© Prentice Hall, Social Responsibility of Business Prepared by W. L. Dougan

© Prentice Hall, 2001 Chapter Five Marketing and Disclosure of Information Ethical Theory and Business, 8 th Edition Tom L. Beauchamp & Norman E. Bowie

© Prentice Hall, Overview Marketing and Disclosure Advertising and Behavior Control  Arrington Information Disclosure in Sales  Holley Marketing to Vulnerable Audiences  Brenkert Legal Perspectives

© Prentice Hall, Ethics in Marketing Types of misconduct Withholding of information Distortion of information Bluffing (misrepresentation) Due to information asymmetry (knowledge gap) Leads to questions regarding the effects of trust by customer Issues of autonomy Issues of harm

© Prentice Hall, 2001 Considerations for Determining Misrepresentation Sophistication of audience Standard practices/expectations Intention of informer 5

© Prentice Hall, Deceptive Advertising An advertisement which is potentially misleading or literally false is deceptive. Potentially misleading ads are difficult to evaluate because miscomprehension may often occur. Miscomprehension is a problem for firms because the audience does not understand the message being delivered. The FTC regulates deceptive advertising, but not miscomprehension. Source: Mowen and Minor

© Prentice Hall, Tom L. Beauchamp Advertising should be persuasive, but should be judged to be morally inappropriate when it is manipulative Three broad categories of influence: Coercion - When one party deliberately and successfully uses force or a credible threat of unwanted, avoidable, and serious harm in order to compel a particular response from another person.

© Prentice Hall, Tom L. Beauchamp Persuasion - A successful appeal to reason in order to convince a person to accept freely what is advocated. Does not involve use of deception. Rational persuasion Non-rational persuasion Manipulation - The act of getting people to do what is advocated without resorting to coercion and without appealing to reasoned argument. Involves use of deception.

© Prentice Hall, Tom L. Beauchamp Central issue of manipulation How or through what psychological process a person responds to or is affected by an attempt at influence NOT what is done as a result of influence

© Prentice Hall, 2001 Manipulation BBA - Acceptable versus Unacceptable manipulation Anheuser-Busch  false implications Kellogg’s  false implications 10

© Prentice Hall, Continuum of free will Persuasion Manipulation Coercion Justified Manipulation Unjustified Manipulation

© Prentice Hall, Michael J. Phillips No sharp line between acceptable and unacceptable behavior Manipulative advertising Advertising that tries to favorably alter consumers’ perceptions of a product by appeals to factors other than physical attributes or functional performance Deceptive advertising False or misleading assertions or omissions that cause reasonable consumers to form erroneous judgments about the nature of a product.

© Prentice Hall, Michael J. Phillips Associative advertising – Favorably influencing a consumer’s perception of a product by associating the product with a non-market good (e.g. sex, vigor, power, status, etc.) that the product ordinarily cannot supply on its own. One type of deceptive advertising.

© Prentice Hall, 2001 Robert L. Arrington “Advertising and Behavior Control” “Is advertising information or creation of desire?” Considers whether or not advertising illegitimately interferes with consumer autonomy via manipulation. The author argues that generally it does not. advertising seldom controls behavior or creates wants that are not rational or truly those of the consumer 14

© Prentice Hall, 2001 Robert Arrington Puffery Exaggerated, fanciful or suggestive claims Some argue that the use of puffery constitutes manipulation Autonomous Desire We act autonomously when we act in a manner consistent with our second- order desires (which are desires regarding first-order desires). Rational Desire and Choice a) Based on knowledge of relevant information Control or manipulation Free Choice (Acting Freely) a) We act freely when we do things for a reason 15

© Prentice Hall, 2001 Arrington Four concepts Autonomous desire Rational Desire Free choice Control 16

© Prentice Hall, 2001 Manipulation Intention C intends P to act in a certain way A Causality C’s intention is causally effective in bring about A Guaranteed Control of Outcome C intends to ensure that all of the necessary conditions of A are satisfied 17

© Prentice Hall, 2001 Persuasive Advertising Persuasive advertising typically does not undermine autonomy Such persons act freely (on reasons) Such persons act on reasons they take to be good ones Such persons act on their second-order desires Such persons are not manipulated 18

© Prentice Hall, 2001 David M. Holley “Information Disclosure in Sales” Obligations to disclose information on the part of a salesperson Opposed to professions where service providers are obligated beyond their economic interests Salesperson’s role is as an advocate, thus the salesperson has an obligation to present a favorable story 19

© Prentice Hall, 2001 Five levels of disclosure: Minimal Information: Buyer is solely responsible Modified Minimal Information: Disclose only what is necessary to avoid risk of injury Fairness Rule: Safety information plus unavailable information Mutual Benefit Rule: Safety information plus information needed for a “reasonable judgment” Maximal Information Rule: all relevant information 20

© Prentice Hall, 2001 Defending the Mutual Benefit Rule Mutual Benefit Rule allows the salesperson to meet his or her ethical obligations Allows all parties to protect their obligations Eliminates need to determine specific types of customers Might be an exception where buyer indicates he/she is uninformed 21

© Prentice Hall, 2001 Vulnerability Exception in the case of vulnerable customers Also, salesperson can be vulnerable as well 22

© Prentice Hall, 2001 George G. Brenkert “Marketing and the Vulnerable” Some consumers lack “market competency” and such vulnerable individuals should not be targeted by marketers in ways that take advantage of their vulnerability 23

© Prentice Hall, 2001 Three objectives Explore the notion of vulnerability Design of marketing campaigns to protect vulnerabilities in some customers Marketing programs which violate the previous directive or morally unjustified 24

© Prentice Hall, 2001 Vulnerability as a four place relation Person (P) is vulnerable to another (moral or causal) agent (A) with respect to harm (H) in a particular context (C) Distinct from susceptible Distinct from disadvantaged (but may be overlapping) Not generalized 25

© Prentice Hall, 2001 Vulnerable individuals Operate with conditions or incapacities that impede their ability as normal market participants Physical vulnerabilities Cognitive vulnerabilities Less able to protect their interests Possess these vulnerabilities due to factors beyond their control Often unaware of their vulnerabilities Vulnerabilities render them susceptible to harm 26

© Prentice Hall, Advertising to Children Both policy makers and marketing managers have reacted to criticism of advertising directed at children. Some countries have banned advertising to children under 12. Source: Mowen and Minor

© Prentice Hall, Telemarketing Fraud The elderly are vulnerable to fraud by telemarketers. A program to combat this fraud is the Know Fraud Program. Organizations that fight telemarketing fraud are the AARP, the FBI, the Post Office, and others. Source: Mowen and Minor

© Prentice Hall, Negligent Consumer Behavior Negligent behavior is composed of actions and inactions that may negatively affect the long-term quality of life of individuals and society. This type of behavior can occur in two different contexts: Product Misuse Consumption of Hazardous Products Source: Mowen and Minor

© Prentice Hall, 2001 Criteria for Determining Market Competency The knowledge that one should shop around Ability to determine differences in quality and the best price Knowledge of legal rights Knowledge of the products and their characteristics Appropriate resource 30

© Prentice Hall, 2001 Morally justified market relations Competition is free Participants do so voluntarily Competition is open Deception or fraud are not used 31

© Prentice Hall, 2001 Morally justified market relations Morally justified market relations require that all participants be capable of exhibiting market competency. a) Individuals who are simply lazy should not count as vulnerable. Not morally acceptable to market goods to especially vulnerable people with the intention of taking advantage of their vulnerability 32

© Prentice Hall, 2001 Vulnerabilities Four types Physically vulnerable Cognitively vulnerable Motivationally vulnerable Socially vulnerable Due to factors beyond their control Render them susceptible to harm 33

© Prentice Hall, 2001 Implications Does NOT mean don’t market to vulnerable When condition is temporary, wait May not use a campaign that exploits special vulnerabilities May not rely on vulnerable to bring pressure to bear on non-vulnerable May not depend on others to prevent vulnerability from causing harm 34

© Prentice Hall, 2001 Irving A. Backman v. Polaroid Corporation Investors sued Polaroid for failing to disclose unfavorable information about their Polarvision product. The court sided with Polaroid 35

© Prentice Hall, 2001 Sanfield, Inc. v. Finlay Fine Jewelry Corp. A local jewelry company (Sanfield) sued a national chain (Fine) for deceptive marketing practices. The practice in question concerns pretending to offer large discounts on jewelry. 36

© Prentice Hall, 2001 Coca-Cola Company v. Tropicana Products, Inc. Coke (maker of Minute Made orange juice) sued Tropicana for misleading television commercials. The court sided with Coke. 37

© Prentice Hall, 2001 Kasky v. Nike, Inc. Nike was accused of lying about its labor practices. Nike argued that all statements about labor practices were protected political speech. The court disagreed and argued that the speech was unprotected commercial speech for which Nike is accountable. 38