Ethical Issues• Deceptive selling practices- Eg. Paste 100 gms free• Shoddy (Inferior) product Construction• Product Breakdown• Warranties not honoured• Advertisements- Misrepresentation and Exaggeration• Lack of information about the product
Unethical Issues and Marketing More than 5 lakhs injuries requiring Hospital treatment using toys, nursery equipments and Playground equipments 3 lakhs people injured using workshop equipments 2 lakhs people injured using home furnishing equipments 3 lakhs people injured using construction materials 117 deaths per day due to auto related accidents
In most of the cases government will not take the responsibility Company will not take the responsibility
Major IssueBusinessmen look at ProfitConsumers look at Satisfaction So they buy and sell cheaper and unsafe products
Consumers should insist for only saferproductsIf no demand for unsafe products-Automatically production of unsafe productsstops
ETHICAL PRACTICES IN MARKET PLACEThree Theories of ethical duties towards consumers•The Contract Theory•The Due Care Theory•The Social Costs Theory
I. THE CONTRACT THEORY( Business Firms’ duties to consumers)“ The relationship between a business firm and its consumersis essentially a contractual relationship and the firms moralduties to the customer are those created by this contractualrelationship”
Contractual ResponsibilitiesFirm has the responsibility to deliver the goods according tothe characteristicsCustomer has the responsibility to pay the money
According to this veiw, the duties of the firms to consumersare--------•Complying with the terms of sales contract•Disclosing the nature of the product•Avoiding misrepresentation•Avoiding the use of undue influence
OTHER DUTIES OF FIRMS TO CONSUMERS•The duty to complyProvide consumers with a product that lives upto those claimsexpressed by the company.Eg. Winthrop Laboratories marketed a painkiller that itadvertised as “Non addictive”. But a patient got addicted anddied.
•ReliabilityRefers to the probability that the product will function as theconsumer is led to expect that it will function•Service LifeRefers to the period of time during which the product willfunction as effectively as the consumer is led to expect it tofunction
• MaintainabilityThe ease with which the product can be repaired and kept in operating condition.Eg. Whirlpool Corporation.First year– All parts of the appliance found defective in materials or workmanship, Repairs and replacement free of charge including laborSecond year- Pay only labor.
• Product SafetyThe degree of risk associated with using a product.Eg. OK Tested.Sometimes reasonable risk expected by buyers-----Container with label: Highly Toxic Danger- Poison Keep away from children
• The duty of DisclosureThe seller who intends to enter into a contract with a customer has a duty to disclose exactly what the customer is buying and what the terms of the sales are
• The duty not to misrepresent (False Representation)Eg. Writing wool or silk for cotton material Writing regular price on article sold for higher price• The duty not to coerceGetting the consent creating stress, fear or emotions.Eg. Stove and LPG connections.
II DUE CARE THEORY(Business firms duty to consumers)Based on---Consumers and sellers are not equal.Sellers are knowledgeable and expertsConsumers lack knowledge and expertiseCaveat emptor is replaced by caveat venditorEg. Power steering in a vehicleUser does not know how it operates.
Due care must be taken in-• Design of the product• Choice of reliable materials for the product• Manufacturing process• Quality control tests• Warning• Labelling
Duties• The duty to exercise due care• Design– free from danger• Production- eliminate any defects• Information- Fix labels, notices, instructions.
III Social Costs Theory(Business firms duty to consumers)The view that a manufacturer should pay the costs of any injuries sustained through any defects in the product, even when the manufacturer exercised all due care in the design and manufacturer of the product and has taken all reasonable precautions to warn users of every foreseen danger.