Chapter
16
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.
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.
16-3
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.
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.
16-4
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.
16-5
Consumer
A person who uses
products and
services in a
commercial economy.
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
16-6
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 20th 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.
16-7
The Rise of Consumerism in America
(continued)
 Voices have long been raised against a focus on
consumption.
 Thorstein Veblen – The Theory of the Leisure Class
 Ralph Nader
 Attempts to create sanctuaries from consumerism in
American society have been losing efforts.
 Blue laws
 Radio commercials
 Fence off childhood from it
 Consumerism, once it takes hold, seems irrepressible,
but resistance continues.
16-8
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.
16-9
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.
 An important protection also exists in the
dissemination of information to the mass media and
the growth of investigative reporting.
 More than 50 federal agencies and bureaus are active
in consumer affairs.
16-10
The Consumer Product Safety Commission
 Created by Congress in 1972.
 Directed by six major statutes.
 Much effort cooperates with business.
 Regulates every consumer product except:






Guns
Boats, planes, cars, and trucks
Foods and drugs
Cosmetics
Tobacco
Pesticides
16-11
The National Highway Traffic
Safety Administration

Created by Congress in 1966 to:
1. Mandate minimum safety standards for automobiles,
trucks, and their accessories.
2. Establish fuel economy standards.
3. Administer state and community highway safety
grant programs.
4. Conduct research on, and development and
demonstration of, new vehicle safety techniques.
16-12
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.
16-13
Federal Agencies Responsible for
Ensuring Safe Pizza
16-14
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
16-15
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.
16-16
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.
16-17
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.
16-18
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
16-19
An Assessment of Product Liability Suits
 Product liability law has attracted
controversy:
 Supporters argue that it fulfills its purpose to
compensate victims and to deter future corporate
wrongdoing.
 Corporations see a legal doctrine in need of reform.
 Industry complains that many product liability
lawsuits are frivolous and jury awards are
capricious.
16-20
Business Wants Product Liability Reform
 Establish uniform federal product liability standards
in all 50 states.
 Move product liability cases to federal courts.
 Eliminate strict liability for products that cause
injuries in the future that could not reasonably have
been foreseen when the products were made.
 Limit punitive damages in product liability cases.
 Immunize industries through legislation.
16-21
Impacts on Operations
 Many firms have learned that the following actions
are important for preventing lawsuits:




Attention to design
Improving quality
Instructions and warning labels
Product recalls
 Such actions reduce, but cannot eliminate, product
liability exposure.
16-22
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.
16-23