degeorge_business ethics_chap 15

Copyright © 2011 Pearson Education. All Rights Reserved.

Chapter 15

Marketing, Truth, and Advertising


Marketing

• Once a manufacturer produces a certain product, its aim is to sell it.

• Marketing is the process by which it does so.


Competition• Competition tends to produce efficiency in the market and

benefits the general consumer by resulting in a variety of goods at the best prices. But the competitive market works to the advantage of the buyer only when the competitive process is fair.

• One major way of undermining competition is through the creation of monopolies.

• A second way of controlling competition is for a small group of producers of a product to collude for their common good. For example, they may agree on the prices to charge—a practice known as price fixing. Such collusion is generally illegal because it undermines the competitive system to the detriment of the buyer.


Pricing• In general, the competitive system should preclude the possibility

of overpricing where this means charging much more than the producer knows the product is worth, thus yielding an excessive profit. – There are some who might claim that overpricing is a misnomer

because there is no specific limit of justifiable profit. But this claim assumes that prices are competitive, and they are not always competitive.

• A second area in which excessive rates arise is in the lending of money. For those unable to borrow money in the conventional, competitive way, loan sharks can charge usurious rates

• A clearly immoral practice, because it is deceptive, is setting a price for a product higher than that at which it is ever sold, so that it can always be sold at a discount. This is deceptive, because to sell at a discount implies a discount from its real price, not a discount from an artificially inflated one.


Price Gouging

• Price gouging refers to the practice of a seller putting a much higher price on the item for sale than is considered fair or reasonable.

• Price gouging usually refers to the pricing not of luxuries or optional items, but of practical necessities—fuel, food, water, and shelter—in times of emergency.


Bidding• Not all bidding is secret, but much of it is. • Secrecy tends to produce fairer bids and lower prices for

the purchaser. This happens in two ways. – If the process were open, a firm that could make a profit at a

price considerably less than the competition would make a bid only just enough less to win the contract.

– If the competition were open, a firm might start out at a bid low enough to scare off others from bidding, even though the bid is not the lowest he would offer if forced to make a secret bid.

• In addition to fraud, using materials inferior to those specified in the bid, and perpetrating other obvious violations of justice, honesty, and fairness, bidding has led to other questionable practices.


Bidding• One difficulty many of the states in the United States

encounter is that there are only a few construction companies capable of handling a given state’s large construction needs, whether for roads or large buildings.

• In the defense industry ethical issues include cost overruns and locking in the government to a single supplier.

• Several pitfalls are also common in the purchase of goods by a government or large firm. – There is always the possibility of leaking information to a

potential supplier—an unfair practice. – There is also the possibility of writing specifications in so

detailed and narrow a way that only one supplier can fill the order, thereby undermining the purpose of the bidding procedure.


Consumer Marketing

• The opportunities for fraud, deception, and unethical practices are endless, but most such practices are clearly immoral and so raise no ethical problems.

• A few of the issues of current concern, however, include truth in lending, unit pricing, and labeling and dating. All of these have become items of consumer concern and the focus of attention by the consumers’ movement.


Direct Marketing

• Direct marketing takes various forms. • Direct-to-individual marketing involves

contacting or targeting individuals rather than broadcast advertising to a large indiscriminate audience.

• Three principal ways of contact are through direct mail, direct phone solicitations, and email or other electronic means.


Questionable Products

• It is often assumed that what it is legal to manufacture, it is legal to sell.

• But there are products that some have questioned in this regard. – For example, small, cheap handguns, known as

“Saturday night specials.”


Advertising• There are five areas in which the moral

dimension of advertising is of central importance: – the immorality of untruthful, misleading, or deceptive

advertising; – the immorality of manipulation and coercion through

advertising, including the question of audience; – the morality of paternalism with respect to

advertising; – the immorality of preventing some kinds of

advertising; and – the allocation and distribution of moral responsibility

with respect to advertising.


Truth and Advertising• A major function of advertising is to sell goods. Advertising

may educate the public or mold public opinion. • The terms “true” and “false” are properly predicates of

sentences or propositions. Only a proposition can be true or false. A statement or proposition is true, roughly speaking, if the stated relation between subject and predicate corresponds to the actual relation in the world between what are designated or referred to by the subject and predicate.

• Lying consists, however, not simply in making a false statement. Lying consists in making a statement, which one believes is false, to another person, whom one has reason to think will believe the statement to be true.


Truth and Advertising• Whether a statement or proposition is true or false

depends on the world; whether a statement is an instance of lying depends on the intent of the speaker.

• Some advertisements contain sentences—express propositions—that are appropriately evaluated in terms of truth and falsity.

• Without making any false statements, an ad might be misleading or deceptive. – A misleading ad is one in which the ad does not misrepresent or

make false claims but makes claims in such a way that the normal person, or at least many ordinary people, reading it quickly and without great attention and thought, will make a false inference or draw a false conclusion.


Truth and Advertising

• A statement made about a product may be true, may not mislead, may not deceive, but may be morally objectionable nevertheless. Sometimes, what the ad does not say is as important as what the ad does say.

• It is immoral to advertise and sell a dangerous product without indicating its dangers.


Manipulation and Coercion• Persuasion in itself is not immoral.• In Kantian terms, both coercion and manipulation

treat another person only as a means to one’s own end and deny respect for his or her freedom.

• Coercion involves force or the threat of force, either physical or psychological.

• Manipulation does not use force; it involves playing upon a person’s will by trickery or by devious, unfair, or insidious means.

• Coercion and manipulation in advertising are therefore immoral.


Prevention of Advertising• The prevention of advertising, in some cases, comes up against the First

Amendment’s right of free speech.

• Until recently, many professionals were restricted from advertising by their professional associations. Advertising was considered to be in poor taste, vulgar, and unprofessional.

• The arguments in favor of changing them were several. One can be put in utilitarian terms. – Essentially, the good gained by the lawyers and doctors and their respective

professions was less than the evil suffered by their potential and actual clients and patients.

• Another argument rests on the right of the individual practitioner to make known his services and to compete, in price and in kinds of services provided, for the business of potential clients.


Allocation of Moral Responsibility in Advertising

• Prime responsibility for advertising rests on the one who initiates and directs the advertising.

• Advertising agencies handle the promotion of a great many goods. Advertising agencies have the moral responsibility not to lie, mislead, or misrepresent products. They also have an obligation to investigate when they suspect that they are being asked to lie, mislead, or misrepresent a product.

• Once an advertisement or an advertising program has been produced, it can be presented to the public in a variety of forms. All TV stations, magazines, and newspapers have the moral responsibility for what appears in their shows or in the pages of their publications.


Allocation of Moral Responsibility in Advertising

• If members of the general public are concerned about the truthfulness or accuracy of an ad, if they feel an ad is misleading or deceptive, they can perform a public service by making their feelings and perceptions known.

• Government has taken an active role in regulating and monitoring advertising. The role of government in the area of advertising is to protect the public interest.

degeorge_business ethics_chap 15

Documents