CORPORATE RESPONSIBILITY IN ADVERTISING, PRODUCT SAFETY AND LIABILITY Presented By: Akrit Mehta, Ankita Ghosh, Donald White, Farhana Choudhury, Harish Dalwaipattan, Niyati Gauba

Agenda What is Corporate Responsibility ? Corporate Responsibility Advertising Product Safety Product Liability

What is Corporate Responsibility ? Corporate Responsibility is an expression used to describe what some see as a company's obligation to be sensitive to the needs of all of its stakeholders or even to society as a whole in its business operation

Corporate Responsibility in Advertising

Advertising Can be defined as a form of communication between buyer and seller Provides consumers with information about the goods & services Its goal is to persuade

Deceptive Techniques in Advertising Ambiguity Concealed facts Exaggeration Psychological Appeals

Deception- example Ads for diet products and services sold each year often include misleading and exaggerated claims that promise rapid, effortless weight loss and unachievable goals At least 40 percent of the 300 ads reviewed in the two- year study made at least one false representation, such as 'can eat as much as you want and still lose weight‘ Other ads made unproven claims about safety and effectiveness, when there was little to support that claim.

Ads directed at Children Significant consumer group Low resistance to deception/manipulation Problem – gullible / naïve Example : The Centre for Science in the Public Interest announced legal action to try to stop the Kellogg Co from aggressively marketing high-sugar, low-nutrient foods to kids

Corporate Responsibility in Advertising Advertising needs to ensure Are the public welfare and good taken into consideration for the effects as well as the intention of advertisements? Has anyone been harmed? Whose rights are being protected or violated intentionally and inadvertently? Are consumers being justly and fairly treated?

Corporate Responsibility and Government Enforcement Government , at times bans or restricts commercial speech to obtaining a public policy goal Example : The basic argument for restrictions on tobacco advertising stems from the belief that tobacco advertising leads to an increase in overall consumption and also that this advertising contributes to minors smoking

Corporate Responsibility in Product Safety

Product Safety Refers to measures undertaken by manufacturers against unreasonable risks of injuries associated with consumer products. The responsibility of manufacturers to consumers concerning: Product quality Prices Labeling Packaging

Need for Product Safety Increased dependence of consumers on manufactured goods Informed consumers Prevention of consumer exploitation Potential hazards associated with consumer products

Product Safety Issues Injuries from product use Safety manuals Statutory warnings Costs from deceptive selling practices Emotional costs Loss of goodwill

Product Safety Issues Costs from defective goods Physical damage Collateral damage Adherence to societal and consumer norms Disclosure of confidential information Doctor/Lawyer client relation

Corporate Responsibility in Product Liability

What is Product Liability ? This is the area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held responsible for the injuries those products cause. Encompasses a number of legal claims that allow an injured party to recover financial compensation from the manufacturer or seller of a product Product liability and business ethics Philosophers of business ethics would argue that a producer of goods and services is a moral fiduciary, with duties towards others that extend beyond legal obligations. For example, a ladder manufacturing company might clearly post the weight limits of its ladders, and exceed legal requirements in every way; however, if it also knows that there is a reasonable probability that its ladders will be frequently misused in a hazardous way, notwithstanding the fact it has met its legal responsibilities, it has a moral obligation to do what it can to prevent this. Such a view is propounded by philosopher Michael E. Berumen, among others.

Product Liability Claims are associated with : Negligence, Strict liability Breach of warranty Various consumer protection claims Negligence A basic negligence claim consists of proof of a duty owed, a breach of that duty, an injury, and that the breach proximately caused the plaintiff's injury. the scope of the duty of care was limited to those with whom one was in privity. Over time, negligence concepts have arisen to deal with certain specific situations, including negligence per se (using a manufacturer's violation of a law or regulation, in place of proof of a duty and a breach) and res ipsa loquitur (an inference of negligence under certain conditions). Strict Liability Manufacturer of a products can be held responsible if the product was defective and someone was injured, regardless of whether the manufacturer was negligent. There is no need to prove negligence but the injured party must prove that the product was defective. Breach of warranty Warranties are statements by a manufacturer or seller concerning a product during a commercial transaction. Warranty claims commonly require privity between the injured party and the manufacturer or seller; in plain English, this means they must be dealing with each other directly. Breach of warranty-based product liability claims usually focus on one of three types: (1) breach of an express warranty, (2) breach of an implied warranty of merchantability, and (3) breach of an implied warranty of fitness for a particular purpose. Additionally, claims involving real estate may also take the form of an implied warranty of habitability. Express warranty claims focus on express statements by the manufacturer or the seller concerning the product (e.g., "This chainsaw is useful to cut turkeys"). The various implied warranties cover those expectations common to all products (e.g., that a tool is not unreasonably dangerous when used for its proper purpose), unless specifically disclaimed by the manufacturer or the seller. Consumer protection claim many states have enacted consumer protection statutes providing for specific remedies for a variety of product defects. Statutory remedies are often provided for defects which merely render the product unusable (and hence cause economic injury) but do not cause physical injury or damage to other property; the "economic loss rule" means that strict liability is generally unavailable for products that damage only themselves

Types of Product Liability There are three major types of product liability claims: Manufacturing defect Design defect A failure to warn these are not legal claims in and of themselves, but are pleaded in terms of the theories mentioned above. For example, a plaintiff might plead negligent failure to warn or strict liability for defective design. Manufacturing defects are those that occur in the manufacturing process and usually involve poor-quality materials or shoddy worksmanship. Design defects occur where the product design is inherently dangerous or useless (and hence defective) no matter how carefully manufactured. Failure-to-warn defects arise in products that carry inherent nonobvious dangers which could be mitigated through adequate warnings to the user, and these dangers are present regardless of how well the product is manufactured and designed for its intended purpose.

Legal Liability of Manufacturers Provide customers with a product that lives up to the claims the firm makes about the product Due-care theory of the manufacturer’s duties to consumers Caveat emptor Strict Liability

Due Care Theory Due care is 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. According to the due care view, the manufacturers have an obligation above and beyond any contract, to exercise due care to prevent the consumer from being injured by defective products.

Caveat Emptor “Let the buyer beware” The law now requires that goods must be of “merchantable quality” CE also applies to the return policy There is no legal requirement for the vendor to provide a refund or exchange

Caveat Emptor According to the doctrine of caveat emptor, consumers were held to the ideal of being knowledgeable, shrewd and skeptical in their purchases. It meant that the consumer was entirely responsible if harmed by a purchased product.

Product Liability Law in India The Consumer Protection Act, 1986 The Sales of Goods Act, 1930 The Monopolies and Restrictive Trade Practices Act, 1969 (“MRTP Act”) The Consumer Protection Act imposes strict liability on a manufacturer, in case of supply of defective goods by him, and a service provider, in case of deficiency in rendering services. The term “defect” and “deficiency”, as held in a catena of cases, are to be couched in the widest horizon of there being any kind of fault, imperfection or shortcoming. b)       The Sale of Goods Act, interalia, confers, upon a buyer, the right to repudiate the contract and sue for damages in case of breach of a condition, whether relating to quantity, quality or description. Breach of warranty, on the other hand, entitles the buyer, to sue for damages but not repudiate the contract. c)       The MRTP Act, on the other hand, has been comprehensively drafted so as to empower the Commission to grant temporary injunctions and compensation, for loss and damage, as a result of monopolistic, restrictive and unfair trade practices. The MRTP Act, though, remains in force but the Competition Act, 2002 has been enacted to supersede the prevailing MRTP Act.

Cases Stella Liebeck vs. Mc.Donald's Corporation Smt. Uma Deepak v. Maryti Udyog Ltd. & Ors Wheels World Vs. Pradeep Kumar Khurana In Wheels World Vs. Pradeep Kumar Khurana, the complainant, a doctor by profession, complained to the respondent about deficiency in service in not repairing, free of charge, a technical fault, which occurred during warranty period, in his new Montana car and then not delivering the same for a period of 4 years. Also a monetary punishment was levied. case of Smt. Uma Deepak v. Maryti Udyog Ltd. & Ors. the Complainant alleged that the car sold by the opposite party was not only accidental but the price, for the same, was also overcharged. The Court, in response to the allegations made by the complainant, directed arrest of the Directors as well as the manager of the dealers/agents who sold the said defective car to the complainant and remanded them to judicial custody

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