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Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.

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Presentation on theme: "Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin."— Presentation transcript:

1 Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

2 15 - 2 Chapter 15 Consumerism This chapter:  Defines and discusses the idea of consumerism.  Describes the protective shield of statutes, regulations, and consumer law that has risen to protect consumers since Harvey Wiley’s era.

3 15 - 3 Harvey W. Wiley Opening Case  In the late 1800s, Harvey W. Wiley, a professor at Purdue University, began working with Indiana state officials to detect adulteration in food products.  A large, highly competitive food industry applied new food chemistries using preservatives, colorings, flavorings, texturizers, and other additives.  With few laws to police dishonorable operators, dangerous, fraudulent, and cheapened products made their way to market.  At age 39, Wiley took charge of the Bureau of Chemistry in Washington, D.C.

4 15 - 4 Harvey W. Wiley Opening Case (continued)  Wiley began to agitate for a national pure food law.  Wiley set up an experiment whose participants were nicknamed the “poison squad.”  In 1906, Congress finally passed the Pure Food and Drug Act.  The Bureau of Chemistry evolved into the Food and Drug Administration, a powerful agency that protects public health. America’s memory of Dr. Wiley has dimmed, but his work still touches our lives. The law he fought for is the foundation of modern food and drug regulation.

5 15 - 5 Consumerism  Consumerism is a word with two meanings:  A movement to promote the rights and powers of consumers in relation to sellers.  A powerful ideology in which the pursuit of material goods beyond subsistence shapes social conduct. Consumer A person who uses products and services in a commercial economy.

6 15 - 6 Consumerism as an Ideology  Consumerism describes a society in which people define their identities by acquiring and displaying material goods beyond what they need for subsistence.  The full emergence of consumerism came as economic changes interacted with cultural and social developments.  Declining influence of religion  The industrial revolution

7 15 - 7 The Rise of Consumerism in America  In the 1800s, a commercial economy began to appear.  Consumerism in America began with a confluence of events at the turn of the 20 th century.  Railroads  Great merger wave of 1896-1904  Mass production of consumer goods  Electricity and other new technologies  Movement of people  People began to express role and status through products they consumed.

8 15 - 8 Consumerism in Perspective  Marketing research reveals a widespread, profound effort to find love, status, and individuality in products.  Materialism is an emphasis on material objects or money that displaces spiritual, aesthetic, or philosophical values.  Thorstein Veblen, in his book The Theory of the Leisure Class, challenged the conventional economic wisdom that consumers bought goods for their functional utility.

9 15 - 9 Consumerism in Perspective (continued)  Complaints about consumerism include:  It leads to commodification of all parts of life  It encourages unwise, irrational, and unproductive uses of money  Heavy consumption is profligate with natural resources  Consuming beyond necessity violates “the idea the God’s world is already full and complete”  It distorts our values  It is a pathology of corporate capitalism

10 15 - 10 The Global Rise of Consumerism  The ideology of consumerism has risen in Russia, Asia, Latin America, the Middle East, and even Africa.  It may be less a Western than a universal phenomenon, coming with human nature, economic progress, and cultural change interact at a certain moment in a modernizing society.  Once it takes hold, consumerism seems irrepressible, but resistance continues.

11 15 - 11 Consumerism as a Protective Movement  The idea of collective interest in protecting consumers dates back to the earliest transactions between merchants and customers.  1870s when Populist farmers attacked railroads  Food and Drug Act of 1906  The 1960s and 1970s prompted another wave of legislation to protect consumers and expand their rights.  Consumer protection is today a major function of government.

12 15 - 12 The Consumer’s Protective Shield  Besides federal laws and regulations, there are significant protections at the state and local level.  Every state and local government has extensive consumer protection laws.  More than 50 federal agencies and bureaus are active in consumer affairs.  These agencies and bureaus are effective despite changing ideologies in administrations, powerful critics, budget restraints, and too little staff to meet all their statutory mandates.

13 15 - 13 The Consumer Product Safety Commission  Created by Congress in 1972.  Directed by six major statutes that mandate it to:  Protect the public against unreasonable risks of injury and death associated with consumer products  Help consumers evaluate the safety of products  Develop uniform safety standards for products  Promote research and investigation related to product- related deaths, illnesses, and injuries.  Often cooperates with business.  Regulates every consumer product except guns, boats, planes, cars, trucks, foods and drugs, cosmetics, tobacco, and pesticides.

14 15 - 14 The National Highway Traffic Safety Administration  Created by Congress in 1966 to:  Mandate minimum safety standards for automobiles, trucks, and their accessories.  Establish fuel economy standards.  Administer state and community highway safety grant programs.  Conduct research on, and development and demonstration of, new vehicle safety techniques.  No other agency has such extensive controls over a single product.

15 15 - 15 The Food and Drug Administration  Evolved out of the authority established by Congress in the Food and Drug Act of 1906.  Nineteen specific areas of responsibility. Examples:  Regulate the composition, quality, safety, and labeling of food, food additives, and cosmetics.  Require premarket testing of new drugs and evaluate new drug applications and requests to approve drugs for experimental use.  Develop standards for the safety and effectiveness of over-the-counter drugs.  Inspect and license manufacturers of biological products.

16 15 - 16 Other Consumer Protection Agencies  The Federal Trade Commission  The Environmental Protection Agency  Occupational Safety and Health Administration  The Food and Safety Inspection Service  The Securities and Exchange Commission  The Department of Health and Human Services  The Equal Employment Opportunity Commission  The Federal Deposit Insurance Administration  The Pension Benefit Guaranty Corporation  Transportation Security Administration

17 15 - 17 Product Liability Law  Beyond regulation, a major restraint on business is the ability of consumers to file product liability lawsuits when they are harmed.  The tort system is designed to provide compensation to victims and to deter future misconduct.  Product liability is the branch of tort law that covers redress for injuries caused by defective products.

18 15 - 18 Negligence  A tort involves either an intentional or a negligent action that causes injury.  Obstacles to consumers in early product liability law:  Caveat emptor  Narrow interpretation of the doctrine of privity, which held that consumers could sue only the party that sold them the product  This legal protective wall for manufacturers was broken down by the milestone case of MacPherson v. Buick Motor Co. in 1916.

19 15 - 19 Warranty  A warranty is a contract in which the seller guarantees the nature of the product.  An express warranty is an explicit claim made by the manufacturer to the buyer.  An implied warranty is an unwritten, commonsense warranty arising out of the buyer’s reasonable expectations.

20 15 - 20 Strict Liability  The doctrine of strict liability established that anyone who engages in a dangerous activity is liable for damages to others, even if the activity is conducted with utmost care.  The key to strict liability is that the injured person need not prove negligence to prevail in court.  Under strict liability an injured plaintiff must prove only that:  The manufacturer made a product in a defective condition that made it unreasonably dangerous to the user  The seller was in the business of selling such products  It was unchanged from its manufactured condition when purchased

21 15 - 21 Perspectives on Product Liability  The U.S. legal system makes it easier for plaintiffs to win large damage awards from product makers than do the systems of other countries.  Nowhere else in the world has the legal system created such a favorable environment for product lawsuits as in the United States.

22 15 - 22 Cost and Benefits of Lawsuits  A recent estimate is that the tort system inflicts an annual economic cost of $865 billion on society, about 2.8 percent of GDP, more than triple the percent average of other industrial nations.  Dangerous products have been either taken off the market, had their sales restricted, or been redesigned.  Lawsuit threats and high liability insurance costs regularly cause companies to drop high-risk products.  An unknown number of new products never come to market because their liability potential scares manufacturers.  Business argues that product liability law has moved beyond equitable victim compensation.

23 15 - 23 Concluding Observations  Consumerism is a word with two meanings: it refers both to a kind of society and to a protective movement.  Consumerism as a way of life is spreading around the world because the conditions that support it are becoming more common.  Consumers in the United States are now more protected from injury, fraud, and other abuses than in the past because of stronger government regulation and more consumer- friendly common law doctrines.


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