Everyone understands that in order to sell a product people need to know about the product. Advertising is the vehicle for informing the consumer about products. It is understood that an advertisement is an attempt to generate sales. There are three areas of ethical concern raised by advertising. First, there is concern over deception in advertising. Second, there are concerns about certain styles of advertising. Third, there are concerns over the impact of advertising on the free market system.
Deception
There is a natural conflict between the advertisers desire to sell a product and the consumers expectation to receive good information from ads enabling them to make purchasing decisions. We have moved beyond old the caveat emptor standard for advertising in which no restrictions on information were sought. In the modern marketplace, it is understood that advertising cannot be false and should not be deceptive. Yet, agreement on this requirement begs the question: When is an ad false or deceptive?
Thought Question:
Coke vs. Tropicana
Tropicana ran a commercial with an athlete squeezing an orange and pouring the juice into the Tropicana container while the audio said “It’s the only leading brand not made with concentrate and water.” Coke sued claiming that it, as maker of Minute Made, was materially harmed by Tropicana’s false advertising. Coke claimed that the commercial lead consumers to believe, falsely, that Tropicana was fresh squeezed juice (which it is not). The standard of proof in this case was for Coke to show that if some consumers are mislead by the commercial that Coke will loose some sales to Tropicana which would constitute an irreparable harm. The court found that since the ad’s depiction on how Tropicana was produced was patently false (it is not simply squeezed and packaged) that Coke was entitled to relief under the law. Was this a deceptive ad? Should Tropicana owe Coke damages for the ad?
One cannot answer this question by an appeal to “truth” in advertising. We might construct advertisements composed of entirely true statements and yet still find that deceptive advertising had occurred. For instance, the grocery store can advertise that they will sell good X at price Y and when you go to the store you find that good X has been and continues to be out of stock. This ad is true (they will sell X for price Y) and yet would hardly qualify as non-deceptive advertising.
Another answer that will not succeed is to require the whole truth in advertising. We would never require that one company’s ad mention that their price is higher than their competitor for the same product. We understand that there is a need to shape the information in advertising so that it can appeal to consumers and yet not be deceptive.
I’m advertising a new breakfast cereal called “Chocolate Frosted Sugar Bombs,” a very sweet cereal that kids love to eat. Knowing that kids will love the cereal (and the nice cartoon character on the box) the hurdle my advertising needs to overcome is the parents’ concern for their child’s health. As a result my, ads always picture a bowl of Chocolate Frosted Sugar Bombs next to orange juice, buttered toast, and a banana with the tagline “part of a nutritious breakfast.” Of course, I know that Chocolate Frosted Sugar Bombs are anything but nutritious but the picture and tagline are technically true. Is my ad deceptive?
Thought Question:
It is clear that some standard of deception is needed for advertising but it is not clear what that standard should be. We might hold as a standard that an ad is deceptive if the majority (or sizable minority) of those exposed to it gain false beliefs as a result of it (that Chocolate Frosted Sugar Bombs are actually nutritious, for instance). Others hold that this standard would be too subjective. This group claims that so long as the advertising is true, it passes the ethics test. An ad that contains no false statements but still creates false beliefs in consumers, would be the fault of the consumer then and not the advertiser.
Another way that advertising might be deceptive involves what is left out of the ad. One example is the breakfast cereal which advertises itself as “good for your heart.” Most people might conclude that eating the cereal is in some way good for your cardio-vascular system. However, the actual meaning behind this phrase is that by eating cereal you won’t eat as much bacon or ham for breakfast and therefore your heart is healthier. Another example is an ad announcing a sale on last year’s cars with no mention that the new models are already in stock (limiting information to move one product over another).
Thought Question:
Kellogg’s All-Bran ran an ad which claimed that eating All-Bran will help prevent cancer. This caused an immediate escalation in the product’s sales. No evidence ever directly tied All-Bran to this claim, but a low fat, high fiber diet does help reduce cancer. Was this ad deceptive?
Numerous ethical concerns arise over the tactics used by advertisers. I will list several of them here and briefly explain why these advertising practices might be problematic.
Issues of Targeting
Certain products appeal to certain types of consumers. The natural result is that ads will target a specific group of consumers. Ads often aim at groups by age, gender, income, and lifestyle. One area of concern with targeted ads is when this tactic is applied to children. For instance, how many sugar cereal ads did you see as a child? Advertisers bombard children with targeted ads in the hopes that their desire (expressed in constant whining) will result in parents purchasing the product. Ethically this raises two immediate concerns. First, are advertisers harming children (who are not rational adults) when they a create desire for products that are not good for the child? Second, is there a sort of foul play when advertisers knowingly try to create juvenile desires for a product with the full knowledge that kids cannot buy the product themselves? In other words, are advertisers unfairly going around the parent’s back to create demand in children knowing that parents would not themselves want their children to desire such a product? Another issue about targeting children occurs through product placement in stores. In most states, parents can’t escape having to pass stacks of candy and gum at the checkout. This targeted product placement in stores will get kids to whine until many parents give in. Here again there is a deliberate attempt by advertisers (and retail establishments) to bypass what the parent wants for their child and create demands in a child for something against the wishes of the parent. This retail practice has been dealt with in some states (California, for example) where the law requires that there be some checkout isles without candy or other items targeted at children.
Manipulation via Irrelevant Information
Everyone knows ads are designed to sell products. One tactic for increasing sales is persuasion. Persuasion offers a potential consumer reason-based information to influence them into purchasing a product. Companies, for example, might give you information as to why their product, rather than another brand, is the one you should buy (Their car has a higher safety rating, better gas mileage, longer warranty, etc.). Many companies utilize another less ethical tactic instead of persuasion–that of manipulation. Manipulation appeals to irrelevant factors to get you to purchase a product. This would include the use of sex to sell products that have nothing to do with sex. The objection to manipulation is based upon its use of irrelevant information to sell a product. Recall that advertising supports the free market by providing information to help consumers purchase the correct product. Manipulation does not further this goal as it does not provide relevant product information.
Manipulation via the Appearance of Authority
Similar to manipulation via irrelevant information, this type of advertising tactic attempts to generate sales by appealing to some sort of authority. Perhaps the most objectionable use of this style is the use of people in white coats (who are not medical professionals) to add legitimacy to their claim as to why this product is good for your health. Studies have demonstrated that making someone look like a doctor does lead people to believe that the claims made carry the authority of a doctor.
Self-identity Image Advertising
This type of ad appeals to the type of person using a product, rather than the quality or attributes of the product itself. An infamous example would be the Marlboro Man advertising campaign. Some authors also mention the Chanel and CK ads, which appeal to the sexual imagery of the person in their ads to entice people wanting to be desirable and sexy like the ad’s model into purchasing their products. Objections to these types of ads include:
False Promises – The Chanel ad would lead one to believe that use of the product will make a consumer beautiful like the person pictured.
Even with continued use, however, the product will not keep one’s skin perfect as displayed in the ad. The ad therefore implies assurances or promises that are not true.
Presuppositions – The Chanel ad promotes the values that beautiful women are wrinkle free, that the woman pictured is the type that is beautiful, that women ought to pursue beauty as pictured, and that women should be valued for their beauty.
The effects of these presuppositions are most noted within children. For instance, there is a link between advertisings focus on a particular view of beauty and eating disorders in young women (and increasingly young men). Similar evidence ties image advertising to low self-esteem in young women or the unrealistic expectations young men place upon potential mates physical appearance. There is also questionable presuppositions in the CK ads which sexualize teenagers. Perhaps no one ad campaign is at fault, but when one considers how many thousands of ads young people are exposed to with similar presuppositions the negative effects become more likely. Just think of the body types of women used in ads. The body types used are not common in society and many of them have been digitally altered. Can we reasonably conclude that this will not have a negative impact? What is especially problematic about the self-identity image advertising tactic is that this method works best by undercutting consumer self-esteem. The message is “I’m not beautiful, the person in the ad is, therefore I need the product to make me more attractive.”
Puffery
This style of ad makes exaggerated claims about a product. For example, does drinking more beer lead to lots of attractive women talking to you? (my guess is the reverse might be more likely). Or, if you had this car people would think you were cool, special, or important so buy this car. Objections to puffery revolve around the failure to provide real relevant product information replacing it instead with exaggerations designed to manipulate rather than inform. Many advertisers defend puffery on the grounds that it gives people what they want – a picture of life beyond the ordinary. It would not be unfair to say that advertisers have more expertise in psychology than products and the use of puffery represents this. Psychologically people want to imagine the unrealistic depictions of life that puffery offers. In other words, people do not want ads that inform they want ads that entertain.
Subliminal
An ad designed to be noticeable to the subconscious but not the conscious mind. Without debating the effectiveness of such ads, we can say that such ads pose an ethical problem. Namely, they attempt to influence us without our knowledge. This looks like an infringement upon our free action. It is legitimate to attempt to influence us when we know that influence is occurring, it may not be legitimate to influence our decisions when we have no idea it is occurring. Subliminal advertising seems to fail the Kantian respect for persons by attempting to influence their decisions without their knowledge. To show respect for your ability to reason, an ad should be up front that it is an ad.
Each style presented here has its own arguments for against this type of advertising practice. What we have done is to frame the issues to see where, if anywhere, an ethical objection could be made. There are many in businesses and advertising who hold that advertising’s real objective is to sell products. So long as an ad contains nothing false and people know it is an ad, then anything is fair game. Advertisers are quick to point out that people respond better to the styles of ads mentioned above than they do to ads focused on product information. People want to be entertained in ads, they are willing to pay huge prices for an imagine or brand name. Defenders of these advertising methods will conclude that if there is an ethical problem here it is found with the consumer and not the ad. Though, this may be a persuasive argument within business, there is no ethical foundation to “we’re not doing anything wrong, we’re just giving people what they want” as even the drug dealer can say that. Still, if we do find ethical fault in some advertising styles there remains the practical problem of how do we change these tactics. Recently some companies have “owned” the negative impact of advertisements and deliberately altered the way in which they advertise to avoid the objects discussed above. With this basic grasp of the ethical concerns of some advertising styles, let us turn to another problem within advertising, namely, its potential negative impact on the market.
Given advertising’s huge influence on the free market system, a brief ethical evaluation on these effects is necessary. The ethical objection is mostly utilitarian in nature as it appeals to some adverse economic consequence that advertising brings to our free market society. There are two areas in which advertising might be said to subvert the gains of free market capitalism. First, there is an impact upon how we view innovation in the marketplace. Second, there is the informational role advertising plays in determining which products succeed in the market.
The traditional free market theory of innovation holds that the existence of a need or desire creates an opportunity for developing a new product. The product is then created to suit the existing need. It is not hard to think of how many products have allowed us to do things more efficiently than before or allowed us to do things we could not do before. These products fit the traditional theory of market innovation. However, the success of advertising has created a new theory of market innovation in which there does not to exist a need or desire to innovate. Instead, there is a potential product to be sold and marketing can create the desire. Innovation is not motivated by an existing need or desire, but by the possibility of creating need or desire. Though no one needs or desires the product a successful targeted marketing of the product will create a need or desire for consumers to have the product (did anyone need or want a pet rock)? The marketing theory of innovation has lead to the creation of a great many products that were not needed or wanted, the products were created and marketing created demand. This is an inversion of the traditional motive to innovate. The cart can now lead the horse. The ethical concern is that such a shift takes resources and innovations away from areas where they are needed and places them where marketing can create a profit. This may sacrifice products that would benefit society in favor of those that can earn a quick buck.
The second problem, that of the informational role of advertising, can be seen as a consequence of the following argument:
If consumers gain most of their purchasing information from advertising, and
If advertising is not a viable source for good information about purchases, then
It is not the case that this system of information delivers the stated virtues of the free market system.
The first condition, that we gain most of our information from advertising, is a factual matter that is not likely to change. The second condition, that advertising is not a good source of information, is something that might be controlled. As a result, one of the greatest reasons to support a free market system is dependent on advertising practices. If advertising is done properly, then the benefits of a free market are obtained, if done improperly those benefits are lost.
The sort of marketing practices which undercut the benefits of a free market are not always deceptive (as with the supermarket cases). Imagine two products X and Y where X is cheaper and higher quality than Y. Any rational consumer, given good information (X is better quality and cheaper) will choose to purchase product X. The result of free market theory would be that X becomes the dominant product and Y either improves or disappears from the market. However, the manufacturers of X have very little money for advertising (due to developing and producing a better quality product while selling it for less). On the other hand, Y puts all of its money into a slick, widely distributed advertising campaign. Consumers, making their decisions based upon the advertising end up buying Y instead of X. In this instance, advertising has undercut free market theory by creating a situation where the low quality, high cost good dominates the market and the high quality, low cost producer is forced to raise prices, lower product quality, or leave the market. What is very clear here is the power of advertising to shape a market such that the “better” product is not always successful within the market.
We might surmise this economic problem in ethical terms as follows. When advertising is used in such a way as to provide bad, incomplete, or irrelevant information to sell an inferior product (lower quality, higher priced, etc.), it has the effect of making things worse off. It does this either by driving the better product out of the market or keeping an inferior product in the market. Ethically, this could be expressed in both utilitarian and Kantian concerns. A utilitarian might argue that by knowingly manipulating the information in ads to sell an inferior product, you are decreasing the common good whereas providing good relevant information would better inform consumers on the best product for them. A Kantian might argue that by knowingly manipulating information in ads to generate sales of an inferior product when providing good relevant information would lead consumers to a different choice you are using the consumer (through information deception) as a means and not an end.
It is important not to take either of these arguments as an overarching indictment of advertising. These arguments target the information in the ad and not the ad itself. For instance, even if your product is inferior neither the utilitarian or Kantian would object to you advertising the product, what it does, where it can be found etc. The objections presented above apply when the information in the ad does something more: when it is deceptive, when it overstates claims, or when it appeals to irrelevant grounds for you to purchase the product. These sorts of ads end up undercutting part of the social good that the free market system is supposed to provide (better quality, cheaper products, in larger quantities) by confusing consumers into purchasing inferior goods.
Sales is the largest area of marketing. Over the years a great deal of unethical sales conduct through information disclosure has occurred. These unethical practices are motivated in large part by sales commissions and high pressures upon salespersons to move products. Unethical information disclosure can occur in what is disclosed and by what is withheld. Our focus will be on two ethical questions concerning sales and information disclosure. First, is bluffing (a form of deception) an acceptable sales tactic? Second, how much information is a salesperson obligated to give a potential buyer? We begin with bluffing.
Is Bluffing an Acceptable Sales Tactic?
We might define lying as making statements one believes to be false. What makes lying unethical though is that false statements are made in a context where one warrants the truth of such statements. We all agree that lying is unethical in advertising and sales. However, providing a false statement in a context where one does not warrant the truth is not lying (or at least not the sort of lying that is considered unethical). The classic example is the poker game. When one sits down to play poker it is understood that there is no warrant of truth in what anyone says. Therefore, when one plays poker, a practice of bluffing is fair game. To avoid confusion the term “bluffing” is substituted to mean lying under conditions where the truth is not warranted. In poker bluffing is not unethical. Instead, bluffing is an integral part of the game.
This analogy is often applied to business, such that bluffing is just a part of the business game. In contexts of many business negotiations (union contracts, real estates sales etc.) it may be that statements are made that are thought false, but it is not the case that the truth of those statements is warranted. In other words, when two negotiators sit down, both know and expect that what is said is part of the game and is not truth certified. So pervasive is this expectation that for one to certify the truth it would not be taken as truthful. Certainly if all parties to a negotiation know that the certification of truth is suspended (as one knows when one joins a poker game) then bluffing is acceptable. Since sales is an instance of business negotiation and all parties know that the “rules of the game” allow for bluffing, then bluffing is an ethical sales tactic.
This is not to suggest that salespersons have free reign to make false statements. An allowance for bluffing is to allow strategic disclosure and overstatement because everyone knows seller and buyer can adopt these tactics. A salesperson could exaggerate the usefulness, value, or real price of the product. A salesperson could not make false material claims about what the nature, function, or safety of the product.
There are three defenses for allowing salespersons to engage in bluffing:
As in poker, bluffing is part of the rules of the game when negotiating a sale.
In legal cases everyone understands the defense attorney isn’t going to admit his client is guilty. So too, a salesperson isn’t going to admit his products are overpriced or of a lesser quality. From the moment one applies for a job, one plays the game of concealing negative information and puffing up aspects that will appeal to a particular employer. Consider what you say on job applications and ask yourself if you engage in bluffing? This defense of bluffing is not itself sufficient as it tends to collapse into the idea that ethics in business simply means applying a winning strategy within the rules of the game.
Bluffing is acceptable when one has good reason to suspect the other person will engage in bluffing.
It is not acceptable to bluff when one does not have reason to suspect the other person will bluff. This argument has a stronger tie to ethics than the previous one. It is identical to the classic statement of lex talionis (an eye for an eye, a tooth for a tooth, and a life for a life). Only in this instance, it would add something similar to “a lie for a lie” as you are only required to refrain from bluffing if the other party does so and are free to bluff if the other party does.
Bluffing is legal.
No law precludes bluffing in sales. Laws do exist which prohibit lying about other aspects of the product but not the sort that bluffing seeks to allow.
Now that we have seen the arguments for bluffing here are some objections to the practice.
If our defense of bluffing in business is simply that this is how it is done in business, then we are accepting a form of relativism which holds our action is right because this is what is done.
No objective moral support for this position is offered. The fact that bluffing is effective, is widely practiced, and even that everyone knows this information, is not an ethical reason to support the practice (your mom probably taught you something similar already – “just because everyone else does it…”). A more solid moral grounding is required.
An alternative defense of bluffing is the appeal to the law.
Since nothing was illegal, then nothing was immoral. This rests on an erroneous understanding on the relationship between law and morality. Morality sits in judgment of law rather than morality being determined by law. Therefore, we cannot hold that since the law allows for bluffing that therefore it is moral to bluff. Instead we should ask if bluffing is immoral and then make laws accordingly.
To suggest bluffing is acceptable whenever one expects another to bluff is an inversion of the Golden Rule.
Rather than do unto others as you would have them do unto you, it holds that we should do unto others as they would do unto us. If someone would steal from us we should steal from them, if they would harm us we should harm them. This seems more of an abdication of morality in favor of pure prudence than an ethic. This goes even further as it does not require that the other person actually bluff, only that you have reason to suspect that they will. This then collapses into only acting morally when one expects others to do so. One might question then when in our daily lives we have reason to expect others to act morally towards us? As whenever we do not have such reason this theory excuses us from any obligation to act morally towards them.
Is sales ethically like poker?
There are at least two areas where sales and poker are different. First, sales is not like poker because all players are not on equal footing. Each poker player has equal advantage in the game. In sales it is the seller who has the advantage of information. Second, when we sit down to play poker there is an honest and upfront understanding that there is no warrant for truth. We could imagine first time poker players agreeing in advance not to bluff when playing and with such a prior agreement the players would have cause to feel any occurrence of bluffing was wrong. Yet, in business there is nothing comparable as how does one go about entering a business negotiation while still retaining the warrant of truth? If one suggests prior to entering negotiations that the warrant of truth not be suspended, would bluffing then be restricted during the negotiation? Defenders of bluffing would not take such a request seriously. Without such an option bluffing is not only different from poker, but its defense collapses into “when you negotiate with me I’m going to bluff regardless of any agreement to the contrary.”
Thought Question:
Honest deception?
Suppose we admit that bluffing (making false statements during negotiation) is not acceptable. Suppose, in an attempt not to make false statements (but still deceive you to their advantage) a salesperson tells you that “my boss said that we cannot go any lower on this price” (while knowing that my boss was lying when he said this). The salesperson’s statement is true, but it is deceptive. Does this seem to be morally different than simply making a false statement such as “we cannot go any lower on this price”?
With this understanding of the ethical issues revolving around bluffing in business, let us move on to the question of how much information a salesperson if required to provide the customer.
How Much Information Must a Salesperson Disclose?
At least four potential standards have been proposed to answer this question. Below each is presented along with an objection to it.
Minimal Information – The seller is obligated only to provide information that the buyer asks about. The burden of finding out is entirely on the buyer. Objection: Minimal information does not protect consumer safety. If a seller is aware of a potential danger and we do not require disclosure then we are setting the stage for increased injury. Therefore, something more is needed.
Modified Minimal Information – Same disclosure standard as above except that seller is obligated to provide safety information to help buyer avoid injury. Objection: Even though safety information is conveyed this does not address the inequality between the seller and buyer. The seller has far more knowledge and expertise, which leaves the buyer at a disadvantage. They can only be placed on equal footing by requiring more disclosure than simply safety information and questions the buyer asks.
Mutual Benefit – In addition to the disclosure requirements of the modified minimal information standard, the seller is obligated to provide all information needed to make a reasonable judgment about whether to purchase the product or not. The burden is on the seller to provide this information as the buyer is not expected to know, but has a reasonable expectation to be told. This would entail an obligation for a seller to direct buyers to products that suit their needs (as opposed to the ones with the highest commission). This does not require a seller to provide all negative information about a product, but it does require them to provide negative information that is relevant for that particular buyers needs. Objection: This standard relies upon a notion of “reasonable disclosure” which is not specific enough. As with any attempt to appeal to what is “reasonable” we find a great many interpretations of what this means. An ethical standard for sales needs to be more specific.
Maximal Information – In addition to the disclosure requirements of the mutual benefit standard, the seller must provide any information relevant to a purchase decision for the product. In many ways this standard represents a shift in how many buyers view salespersons. They view the salesperson not as a product advocate, but as a purchasing advisor who helps them find the right product for them. Given this shift in role, it is easy to see where a move to a fairness standard is desirable. Objection: Such a rule denies the salesperson their essential function in the competitive market, which is to be an advocate for their company’s products. Rather than being hired to sell the products of their employer, the salesperson under this standard would be more of a “consumer reports” aid to customers which may require them to direct customers to their competitors.
At least one author has proposed that the mutual benefit standard is the best of those proposed. It provides strong protection for the consumer, while allowing a salesperson to meet their obligation to sell products for their employer. It may be a vague standard, but it is a start. There are also those who argue that the mutual benefit standard fails because:
1. Salespersons don’t always know what others would want to know.
2. Salespersons don’t always know all of the product information themselves.
3. Salespersons have limited time to give any one customer which precludes giving extensive information.
4. Salespersons cannot make accurate judgments about what a customer already knows.
5. Salespersons have moral duties not only to customers but also to their employers. This precludes them from being consumer advocates at the expense of their employer.
Instead of the mutual benefit theory it is argued that salespersons have four obligations for information disclosure.
1. Salespersons should provide safety information.
2. Salespersons should refrain from lying and deception when dealing with customers.
3. Salespersons should answer customer questions to the best of their knowledge given time constraints. They are obligated to answer questions about their goods but not those of competitors.
4. Salespersons should not steer customers towards products that may harm customers or that don’t fit the objectives that the customers seeks in a product.
The above obligations meet the standards of several ethical principles. First, they satisfy the traditional Golden Rule that one does to others what one would want done to you. If salespersons and customers were in each others shoes these four obligations would be what they would agree to. These obligations do not run afoul of Kantian respect for persons as each customer is treated for as their own end with their own individual product needs. Further, utilitarian ethics can support consequences of these obligations which ensure safety, that customers are aided in obtaining what product suits their needs, and that salespersons are not overburdened (as this would be bad for the business end of things).
Concluding Cases: Business Practices and Deception
The Shell Game
One practice in some businesses involves each seller renaming the same product differently to deprive the consumers of any cost comparisons. For instance, the same mattress manufacturer will distribute the same mattress to six stores but it will carry a different name and model number at each store. Of course, this practice is designed to benefit sellers not consumers. But is this practice deceptive? What could be done about it?
Sanfield Inc. v. Finlay Fine Jewelry Corp.
Finlay sets its regular prices at 5.5 times their costs and then regularly touts a 50% off sale. Sanfield alleged that since the real regular price was with the 50% discount the regular price is deceptive advertising. Even with the regular 50% off sale at Finlay, the regular price at Sanfield was lower. Any consumer who was aware of this comparison would shop at Sanfield. However, Finlay’s consistent advertising of 50% of sales proved such a powerful marketing device that most consumers never thought to compare prices. Like many states, this one (Illinois) had laws holding that it is deceptive for sellers to compare their discount prices to competitors when their regular price is so high as to not generate substantial sales. Further, the law held that sale prices were deceptive if they were continual such that the regular price was rarely charged. The burden in the law was on Sanfield to prove that
Finlay did not make significant sales at its regular prices and
Finlay did not charge its regular prices for a significant time and
Consumers were confused by the deception.
The court found that some evidence for this burden was offered, however Sanfield could not prove that all three conditions were met. Most notably, it was hard to show that consumers were confused by the deception (imagine the logistics of making this case). The ruling was for the Finlay. Was this the right decision? Is the practice of having exceptionally high regular prices in order to claim regular 50% sales deceptive? What might be done about it?
Backman v. Polaroid Corporation
The Polaroid company knew of negative info on its product and withheld it from investors, which kept the stock higher than its real value. The plaintiff’s were stockholders who bought stock based upon disclosures the company had made. If the company had disclosed all of its negative information, investors would not have purchased the stock and would have sold the stock they owned. The court found that everything the company did disclose was accurate at the time of disclosure and therefore, the company was not liable for what it did not disclose. In other words, the company could not be liable for failing to correct its previously accurate statements with more recent information to the contrary. Was this the right decision? Do companies which fail to correct previous statements about their future that they now know to be false unfairly deceive investors?
Green Advertising
After numerous studies demonstrated that people will pay more for environmentally friendly “green” products, several companies made ads claiming to be green. Some of these companies actually had terrible environmental records. Others began advertising “green products” which were no different from other products (because there is no legal standard for what constitutes “green products”). Were the acts of these companies deceptive? Should there be federal standards for claims of “green” products or companies?
The Camera Sale
In order to earn a higher commission, salespersons at a camera store direct all customers to their higher end camera regardless of whether or not that camera meets the customer’s need. Has the customer been harmed by the salesperson? Has the salesperson engaged in deceptive sales or some other unethical practice?
Malt Liquor
One company began marketing its new beer “Powermaster” with 5.9% alcohol (3.5% higher than standard). Powermaster’s marketing campaign was aimed at young black men who consume 33% of malt liquor. Other companies had used slogans such as “it’s the power” without any criticism. Race appeared to be the source of the objections to Powermaster. Is there any reason to object to a beer named Powermaster? What is the ethical problem (if any) with targeting product marketing to a specific race and gender?
