. According to due care theory, manufacturer not only has a duty to deliver a product but also exercise due care to prevent others from injured by the product even if the manufacturer explicitly disclaims such responsibility and the buyer agrees to the disclaimer. According to Due Care theory, a manufacturer is not morally negligent when others are harmed by a product and the harm was not one that the manufacturer could have possibly foreseen or prevented. Nor is a manufacturer morally negligent after having taken all reasonable steps, to protect the consumer and ensure that the consumer is informed of any irremovable risks that might still attend the use of the product. An electric coffee pot manufacturer should have proper design, a good production manager and well defined instructions part on the product. After having all the precautions, if there is a fault on product and manufacture could not foreseen or prevent it, he/she is not morally negligent. Also, in the case, it is mentioned that manufacturer recalled the pot through newspaper announcements. He/she is morally responsible to inform his/her customers to protect them from any harm which can come from the use of the product. But there is a problem with due care theory. It assumes the manufacturer can discover the risks that attend the use of a product before the consumer buys and uses it. But in the case and real life it is not that easy. Beyond business firms the contractual and due care duties for preventing injury or harm, there is the third theory of social cost that the firms should pay the costs of any injuries come from the usage of the product. From that point, manufacturer could not foresee or prevent a product related injury and the customer could not guard against injury because the danger is unknown. There are two innocent parties. According to strict liability, manufacturer should pay the cost of the improper design of handles which may result in bodily harm.

From the point of social cost view, manufacturer has additional duties customers who did not return the pots. If they have injuries from unavoidable defects in design of coffee pots, manufacturer should pay the cost of injuries. ( Such as paying the hospital bills, providing free new product etc.) On the other hand, there are man arguments about the internalizing the external costs of injuries. This argument brings us to compensatory justice. If the manufacturer could not see the risk of the injury, he/she should not be forced to compensate injuries. Social cost and the legal theory of strict liability treat manufacturer and customer who share the costs of injuries unfairly. Unfortunately even todays world, there is no solution for this problem.

References: Velasquez, Manuel G., Business Ethics, Sixth Edition