December 16th, 2010

TRM 409.01

BUSINESS ETHICS

Assignment II:

“Ethics of Consumer Production and Marketing”

Instructor: Perran AkanStudent: Neşe 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 firm’s duties to consumers.

In your answers use the terminology related to the Ethics of Consumer Protection and

Marketing:

Manufacturer’s implied warranty, caveat emptor, caveat vendor, contractual theory (of

seller’s duties), social cost theory (of seller’s 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.

Today’s 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 competitor’s 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 today’s world, there is no solution

for this problem.

References:

Velasquez, Manuel G., Business Ethics, Sixth Edition