The Ethics of Negative Option Marketing
C. W. Von Bergen
Department of Management and Marketing,
John Massey School of Business
Southeastern Oklahoma State University
Durant, Oklahoma 74701
580.745.2430
FAX 580.755.7485
cvonbergen@sosu.edu
The Ethics of Negative Option Marketing
ABSTRACT
Negative option marketing (NOM), where customers are required to expressly
reject unsolicited offerings to avoid being charged for a product or service, is becoming a
common marketing strategy
2
The Ethics of Negative Option Marketing
VOICE ON THE PHONE: C. J. Nickle Company would like to thank you for your
catalog order today. As a token of our appreciation, we would like to send
you, free of charge, Northern Living Magazine.
CONSUMER: Great! I really like Northern Living.
VOICE ON THE PHONE: OK then. You will receive 3 months of Northern Living,
absolutely free. At the end of the 3 months, we will bill the C. J. Nickle
Company credit card you used today for your year’s subscription. Or,
after 3 months you can call 1-800-xxx-xxxx and cancel your subscription
to Northern Living and keep the 3 months of issues absolutely free.
For centuries, commerce was simple and straightforward. A merchant would offer
a good or service for sale and a consumer would decide whether or not to buy. Today,
with negative option marketing (NOM), commerce can be anything but simple, and
consumers can end up being charged for products or services they never intended to
purchase. Simply put, the NOM technique—also known by such terms as advanceconsent marketing, continuous-service agreements, inertia selling, or opt-out options—
turns the sales transaction around and requires that the customers act to prevent a sale
from taking place. In the past, silence meant no sale, however, under NOM, silence
means sale and consumers must act to prevent the sale from taking place (Lamont 1995).
Thus, instead of the merchant having to “sell” an individual a product or service, it starts
with the assumption that the person already bought it—and it is up to the consumer to
contact the merchant and cancel the order if they do not want to complete the transaction.
It is no longer a world of consumer consent, but consumer rejection. In effect, the NOM
practice is based on presumption—the individual is presumed to agree to a proposition
unless he or she takes the initiative to refuse it.
Companies are using perfectly legal marketing strategies of "negative options" to sell
magazines, natural gas, cellular phone service, health club memberships, lawn care contracts
and other goods and services (. According to Jean Ann Fox, director of consumer protection for
the Consumer Federation of America, as quoted in the Post article, "It's no longer a world of
consumer consent, but consumer rejection," which puts more pressure on customers.
The Post article goes about detailing various pros and cons of the practice, for both the
customers and the marketing companies. Mail-order music and book clubs have been using it for a
long time. They send you the goods, and if you do not act to return the items, your account is charged for
the goods. Other companies use it to extend the subscription period by sending a letter saying that unless
you act, we will extend your subscription and charge your account. There are many other ways that the
negative options are being used or could be used.
considers opt-out to be a weak form of consent - one that unfairly puts the onus of initiative on the wrong party
and reflects at best a mere token observance of what is perhaps the most fundamental principle of the Act. We
would prefer that organizations adopt an exclusively "positive" or "opt-in" approach - a much more respectful
approach whereby individuals would be deemed to have consented only if they have expressed a definite "yes" to
a proposition.
3
The reason for this increased usage of negative options marketing is quite obvious. A lot
of consumers do not notice the negative option, which is usually in small print, in their
communications. Other times exercising the "opt-out" requires effort and time from the
customer that he or she may not be willing to spend. Thus, by default, the customer stays
with the company and many times purchases something. The proponents of the strategy
say that it results in increased retention rate, convenience to customers and lower costs.
On the other hand, the detractors of the practice say that it creates customer confusion, is
inconvenient, and is unfair.
Huffman, Mark (2005, November). Negative Option: When No Means Yes. Retrieved
May 18, 2006, from
http://www.consumeraffairs.com/news04/2005/negative_option.html
The Columbia Record Club and various “book-of-the-month” clubs were early pioneers
of negative option marketing. The hook was an offer of five or ten books or records for
free or at a heavily discounted price.
By accepting the offer, the consumer agreed to “join” the club and receive regular
shipments of other books or records at the full price, unless the consumer took the
“negative option,” telling the company it did not want to receive that month’s offering.
As you might expect, negative option has been abused as its use has become more
prevalent. The widespread use of credit cards and the growth of the Internet have fueled
that abuse, to the point that federal and state consumer authorities have taken action.
In 2001, the Federal Trade Commission cracked down on negative option abuses, suing
nine companies for charging customers’ credit cards for products or services without
gaining their express approval. The FTC found the companies, as part of a transaction
with consumers, offered “free offers” or “trial offers” of other products and services,
without disclosing that consumers would be billed for additional products or services
unless they exercised the negative option.
“Negative option marketing is particularly troubling when marketers already have
consumers’ credit card or billing account information and can easily charge consumers’
accounts without their permission or when marketers fail to disclose that consumers’
credit card numbers will be transferred to another company and charged unless
consumers call to cancel,” the FTC’s Elaine Kolish told Congress in November, 2001.
But Congress took no action, and in the last four years, negative option marketing has
increased, and so has its abuse.
According to the FTC, companies selling magazine subscriptions through the negative
option are among the worst offenders. In 2001 the FTC logged 204,000 complaints about
deceptive magazine sales. Two years later, the number of complaints had more than
doubled, to well over 500,000.
4
Magazine publishers are a bit defensive about that. In fact, the Magazine Publishers of
America, an industry trade association, says it prefers to call negative option marketing
“advance consent marketing.” The group defends the practice, saying continuous service
and automatic renewals also benefit consumers.
“The FTC has expressed concern about the disclosures associated with such marketing
techniques and ensuring that consumers understand the terms and conditions of the
marketing offers. A number of industry groups have established guidelines for advance
consent marketing. MPA has created an educational document around one such set of
guidelines,” the group said in a statement on its Website.
The lengthy MPA document, written in 1998, is a set of “voluntary” guidelines for the
independent contractors hired by publishers to sell magazine subscriptions. Judging from
the growing number of complaints received at the FTC about magazine sales, a reader
might conclude these guidelines are not always followed.
Banned in Motown
Michigan Attorney General Mike Cox warns consumers in his state to be wary of
negative option traps. He says businesses employ them for one simple reason – they
work.
“Studies show that if a company asks a customer to sign up for a new service or product,
less than 15 percent of consumers receiving the solicitation will sign up,” Cox said. “On
the other hand, if the service or product is supplied without the consent of the consumer,
up to 80 percent of the consumers will be ‘recruited’ into the new service plan.”
In Michigan, negative option marketing is illegal, based on the state’s interpretation of
the law.
“Basic contract law requires an agreement, not a unilateral tender of goods by a shady
merchant,” said Allison Pierce, Communications Director for the Michigan Attorney
General’s Office.
“Thus, a pure negative option arrangement is no good under contract law, and a bill for
the goods involved is deceptive and violates various laws, including the Michigan
Consumer Protection Act and state and federal unsolicited merchandise laws.”
Even though negative option marketing is considered illegal in Michigan, consumers in
that state still fall victim to the system’s abusive practices. Clarence, of Pleasant Lake,
Michigan complained to ConsumerAffairs.com about an unauthorized charge of $149 on
his credit card from Triligiant’s Health Saver Plan.
“I called the phone number for their health saver plan to find out how and why I was
charged for a membership on my credit card,” Clarence told us.
“For starters, the individual I spoke to was very rude. When I asked him how and why
my credit card was charged he said I cashed a $2.50 check that authorized them to set up
and charge me for a membership. In the first place, I don't remember any check for $2.50.
Secondly, I purposely don't cash these checks when they come in the mail for this
5
specific reason. When I gave him the opportunity to take this charge off from my credit
card he proceeded to tell me the benefits of their plan. I told him I had insurance and
wasn't interested in their plan but, instead of listening to me, he continued to try to push
their plan.”
State and federal governments all have rules in place that are designed to protect
consumers from inadvertently committing to purchases through a negative option pitch.
Still, angry consumers complain they are being victimized. How can this be?
Defending The Status Quo
Very simply, some companies follow the rules while some don’t. Any attempt to toughen
these rules – even outlawing negative option marketing, for example – would be met with
stiff opposition from magazine publishers, specific marketing companies, and the
marketing industry as a whole.
The Electronic Retailing Association, which represents radio, TV and Internet marketers,
has noted with alarm, on its Web site, that “state and federal regulatory activity threaten
the effectiveness and viability of these types of promotions potentially resulting in a loss
of convenience for consumers as well as unnecessarily burden industry with increased
costs associated with compliance.”
The association said it believes that current law provides an adequate infrastructure to
protect consumers from “rogue” companies abusing "advance consent marketing
(negative option) practices."
Staying Out Of The Negative Option Trap
The law does, in fact, provide many consumer-friendly remedies. The problem is, they
aren’t all that well publicized and therefore rarely enforced. The problem is compounded
by the fact that most consumers who fall victim to negative option marketing are
completely blindsided by it.
The law requires that consumers give an informed consent before a negative option
purchase can be considered legitimate. Yet the overwhelming majority of complaints
received at ConsumerAffairs.com are from consumers who have no idea why they are
being charged for a particular service. Under the law, the burden of proof is on the
marketer, not the consumer.
"Telemarketers need to be sure that consumers agree to be charged, and what account
will be charged -- even if they have an account number from another transaction," said
Howard Beales, Director of the FTC's Bureau of Consumer Protection.
"If you charge consumers without their permission, we'll charge you with committing a
fraud."
6
When an unauthorized charge appears on their credit card statement, many consumers
make the mistake of calling the toll-free customer service number of the company placing
that charge, which appears on the same line of the statement. That rarely leads to
satisfaction.
A more successful and less frustrating action is to call your credit card issuer’s customer
service number and report the charge as unauthorized. The credit card company, which
controls the flow of money, will be a much more effective advocate.
In addition to taking action to remove the charge, consumers should always file
complaints with ConsumerAffairs.com and appropriate government agencies.
Finally, consumers should be aware of the pitfalls that lurk behind many ordinary
purchases. Anytime a consumer is offered a “free gift” or “trial offer,” more than likely
there is a longer-term, more expensive negative option transaction taking place. The best
policy is to just say no. Otherwise, read the fine print very carefully.
Organizations can legally make a consumer’s failure to act an acceptance of the
product (Sovern 1999). Whereas previously a person had to affirmatively indicate that
they wanted the product or service (positive/affirmative option), today many
organizations are using NOM to sell magazines, natural gas, cellular phone service,
health club memberships, lawn care contracts, and other goods and services (Sharma
2001). Proponents of the strategy say that it results in increased retention rate,
convenience to customers, and lower costs. On the other hand, detractors of the practice
say that it creates customer confusion, is inconvenient, and is unfair (Sharma, 2001).
Indeed, one consumer attorney indicated that “As a result of such negative-option
offerings, many families have acquired an abundance of unwanted items because they
failed to return a card within a stated time period” (Cox 1992, B1).
7
Though there is little publicly-available empirical evidence on what impact
negative options have on consumer choice what is available shows clearly that it makes a
significant difference. For example, the Federal Communications Commission (FCC)
studied how consumers responded to offers to “unbundled” services by telephone
companies. The FCC found that consumers who had to indicate affirmatively that they
wished to purchase the optional maintenance plan subscribed about 44% of the time.
Consumers who could subscribe by doing nothing—that is, through a negative option—
subscribed 80.5% of the time—a difference of about 36% of the consumers (Phillips
1993).
Similar results have shown up in the cable television industry. In Canada, cable
television companies found that when new channels were offered in normal ways, only
25% of customers subscribed, but when made available through negative options, 60 to
70% of the subscribers did not reject the offer (Austen 1995; Walker 1995). In other
words, for many cable customers, the key factor in the purchasing decision was not the
cost or content of the programming, but rather whether they have to act.
Recently, organizations have also been using the negative option or opt-out model
for building lists for email marketing. Here is how it works: A marketer has a list of email
addresses but does not have permission to send third-party promotions. To obtain
permission, the marketer sends an email stating its intention to send future third-party
emails. If the recipient does not respond (negative option), the marketer assumes the
recipient has granted permission. It then begins sending to the list—and renting the
names to others (Jennings, 2001). Proponents of this approach tell you that as long as the
email address is publicly available (on a business card or in an industry directory) and all
8
future emails include an option to unsubscribe, this approach to gathering permission is
acceptable. Some say that a pre-existing relationship (visit to a trade show booth, receipt
of a company publication) automatically bestows third-party permission. Sending that
initial email is only a courtesy.
Proponents present low "remove me from your list" response rates from these
campaigns as proof that people are OK with the negative option. A marketer I spoke with
uses select quotes from Seth Godin's "Permission Marketing" to validate this model and
describes the resulting lists as permission-based or "permission-cleansed." Marketers
make $3 to $5 per name annually when they put these lists on the market.
Those opposed see things differently. For them, the most controversial part of the
model is the assumption that a recipient's silence equals permission. They point out that
many people don't open every piece of email they receive, so they may not see the
negative option message. The low response rate is cited as evidence. When presented
with an opt-out that can't be missed (such as on a registration page), the response rate is
usually around 15 percent. Comparing this to a low single-digit rate when an opt-out is
offered via a negative option suggests that some recipients miss the opt-out email.
Opponents take issue with the assumptions made about public email addresses,
unsubscribe links, and pre-existing relationships, believing that in these cases an explicit
opt-in is required. Although negative option is legal in the United States, it is not in some
European countries.
9
Merchandisers have acknowledged that consumers buy more readily when items
are sold through negative options. For instance, when one cable television provider
switched its offering of a new channel from a negative option to a positive option, the
company reduced its estimate of the number of expected subscribers to the new channel
from 80 percent to 50 percent (Clayton 1991). Similarly, when the FTC took testimony
on negative option selling, it noted that several industry sellers acknowledged that fewer
subscribers would purchase the goods offered if buying them required affirmative action
(38 CFR 1973).
Furthermore, one observer has noted that consumers are more likely to make a
purchase through a negative-option plan if they do not notice that they are making the
purchase (Craig 1994). In particular, inexpensive items and services are more likely to be
overlooked: “even if the consumer happens to notice the charge, he or she might not
devote much attention to it because of the time and effort to determine the cause of the
charge and to have it removed from the bill. Moreover, those in vulnerable positions,
such as the elderly or foreign born persons, might feel intimidated or deterred from
objecting to the charge” (Craig 1994, 8).
Another study demonstrating the power of opt-out systems inherent in NOM
approaches was demonstrated by a comparison of the vast number of individuals who
want to protect their privacy with the small number of individuals who actually opt out.
For example, Bank of America’s response rate for its opt-out notice to individuals not
wishing to have their financial information shared with other institutions was 0.2%, even
though most public opinion polls suggest that upwards of 60-80% of individuals do not
want their financial information disclosed (Rehm 2000).
10
In general terms, then, NOM reverses the traditional buyer/seller relationship
because it requires consumers to reject expressly unsolicited offerings to avoid being
charged for a product or service (Spriggs and Nevin 1996). Negative option plans
describe an arrangement in which the consumer receives goods and services on a regular
basis until he/she cancels—and failure to reply constitutes acceptance. As suggested in
the opening example, NOM involves transactions between the seller and the consumer in
which there exists a previous/current business relationship: providing a magazine
subscription to a current credit card holder.
NOM has also been referred to as advance consent marketing, automatic
renewals, continuous-service agreements, unsolicited marketing, inertia selling, “free
trial” offers, or “book-of-the-month” type plans.
“Broadly speaking, a ‘negative option’ is any type of sales term or
condition that imposes on consumers the obligation of rejecting
goods or services that sellers offer for sale. A negative option allows
a seller to interpret the failure of a consumer to reject goods or
services as the acceptance of a sales offer, when, under traditional
contract law, an affirmative response accepting the offer would be
necessary” (U. S. Federal Trade Commission [FTC], 1998, 44556).
In the past, the term opt-out marketing has also been used as a synonym for NOM. But
recently, the term “opt-out” has been associated mainly with privacy issues, such as
consumers allowing (via acquiescence) their personal and/or financial information to be
shared between firms (Hatch 2001; Sovern 1999).
The current research does not focus on consumer privacy or its loss, rather the
loss of consumer choice or control, hence the topic is confined to NOM. A review of the
current research on the topic of NOM suggests that there is very little information
available, yet many firms appear to be utilizing this strategy. Why? Does the consumer
11
have a positive or negative attitude toward these offers? Does the consumer’s satisfaction
with the offer influence the attitude toward the organization making the offer?
In the following pages we will review the limited literature on NOM. We then
apply some theoretical constructs to the process to gain an understanding of the
consumer’s perspective on NOM. The research uses an experimental survey design in
which customers of a bank were exposed to one of four treatments–three negative option
treatments and one positive option treatment. The consumers’ attitudes toward the offer
and the firm making the offer are explored. We conclude the paper with a discussion of
the implications for managers regarding the use of negative option strategies and by
addressing privacy, technology, and legal issues pertaining to this marketing procedure.
To our knowledge, this is the first research to examine possible theoretical underpinnings
of NOM option marketing.
BACKGROUND
Negative Option Marketing
NOM has existed for a long time. The famous potter, Wedgewood, used this
strategy in the 18th century to gain a foothold in the pottery market of Europe. He sent
samples of his work, unsolicited, to his customers who were some of Germany’s leading
aristocracy. Wedgewood’s rationale was that his clientele were too lazy to send the
pottery back and would, instead, pay for it (Wasserman 2001).
The next notable use of the strategy was in 1926, when the Book-of-the-Month
Club was formed in the U.S. by marketers Maxwell Sackheim and Harry Scherman. The
Book-of-the-Month Club developers sent new books to members with the agreement that
the Club would pay for return postage if the book was not wanted (Major 2005). This
12
policy proved costly and an adjustment was made. Members were pre-notified of the
book to be sent with the option to decline the book. If a card declining the offer by the
purchaser was not returned in a timely fashion, the book was sent and billed (negative
option) (Bowal 1999).
There appear to be five major variations on the negative option strategy currently
in use.
1. Something is regularly shipped or service provided, once a contract is in
place;
2. The consumer has a limited time free trial membership prior to being
charged, with the free trial beginning with the initiation of a contract;
3. The consumer and firm have a primary transaction relationship, the
negative option is offered through a secondary transaction relationship that
is billed automatically;
4. The consumer and firm have a primary transaction relationship with the
marketer adding goods or services to the consumer’s bill at the marketer’s
discretion; and
5. The contract continues after the end date unless the consumer explicitly
cancels the contract—usually within a certain time before the end of the
contract (Bowal 1999).
The one consistent pattern throughout all five forms is the basis of some sort of business
relationship between the consumer and the firm. Using the relationship as an entree,
negative option strategies are applied.
RESEARCH OVERVIEW
One service provider that has the ability to use negative option strategies that
operate from an existing contractual agreement is a bank. Once a customer agrees to the
stipulations of a demand deposit account (checking), banks can make a number of
13
negative option offers. Because of this circumstance, we chose to research NOM in a
banking environment.
In researching NOM, we investigated four basic research questions, one practical
question, and one ethical question.
What are some consumer perceptions that might impact the consumer’s
satisfaction with the negative option offer?
Does the consumer’s satisfaction with the negative option offer impact
his/her satisfaction with the bank making the offer?
Does the consumer’s satisfaction with the negative option offer impact
consumer behaviors such as intentions to purchase?
Is the impact of satisfaction with the negative option offer mediated by the
consumer’s desirability to control the purchase situation, and the natural
agreeableness of the consumer?
1.
2.
3.
4.
From a practical point of view:
5.
What is the financial impact of a negative option offer?
And from an ethical point of view:
6.
Has the consumer correctly comprehended the offer?
Model Development
Figure 1 indicates a model for analyzing a negative option service offer from a
bank to customers. The dependent variable of interest in the model is satisfaction with the
negative option offer (Satisfactionoffer). Although there are many constructs that might
impact the consumer’s perceived satisfaction with the offer, the authors narrowed the
field to three consumer perceptions that might impact the consumer’s perceived
satisfaction with the offer. These perceptions were selected based on exit interviews
conducted with bank customers (these bank customers were not part of the survey
sample) and include:

Positive influences
14
o The perceived value of the offer
o The perceived procedural justice/fairness inherent in the offer, and

Negative influences
o The perception of opportunistic behavior on the part of the bank
making the offer.
The authors also examined positive and negative individual difference variables that
might mediate the consumer’s satisfaction with the offer. These variables comprise:

Positive mediating influence
o Agreeableness

Negative mediating influence
o Desirability of control
A review of relevant literature on the concepts of the model follows.
[Insert Figure 1 about here]
Influences on Satisfaction with the Offer
Positive - Perceived value of the offer
Perceived value is a key concept in the model illustrated in Figure 1. Woodruff,
Schumann, and Gardial (1993) indicated that perceived value is closely related to
satisfaction. Although a key concept, perceived value is complex (being difficult for both
marketer and consumers to grasp) and difficult to measure. Semon (2001) discussed how
arbitrary most measures of value appear and how often marketers and consumers are not
in agreement in their perceptions of value. Semon (2001) additionally noted that
marketers deal only abstractly with money in terms of value, defining value as price, or
15
sacrifice, while in contrast, consumers find money is the main term used when defining
value.
The complexity of the concept is illustrated in explanations offered in three
investigations. Woodruff et al. (1993), when examining perceived value from the
consumer’s perspective, considered it a basic attribute-to-benefit ratio. Saliba and Fisher
(2000) reviewed the ratio analysis literature and offered a model based on a ratio of
perceived benefits received to perceived sacrifices made to purchase and use the
product/service. Zeithaml (1988) developed a conceptual model that included value.
From her consumer interviews she was able to categorize perceived value from the
consumer’s perspective into four definitions:




Value is low price.
Value is whatever I want in a product.
Value is the quality I get for the price I pay.
Value is what I get for what I give (pg. 13).
The underlying commonality of these perspectives is that the consumer’s perception of
value is based on a ratio analysis. Negative option offers would appear to contain a
perceived value component since the offer clearly states the price (sacrifice), the offers
and benefits, and sometimes even a “free-ride” period. We therefore define the concept of
perceived value of the offer in our model as “What I get for what I give” (Zeithaml 1988,
p. 13).
Positive - Perceived equity of the offer
The concept of equity involves a comparison of fairness, rightness, or
deservingness relative to others. Homan’s (1961) “rule of justice” is a seminal
examination of equity. Essential to Homan’s (1961) equity approach was process,
proportionality, and comparison (Oliver and Swan 1989). The process includes an
16
exchange encounter with another entity. Proportionality referred to Homan’s equation
where rewards and inputs to rewards should be proportional. The third component and
final determinate of equity involves comparison to a person, group, or entity. Oliver
(1997) noted that equity judgments are bipolar-like disconfirmation judgments.
Equity has a direct role in satisfaction as well, with both person-to-person
comparisons and merchant-to-person comparisons (Oliver 1997). Regarding merchant-toperson comparisons, the person is comparing two things. First is the comparison of the
merchant’s selection and service compared to the consumer’s efforts and price paid for
the selection and service. This is an individual type of comparison where the consumer is
only interested in getting what he/she paid for. The second type of comparison is
merchant oriented—what did the merchant receive (profit) for the price the consumer
paid. The importance of these comparisons is that such judgments of equity directly
influence satisfaction (Oliver 1997).
The equity comparisons noted thus far address distributive justice, or outcomes of
an exchange. Goodwin and Ross (1992) expanded the equity concept from a single
dimension of distributive justice, to include procedural justice and interactive justice.
Procedural justice refers to perceptions of the outcome process. Interactive justice refers
to perceptions that the consumer was treated with respect, politeness, and dignity during
the transaction. Goodwin and Ross (1992) found that the inclusion of procedural and
interactive justice significantly increased the explanation of satisfaction variance, with
distributive justice influencing satisfaction the most and interactive justice influencing
satisfaction the least. Thus, the inclusion of equity in the model is warranted.
17
NOM has suffered from the perception of being unfair (e.g., Hatch 2001; Sovern
1999) and much discussion of its legality and ethicality has surfaced in the US and
Canada. After all, the consumer is not given his/her opportunity to opt into an exchange
relationship, rather, the relationship is foisted on the consumer until the consumer
indicates “Enough.” We therefore included perceived equity in our model.
Negative - Opportunistic Behavior
Williamson (1983) first defined opportunistic behavior as “self-interest seeking
with guile” (p. 6). The behavior most often takes the form of manipulating information by
withholding it or distorting it. The end result is that promises or obligations are not
fulfilled. John (1984) noted that the key to such behavior is the inherent deceit as opposed
to ignorance or apathy. In other words, the self-interest seeking behavior is conscious and
goal directed behavior.
John (1984) further noted that in some disciplines where opportunistic behavior
has been studied (such as transaction cost analysis), it is assumed that humans naturally
behave opportunistically. This is particularly so if humans can get away with such
behaviors and such behaviors are profitable. Williamson (1983) noted that humans will
get away with (word choice: display or present?) as many opportunistic behaviors as they
can. The transaction cost analyses processes do not bother to explain the behavior, rather
just attempt to explain the transaction costs of such behaviors. John (1984) indicated that
the potential for opportunistic behaviors is most prevalent in long term relationships, such
as those found between consumers and financial institutions, personal service providers,
and other product-service entities that consumers have come to rely upon.
18
When the opening scenario of this article was read to bank customers during an
exit interview, most indicated that this sounded like opportunistic behavior.
Consequently, this concept was included in the model as having an impact on satisfaction
with a negative option offer.
Satisfaction with the Offer
We found that two rather broad theories were relevant to our concept of
satisfaction with the offer: Expectancy-disconfirmation Theory (Oliver 1980) and
Comparison Level Theory (Thibaut and Kelley 1959).
Expectancy-disconfirmation Theory
Oliver (1980) explained the expectancy-disconfirmation paradigm as a process
whereby satisfaction judgments arise from comparisons of expectations held previously
and current product/service performance. If current performance exceeds previous
expectations the results are positive disconfirmation resulting in increased satisfaction. If
on the other hand, current performance is exceeded by previous expectations the result is
negative disconfirmation and a concomitant increase in dissatisfaction.
Oliver (1997) expanded the information on expectancy-disconfirmation by stating
that assimilation and contrast effects may underlie the expectancy-disconfirmation
process. When consumers assimilate expectations, they are very confident of their
expectations—so much so that they may not compare performance to expectations in case
their expectations are not accurate. They therefore gravitate toward their initial feeling. In
this case, expectations will always equal performance, much like a self-fulfilling
prophecy (Eden 1990; Jones 1977). Contrast effects tend to lead to exaggerations of the
discrepancies or gaps between expectations and performance. For example, contrast
19
effects exaggerate satisfaction (where the discrepancy is due to performance exceeding
expectations) to being very satisfied. Oliver (1997, 91) called this “magnifying ratings in
the direction of the performance discrepancy”.
Comparison-level Theory
Comparison-level Theory is an approach used to explain satisfaction which is
comprised of two standards (Thibaut and Kelley 1959). The first standard is the level of
comparison. The second standard is the comparison level for alternatives. For example, if
an individual lives in a rural community with few health care professionals in a 50 mile
radius (few alternatives for health care), his/her level for comparisons might be low. The
outcome is that individuals might be satisfied with less in the rural environment than if
they were in a metro area with a number of major medical centers (alternatives).
The current study involved a banking context and thus it seemed that
Comparison-level Theory was relevant based on the number of banks found in even the
smallest of communities (not to mention Internet banks).
Individual Differences Variables? Mediating Influences on Satisfaction
Desirability of Control
The Desirability of Control is essentially the desire to “control the events in one’s
environment” (Burger and Cooper, 1979, 382). Some people are high in their Desire for
Control (DC), exhibiting assertive and decisive characteristics, and generally try to
influence others if it is to their advantage. In an attempt to avoid events that are
unpleasant or result in failure, a person high in DC will try to exercise control over or
manipulate events. In contrast, individuals who possess a low DC are generally more
nonassertive, passive, and indecisive. These people will probably not try to influence
20
others and may even prefer that others make daily decisions for them (Burger and Cooper
1979).
The process of NOM takes a certain amount of control of free choice away from
the consumer. Indeed, since the transaction is initiated by the marketer, unless halted by
the consumer, the consumer has lost the ability to affirmatively complete the transaction,
thus losing control over the situation. While some consumers may not be troubled by
losing control, others are often incensed by its loss. It therefore seems plausible that the
individual variable of Desirability of Control may mediate the level of satisfaction with a
negative option offer.
Agreeableness
Personality traits are enduring ways of thinking, feeling, and acting (McCrae and
Costa 1997) and, as such, might mediate the overall feeling of satisfaction with a negative
option offer. A review of the personality literature revealed that the Five Factor Model
(Goldberg 1990; McCrae and John 1992) was most prevalent approach and might provide
additional insights with respect to our model. When placed into a hierarchical structure of
personality the five factors reside at the most elemental, abstract level—“defined as the
basic underlying predispositions that arise from genetics and a person’s early learning
history” (Licata, Mowen, Harris, and Brown 2003, 258).
The five factors are comprised of:





Conscientiousness (or will to achieve),
Agreeableness (opposite of antagonism),
Extraversion or surgency,
Openness to experience, intellect or culture (creativity), and
Neuroticism or emotional instability (McCrae and John 1992).
21
It would seem likely that the level of agreeableness of the consumer might mediate
satisfaction with the negative option offer. If the consumer was very agreeable, he/she
might not take offense at the negative option process. On the other hand, if the consumer
was more antagonistic, he/she might not feel positively about the process which might
mediate satisfaction with the offer.
METHOD
Operationalizing the Model Concepts
Existing scales that had acceptable reliabilities were used to operationalize the
model concepts. All scale items were measured on a 5-point Likert scale. Perceived
value, perceived equity, opportunistic behavior, satisfaction with the offer, and
satisfaction with the bank making the offer, were posed as attitudinal statements with a
1=strongly disagree to 5=strongly agree format. The agreeableness scale was introduced
as “How often do you feel/act:” and followed by 4 adverbs measured by 1=never to
5=always. Desirability of Control was introduced by asking “How often does the
statement apply to you?” and followed by 1=does not apply to me at all to 5=the
statement always applies to me.
The value scale was comprised of seven items borrowed from two satisfactionwith-the-offer scales developed by Burton and Lichtenstein (1988) and Petroshius and
Monroe (1987). The seven items had a Cronbach alpha of .924. Equity was comprised of
two borrowed items (Maxham 1999) having an alpha of .816. Opportunistic behavior
used two borrowed items (McKee, Rodrigue, and Licata, forthcoming) that posted a .723
alpha. Satisfaction with the offer and satisfaction with bank had three and four items,
respectively, borrowed and modified for the research (Mittal and Lasser 1996; Oliver and
22
Swan 1989). Exploratory factor analysis found all items loading on their appropriate
model variable with acceptable statistics, as noted by Hair, Anderson, Tatham, and Black
(2002, 385). Satisfaction with the offer had an alpha of .804 and satisfaction with the
bank had an alpha of .901. The Burger and Cooper Desirability of Control scale (Burger
and Cooper 1979) originally had 20 items. We chose four items that specifically
measured attitudes regarding being told what to do. The four items had a calculated alpha
of .797. Finally, agreeableness had four items borrowed from Licata et al. (2003) with an
alpha of .817. (Note: all items can be found in the Appendix.)
Data Collection and Sample Characteristics
NOM has the potential to be an important marketing tool in the financial services
sector. The industry is seeking new sources of revenue, offering new services and
changing old ones. Technology makes it easier and less expensive than in the past for the
industry to effect these changes. From a negative perspective, the new technologies could
allow industry to profit by surreptitiously billing unsuspecting customers for unwanted
products and services. However, the use of NOM by responsible service providers
operating in competitive markets can enable financial institutions to offer better service
more easily and with greater efficiency.
Consequently, the sample identified was non-interest bearing DDA (checking
account) customers of a community bank in the southwestern US. These customers have
a contractual, primary transaction relationship with bank. Banks often offer additional
services that can be billed directly to the customer’s DDA. We gained access to a 1000customer mailing list with all names having a retail DDA relationship with the bank. The
survey was blind, coming from professors of a nearby university. No pre-announcement
23
or follow-up mailing was used. The survey contained a scenario where the respondent’s
primary bank was offering AD and D (accidental death and dismemberment insurance of
up to $100,000 to customers for $3.50 per month). There were four versions of this offer:
1) the customer can positively complete the transaction by sending the bank an
acceptance card (included in the monthly statement),
2) the insurance will start today and the customer’s DDA will be debited $3.50,
beginning this month, until the customer opts out of the coverage (by calling the
bank),
3) the insurance begins today and the customer’s DDA will be debited $3.50
beginning next month (giving one month free) unless the customer opts out of the
coverage (by calling the bank within the next month),
4) the insurance begins today and the customer’s DDA will be debited $3.50 three
months from now (giving three months free) unless the customer opts out of the
coverage (by calling the bank within the next three months).
The mailing list had 848 valid addresses with 194 usable returned surveys. The
sample was comprised of an almost even split by gender (female 45.9%, male 53.1%),
with 34.6 percent holding a college degree or advanced degree, average age of 36.6 years.
The majority of the respondents (52.6%) were currently married and had an average
household of 2.9 persons.
RESULTS
Mean index scores were computed for all model variables. Table 1 illustrates the
means of the variables and the correlation coefficients. Using a one-sample t-test, all
means were found to be significantly different from middle scale value of 2.50, thus
indicating respondents were not neutral regarding attitudes toward any of the variables.
The lowest mean score was satisfaction with the offer (mean=2.89), while the second
highest score was for satisfaction with the bank (mean=3.73).
24
[Insert Table 1 about here]
A series of hierarchical regressions were used to test the model. Table 2 illustrates
the results of four hierarchical regressions:
Model 1 – Satisoffer= a + x1(perceived value) + x2(perceived equity) + x3(perceived opportunistic
behavior)
+e
Model 2 - Satisoffer= a + x1(perceived value) + x2(perceived equity) + x3(perceived opportunistic
behavior)
+ x4(desirability of control) + e
Model 3 - Satisoffer= a + x1(perceived value) + x2(perceived equity) + x3(perceived opportunistic
behavior)
+ x5(agreeableness) + e
Model 4 - Satisoffer= a + x1(perceived value) + x2(perceived equity) + x3(perceived opportunistic
behavior)
+ x4(desirability of control) + x5(agreeableness) + e
[Insert Table 2 about here]
The adjusted R2 for each model indicated that the basic model has good
explanatory power. When the mediators were added (Models 2-4) the R2 does not appear
to improve significantly. An examination of the standardized beta coefficients illustrates
that DC has a little or no mediating affect on satisfaction with the offer. The results of
adding Agreeableness to the regression indicates no change in beta coefficients. Indeed,
the betas for Agreeableness are not statistically significant. There is also no multiplicative
affect when both DC and Agreeableness are added to the regression, yielding little
change in the betas. It would therefore appear that the individual difference variables of
Desirability of Control and Agreeableness do not mediate the influence of Perceived
Value, Perceived Equity, and Perceived Opportunistic Behavior on Satisfaction with the
negative option offer.
25
There are a number of issues tangential to testing the model. First, does the
satisfaction with the offer affect the customer’s satisfaction toward the bank making the
offer? Recall from Table 1 that the lowest mean score was Satisfactionoffer, (2.89 on a 5point scale, significantly different from a neutral score of 2.50). Interestingly, one of the
highest means was satisfaction with the bank making the offer (Satisfactionbank – mean
3.73). A one-way ANOVA with Satisfactionbank as the dependent variable indicated that
Satisfactionoffer posted a significant F statistic (3.94, p<.001). The adjusted R2 for the
model, .177, may explain why the mean for the Satisfactionoffer was so low and
Satisfactionbank so high—satisfaction with the offer provides very little in explanatory
power for Satisfactionbank.
A second issue concerns the impact of Satisfactionoffer on the customer’s intent to
purchase the service. A univariate regression, with intent to purchase as the dependent
variable and Satisfactionoffer as the independent variable was significant (F=2.79, p<.01,
R2=.212. Therefore, it appears that even though the level of satisfaction with the negative
option offer was relatively low, it positively influenced the intent to purchase the service.
The third issue concerns comprehension. Did the respondents clearly understand
the offer? We included a manipulation check in the questionnaire. It appears that 29
respondents (15%) were unable to correctly state the offer they were made. A study
conducted by Jacoby and Hoyer (1989) using 1347 respondents found that 21.4 percent
of respondents did not understand the meaning of printed communications offered in
advertisements, editorials and magazines. In comparison, we cannot say that our negative
option offer fostered more than “normal” levels of misunderstanding.
26
A fourth issue is the economic impact of the offer for the bank making the offer.
Respondents were given four choices: 1) very interesting in buying the service, 2)
somewhat interested in buying the service, 3) not interested at all in buying the service,
and 4) don’t know if interested or not in buying the service. The scenario involving one
month free service followed by debiting the customer’s DDA had the largest positive
response (very interested in buying the service—48.7 %). We can extrapolate from this
information and get a sense of the economic value of the negative option strategy. The
bank has approximately 10,000 non-interest bearing DDAs. Given these survey results,
4870 DDAs would be very interested in purchasing the insurance. The cost to the
customer would be $3.50 per month or $42 per year. The cost to the bank is $2.49 per
DDA account or $29.88 per year. The negative option offer with one month free would
bring the bank an additional $204,540. revenue per year with a net revenue of
$145,515.60.
DISCUSSION
The current research examines NOM where a purchase is imposed on the
consumer unless he/she acts in a timely fashion to prevent the sale. This seems to be a
very popular strategy in the US and Canada. Despite the frequency of this marketing
strategy there has been no research to gain insights into the strategy. The current
investigation is the first to examine the effectiveness of the strategy and attempt to apply
consumer behavior theory to the strategy.
At the beginning of the article, we posed four basic research questions. RQ1
asked what consumer perceptions might impact the consumer’s satisfaction with a
negative option offer. The data indicated that 74.9 percent of the variance explained in
27
satisfaction with a negative option offer was attributed to consumer perceptions of value,
equity, and opportunistic behaviors. RQ2 and RQ3 asked if the consumer’s satisfaction
with the negative option impacts satisfaction with the organization making the offer and
intentions to purchase. The research indicated that satisfaction with the negative option
offer significantly impacted both satisfaction with the organization making the negative
option offer and intentions to purchase (although satisfaction with the offer explains little
variance with satisfaction with the bank making the offer). RQ4 addresses the mediating
effect of two individual difference variables, Desirability of Control and Agreeableness,
on satisfaction with the negative option offer. The research indicates that these two
particular variables had no significant mediating influence on satisfaction with the
negative option offer.
The results indicate the answer to Q5 (regarding the financial impact of the offer
to the bank) could be quite positive. In spite of a low satisfaction rating with the offer,
enough customers were very interested in the offer to potentially provide the community
bank with an impressive increase in revenue. The results also indicate that, ethically,
NOM does not promote miscomprehension of the offer. Indeed, it appears that more
customers comprehend the negative option offer than suggested by prior advertising
research.
Limitations
The research had certain limitations. First, the research utilized only one context
and one contractual situation. Would the findings hold for another contractual situation,
say a health club or lawn service? Because of this limitation, findings cannot be
generalized—rather findings might be used as exploratory for further research utilizing
28
other contractual situations. The second limitation involves the variables of the model.
Although the independent variables of perceived value, equity and opportunistic behavior
posted a quite acceptable R2, the lack of impact of mediating variables was disappointing.
Future research might focus on choosing mediating variables that might be shown to have
a more demonstrable impact on satisfaction with a negative option offer.
Managerial Implications
Although it might not be appropriate to generalize from the research, based on the
limitations just noted, there may be some managerial implications present.
Marketing effectiveness
First, it appears the reason why this marketing strategy is so popular is because it
is effective. NOM has worked long and well for book, record, and video clubs. In these
competitive markets a relationship is voluntarily established by the customer. A key
feature of these programs (and required by FTC regulations) is that they require that all
terms and conditions of the buyer/seller relationship be explicitly laid out and
acknowledged up front. NOM can be advantageous to both parties when transparency
and tangible benefit to the consumer are evident, (e.g. convenience and better value for
money), and when the respective administrative burdens or costs to both parties are
reduced.
Another potential positive use of NOM involves automatic contract renewal
clauses. Under existing contracts, automatic price rise clauses (negative option price
clauses) can eliminate costly renegotiation of contracts whenever there is a price increase.
Moreover, in a negotiated contract when there is more or less equal bargaining power,
one can assume that there will be benefits to both parties.
29
An extrapolation of the results from this study noted an impressive increase in
revenues (both gross and net) from the strategy with a minimum of “free-ride” time (one
month). For this particular offer, the consumer did not seem to feel particularly positive,
or negative, thus avoiding negative outcomes. The offer, although receiving a low
satisfaction rating, had a positive impact on satisfaction with the bank. Perhaps the offer
represented another “touch” situation, and as long as the offer was not viewed as highly
negative, it positively affected satisfaction with the bank. Additionally, it appears that
managers do not have to worry about the ethical considerations of negative option offers.
Consumers seem to understand these offers better than most advertising and written
offers. In sum, it appears that negative option offers might be an effective new tool for
marketing managers whose service has a contractual relationship foundation.
Privacy concerns and new technologies
Under an opt-out system inherent in NOM strategies information can be shared
and made public unless a person instructs an organization to keep it confidential. An optout system allows unlimited sharing of private information unless and until a consumer
says “stop” (Sovern 1999, 1075). Former Attorney General for Minnesota, Mike Hatch
(2001), indicated that there are three fundamental problems with an opt-out system that
undermine its ability to adequately protect an individual’s privacy interests concerning
the treatment of sensitive personal information. First, a successful opt-out system is
conditioned upon individuals being able to understand how organizations are using their
personal information. Second, a successful opt-out system is conditioned upon consumers
getting meaningful notice that they have a right to opt-out of this information sharing.
Third, a successful opt-out system is predicated upon consumers being able to effectuate
30
their preference without undue convenience. In contemplating using NOM strategies it
would behoove organizations to address these privacy concerns.
This is particularly important in the financial services sector because of the ease
of access to a consumer’s personal financial information (Hatch 2001; Sovern 1999). The
issue of how to manage NOM, including privacy implications, in this and other sectors,
needs to be addressed initially we believe through voluntary codes, and, if necessary,
through other means such as regulatory activity.
Additionally, the potential impact of new technologies on the use and abuse of
NOM is a major issue, (e.g., the case of a bank using credit rating information for
marketing purposes). The interconnection of networks will increase the amount of
information—such as electronic transactions, credit ratings, financial accounts,
educational, medical and driving records—that can be assembled and collated into
comprehensive profiles of individuals or companies. Elaine Kolish, Associate Director of
the FTC’s Bureau of Consumer Protection’s Division of Enforcement, indicated that
“Negative option marketing is particularly troubling when marketers …already have
consumers’ credit card or billing account information and can easily charge consumers’
accounts without their permission or when marketers fail to disclose that consumers’
credit card numbers will be transferred to another company and charged unless
consumers call to cancel” (Federal Trade Commission 2001, 1). These records can be
sold across borders, resold or reused, or integrated with other databases without consent
or remuneration, for purposes unrelated to those for which the data were originally
collected. This makes NOM a very appealing marketing tool. The implications for
guarding and managing personal information on the information highway as it relates to
31
NOM should be reviewed by organizations and governments in response to electronic
privacy issues.
Legal considerations
In the United States, several cases have been brought before the courts involving
cable companies (Time Warner, Comcast, TCI/Encore) that either unbundled channel
packages or introduced new channels using NOM. Most were prosecuted using a
provision of the federal Cable Television Consumer Protection Act of 1992, amended in
1994, to ban the practice of charging a subscriber for any service that the consumer has
not affirmatively asked for by name. In another case, FTC v. Ira Smolev (2001), the FTC
announced that the defendant violated the Telemarketing Sales Rule (16 C.F.R. 2003) by
not disclosing material terms and conditions of the offers up front. As a result, Ira
Smolev, paid more than $9 million to settle charges brought by the FTC and 40 State
Attorneys General, that the defendants misled consumers into accepting trial buying club
memberships and obtained consumers’ credit card account numbers without the
consumers’ knowledge or authorization from telemarketers selling the buying clubs.
Consumers then were enrolled in the clubs and charged up to $96 in yearly membership
fees.
In the final analysis information emerges as one of the key issues in matters of
NOM. Clear, accurate, comprehensible information, presented in plain language, is
required for consumers to make informed decisions and choices and to understand the
terms and conditions of contracts. Organizations considering adoption of NOM plans
would do well to review Federal Trade Commission information with regards to book
clubs, record clubs, and video clubs as a source of guidance in implementing a NOM,
32
regardless of industry. Specifically, under the FTC Trade Regulation Rule Regarding Use
of Negative Option Plans by Sellers in Commerce (16 CFR § 425 1998) sellers must
clearly and conspicuously provide certain information about their plans in any
promotional materials.
The FTC is concerned about this particular marketing approach and has
developed numerous consumer education publications to help consumers protect
themselves. Organizations considering NOM should carefully scrutinize these regulatory
publications before implementing such a practice.
The development and implementation of industry led voluntary codes, standards,
and best practices may be a viable alternative in addition to traditional government
action.
33
REFERENCES
16 C.F.R. § 310.4(b)(1)(iii)(B)(2003).
16 C.F.R. § 425(1998).
38 C.F.R. § 4896, 4902(1973).
Austen, Ian. 1995. Rogers Demands Dismantling of Stentor. Calgary Herald [Calgary,
Canada], January 27.
Bowal, Peter. 1999. Commentary: Reluctance to Regulate: The Case of Negative
Option Marketing. American Business Law Journal. 36: 377-390.
Burger, Jerry M., and Harris M. Cooper. 1979. The Desirability of Control. Motivation
and Emotion. 3(4): 381-393.
Burton, Scott, and Donald R. Lichtenstein. 1988. The Effect of Ad Claims and Ad
Context on Attitude toward the Advertisement. Journal of Advertising. 17(1):
3-11.
Cable Television Consumer Protection Act of 1992, Pub. L. No. 102-385, 106 Stat. 1460,
1461 (1992).
Clayton, Kathy. 1991. Subs to TCI: We Want Our $1 Encore. Cable World. 3(Winter):
1, 20.
Craig, Bruce A. 1994. Negative Option Billing: Understanding the Stealth Scams of the
‘90s. Loyola Consumer Law Reporter. 7(1): 1-10.
Eden, Dov. 1990. Pygmalion in Management: Productivity as a Self Fulfilling Prophecy.
Lexington, MA: Lexington Books.
FTC v. Ira Smolev, No. 01-8922 CIV ZLOCH (S.D. Fla.) (filed Oct. 23, 2001).
Goldberg, Lewis R. 1990. An Alternative ‘Descript of Personality’: The Big Five Factor
Structure. Journal of Personality and Social Psychology. 59: 1216-1229.
Goodwin, Cathy, and Ivan Ross. 1992. Consumer Responses to Service Failures:
Influence of Procedural and Interactional Fairness Perceptions. Journal of
Business Research. 25(September): 149-163.
Hair, Joseph F. Jr., Rolph E. Anderson, Ronald L. Tatham, and William C. Black. 1995.
Multivariate Data Analysis. 4th Edition, Englewood Cliffs, NJ: Prentice Hall.
Hatch, Mike. 2001. The Privatization of Big Brother: Protecting Sensitive Personal
34
Information from Commercial Interests in the 21st Century. William Mitchell Law
Review, 27 (3), 1457-1502.
Homans, George C. 1961. Social Behavior: Its Elementary Forms. NY: Harcourt,
Brace & World.
Jacoby, Jacob, and Wayne D. Hoyer. 1989. The Comprehension/Miscomprehension of
Print Communication: Selected Findings. Journal of Consumer Research.
15(4): 434-443.
Jennings, J. (2001, December 6). The Controversy Surrounding Negative Option OptOut. Retrieved May 18, 3006 from
http://www.clickz.com/experts/em_mkt/opt/article.php/934761
John, George. 1984. An Empirical Investigation of Some Antecedents of Opportunism
In a Marketing Channel. Journal of Marketing Research. 21(August): 278-290.
Jones, Robert A. 1977. Self-fulfilling Prophecies: Social, Psychological, and
Physiological Effects of Expectancies. Hillsdale, NJ: Lawrence Erlbaum.
Lamont, Dennis D. 1995. Negative option offers in consumer service contracts: A
principled reconciliation of commerce and consumer protection. UCLA Law
Review, 42: 1315-1388.
Licata, Jane W., John C. Mowen, Eric G. Harris, and Tom J. Brown. 2003. On the Trait
Antecedents and Outcomes of Service Worker Job Resourcefulness: A
Hierarchical Model Approach. Journal of the Academy of Marketing Science.
31(3): 256-271.
Major, John S. Accessed June 8, 2005. The Book-of-the-Month Club Welcomes
Submissions from Small Press Publishers.
http://www.smallpress.org/articles/bomc.htm.
Maxham, James G. III. 1999. The Influence of Service Recover on Perceived Justice,
Satisfaction, Positive Word-of-Mouth, and Behavioral Intentions. Doctoral
Dissertation, Louisiana State University, E. J. Ourso College of Business
Administration, Baton Rouge, Louisiana.
McCrae, Robert R., and Paul T. Costa. 1997. Personality Trait Structure as a Human
Universal. American Psychologist. 52(5): 509-516.
McCrae, Robert R., and Oliver P. John. 1992. An Introduction to the 5-Factor Model
and Its Applications. Journal of Personality. 50: 175-215.
McKee, Daryl, Christina S. Rodrigue, and Jane W. Licata. Forthcoming. A SelfEfficacy-Based Model of Service Response: An Empirical Study. Journal of
Service Research.
35
Mittal, Banwari, and Walfried M. Lasser. 1996. The Role of Personalization of Service
Encounters. Journal of Retailing. 72(1): 95-109.
Oliver, Richard L. 1980. A Cognitive Model of the Antecedents and Consequences of
Satisfaction Decisions. Journal of Marketing Research. 17(November): 460-469.
Oliver, Richard L. 1997. Satisfaction: A Behavioral Perspective on the Consumer.
Boston: Richard D. Irwin/McGraw Hill.
Oliver, Richard L., and John E. Swan. 1989. Consumer Perceptions of Interpersonal
Equity and Satisfaction in Transactions: A Field Survey Approach. Journal of
Marketing. 53(April): 21-35.
Petroshius, Susan M., and Kent B. Monroe. 1987. Effect of Product-Line Pricing
Characteristics on Product Evaluations. Journal of Consumer Research.
13(March): 511-519.
Phillips, Owen R. 1993. Negative Option Contracts and Consumer Switching Costs.
Southern Economic Journal. 60(2): 304-315.
Rehm, Barbara A. 2000. B of A Chief: Privacy Shields Harm Customers. American
Banker. 165(189): 13-16.
Saliba, Michael T., and Caroline M. Fisher. 2000. Managing Customer Value. Quality
Progress. 33(6): 63-69.
Semon, Thomas T. 2001. ’Value’ Defies Arbitrary Measurements. Marketing News.
35(5): 7.
Sharma, Sunil. 2001. In or Out?: Those are Your Options.
http://www.gantthead.com/article.cfm?ID=19102.
Sovern, Jeff. 1999. Opting In, Opting Out, or No Options at All: The Fight for Control of
Personal Information. Washington Law Review. 74: 1033-1118.
Spriggs, Mark T., and Nevin, John R. 1996. Negative Option Selling Plans: Current
Forms versus Existing Regulations. Journal of Public Policy & Marketing. 15:
227-237.
Thibaut, John W., and Harold H. Kelley. 1959. The Social Psychology and Groups. NY:
John Wiley and Sons.
US Federal Trade Commission. 1998, August 20. 16 C.F.R. Part 425, Trade Regulation
Rule Regarding Use of Negative Option Plans by Sellers in Commerce. Federal
Register, 63, 44555-44562. See also
36
http://www.ftc.gov/os/1998/08/63FR44555.pdf.
US Federal Trade Commission. 2001, November. FTC Testimony Details Deceptive
Negative Option Marketing and the Deceptive Sale of Credit and Credit CardRelated Services.
http://www.ftc.gov/opa/2001/11/kolish.htm.
Walker, William. 1995. NDP Set to Ban Negative Billing and Cable Subscribers Could
Get a Break. Toronto Star [Toronto, Canada], February 24.
Wasserman, Todd. 2001. Inertia: A Marketer’s Best Friend. Brandweek. 42(30): 28.
Williamson, Oliver E. 1983. Markets and Hierarchies: Analysis and Antitrust
Implications. NY: Free Press.
Woodruff, Robert B., David W. Schumann, and Sarah Fisher Gardial. 1993.
Understanding Value and Satisfaction from the Customer’s Point of View. Survey
of Business. 29(1): 33-40.
Zeithaml, Valarie A. 1988. Consumer Perceptions of Price, Quality, and Value: A
Means-End Model and Synthesis of Evidence. Journal of Marketing. 52(July):
2-22.
37
APPENDIX
Scale Items
Perceived Value: Source – Petroshuis and Monroe, 1987; Burton and Lichtenstein,
1988. α=.924
1. I consider the offer a good buy.
2. The cost of the offer is very acceptable.
3. Compared to other offers, this one looks like it provides good service.
4. I think the offer has value.
5. The service offered would appear to be a bargain.
6. I find the offer a good value for the money.
7. I find the cost of the offer very economical.
Perceived Equity: Source – Maxham, 1999. α=.816
1. The bank’s offer would result in a positive outcome for me.
2. What I receive in benefits from accepting the offer seems fair to me.
Perceived Opportunistic Behavior: Source – McKee, Rodrigue and Licata,
Forthcoming. α=.723
1. The offer seems to take advantage of the customer
2. The offer does not seem to have my best interests at heart.
Satisfaction with the Offer: Source – Mittal and Lasser, 1996; Oliver and Swan,
1989. α=.804
1. Compared to other offers this one looks like it provides good service.
2. The service offered seems to meet or exceed my expectations.
3. Overall, I am satisfied with the offer made by ABC Bank.
Desirability of Control: Source – Burger and Cooper 1979. α=.797
1. I try to avoid situations where someone else tells me what to do.
2. When it comes to orders, I would rather give them than receive them.
3. I prefer to avoid situations where someone else has to tell me what it is I should
be doing.
4. I’d rather run my own business and make my own mistakes than listen to
someone else’s orders.
Agreeableness: Source – Licata, Mowen, Harris and Brown, 2003. α=.817
1. Tender hearted with others
2. Sympathetic
3. Kind to others
4. Softhearted
Satisfaction with the Bank Making the Offer: Source – Mittal and Lasser, 1996;
Oliver and Swan, 1989. α=.901
1. I would recommend ABC Bank to my friends.
2. Overall, I am satisfied with the service provided by ABC Bank.
3. The service I receive from ABC Bank meets or exceeds my expectations.
4. Compared to other banks, ABC Bank provides good service.
38
TABLE I
Means and Correlation Coefficients for Model Variables
Variable
1
1.Value
3.23
. 828+
2.Equity
3.Opportunistic -.584+
Behavior
4.Satisfaction – .831+
Offer
-.047
5.Desirability
of Control
.106
6.Agreeability
.372+
7.SatisfactionBank
2
3
4
5
2.95
-.551+
3.23
.813+
-.587+
2.89
-.005
.097
.062
3.57
.088
.368+
-.082
-.381+
.067
.350+
.078
-.059
6
7
3.91
.194+
3.73
+
p<.01
Means are in bold, on the diagonal
39
TABLE 2
Beta Coefficients for Hierarchical Regression Analysis (N=194)
Dependent Variable: Satisfaction with the Offer
Perceived Value
Perceived Equity
Perceived Opportunistic Behavior
Desirability of Control
Agreeableness
Adjusted R2
Model
1
.835*
.390*
-.129*
—
—
Model
2
.832*
.310*
-.124*
.098*
—
Model
3
.834*
.390*
-.129*
—
-.024
Model
4
.832*
.381*
-.124*
.098*
-.016
.749
.752
.749
.751
NOTE: Standardized beta is reported.
*p <.01; **p<.05; ***p<.10
40
The Ethics of Negative Option Marketing
C. W. Von Bergen
Southeastern Oklahoma State University
John K. S. Chong
University
41
The Ethics of Negative Option Marketing
Abstract
Negative option marketing,
, has a history of several hundred years yet no
systematic ethical review of this increasingly popular marketing strategy has been
undertaken.
42
The Ethics of Negative Option Marketing
Velasquez, Andre, Shanks, and Meyer (1996) and White and Taft (2004) provide
similar ethical frameworks for evaluating problematic ethical issues. What is Ethics?
Simply stated, ethics refers to standards of behavior that tell us how human beings
ought to act in the many situations in which they find themselves-as friends,
parents, children, citizens, teachers, professionals, and particularly so for our
purposes, businesspeople (Markkula Center for Applied Ethics, n.d.).
At a minimum, and is the one we will use in our discussion of negative option
marketing. Each addresses essentially five
Many philosophers and ethicists have helped us answer this critical question. They
have suggested at least five different sources of ethical standards we should use.
Five Sources of Ethical Standards
The Utilitarian Approach
Some ethicists emphasize that the ethical action is the one that provides the most
good or does the least harm, or, to put it another way, produces the greatest
balance of good over harm. The ethical corporate action, then, is the one that
produces the greatest good and does the least harm for all who are affectedcustomers, employees, shareholders, the community, and the environment. Ethical
warfare balances the good achieved in ending terrorism with the harm done to all
parties through death, injuries, and destruction. The utilitarian approach deals with
consequences; it tries both to increase the good done and to reduce the harm done.
The Rights Approach
Other philosophers and ethicists suggest that the ethical action is the one that best
protects and respects the moral rights of those affected. This approach starts from
the belief that humans have a dignity based on their human nature per se or on their
ability to choose freely what they do with their lives. On the basis of such dignity,
they have a right to be treated as ends and not merely as means to other ends. The
list of moral rights -including the rights to make one's own choices about what kind
of life to lead, to be told the truth, not to be injured, to a degree of privacy, and so
on-is widely debated; some now argue that non-humans have rights, too. Also, it is
often said that rights imply duties-in particular, the duty to respect others' rights.
The Fairness or Justice Approach
Aristotle and other Greek philosophers have contributed the idea that all equals
should be treated equally. Today we use this idea to say that ethical actions treat all
human beings equally-or if unequally, then fairly based on some standard that is
defensible. We pay people more based on their harder work or the greater amount
that they contribute to an organization, and say that is fair. But there is a debate
43
over CEO salaries that are hundreds of times larger than the pay of others; many
ask whether the huge disparity is based on a defensible standard or whether it is the
result of an imbalance of power and hence is unfair.
The Common Good Approach
The Greek philosophers have also contributed the notion that life in community is a
good in itself and our actions should contribute to that life. This approach suggests
that the interlocking relationships of society are the basis of ethical reasoning and
that respect and compassion for all others-especially the vulnerable-are
requirements of such reasoning. This approach also calls attention to the common
conditions that are important to the welfare of everyone. This may be a system of
laws, effective police and fire departments, health care, a public educational system,
or even public recreational areas.
The Virtue Approach
A very ancient approach to ethics is that ethical actions ought to be consistent with
certain ideal virtues that provide for the full development of our humanity. These
virtues are dispositions and habits that enable us to act according to the highest
potential of our character and on behalf of values like truth and beauty. Honesty,
courage, compassion, generosity, tolerance, love, fidelity, integrity, fairness, selfcontrol, and prudence are all examples of virtues. Virtue ethics asks of any action,
"What kind of person will I become if I do this?" or "Is this action consistent with my
acting at my best?"
Putting the Approaches Together
Each of the approaches helps us determine what standards of behavior can be
considered ethical. There are still problems to be solved, however.
The first problem is that we may not agree on the content of some of these specific
approaches. We may not all agree to the same set of human and civil rights.
We may not agree on what constitutes the common good. We may not even agree
on what is a good and what is a harm.
The second problem is that the different approaches may not all answer the question
"What is ethical?" in the same way. Nonetheless, each approach gives us important
information with which to determine what is ethical in a particular circumstance. And
much more often than not, the different approaches do lead to similar answers.
A Framework for Ethical Decision Making
Recognize an Ethical Issue
1. Is there something wrong personally, interpersonally, or socially? Could the
conflict, the situation, or the decision be damaging to people or to the community?
2. Does the issue go beyond legal or institutional
concerns? What does it do to people, who have dignity, rights, and hopes for a better
life together?
44
Get the Facts
3. What are the relevant facts of the case? What facts are unknown?
4. What individuals and groups have an important stake in the outcome? Do some
have a greater stake because they have a special need or because we have special
obligations to them?
5. What are the options for acting? Have all the relevant persons and groups been
consulted? If you showed your list of options to someone you respect, what would
that person say?
Evaluate Alternative Actions From Various Ethical Perspectives
6. Which option will produce the most good and do the least harm?
Utilitarian Approach: The ethical action is the one that will produce the
greatest balance of benefits over harms.
7. Even if not everyone gets all they want, will everyone's rights and dignity still be
respected?
Rights Approach: The ethical action is the one that most dutifully respects the rights
of all affected.
8. Which option is fair to all stakeholders?
Fairness or Justice Approach: The ethical action is the one that treats people
equally, or if unequally, that treats people proportionately and fairly.
9. Which option would help all participate more fully in the life we share as a family,
community, society?
Common Good Approach: The ethical action is the one that contributes most
to the achievement of a quality common life together.
10. Would you want to become the sort of person who acts this way (e.g., a person
of courage or compassion)?
Virtue Approach: The ethical action is the one that embodies the habits and
values of humans at their best.
45
The first step suggested by Velasques et al. (1996) in analyzing moral issues is
obvious but not always easy: Get the facts.
The first step in analyzing moral issues is obvious but not always easy: Get the
facts. Some moral issues create controversies simply because we do not bother to check
the facts. This first step, although obvious, is also among the most important and the most
frequently overlooked.
But having the facts is not enough. Facts by themselves only tell us what is; they
do not tell us what ought to be. In addition to getting the facts, resolving an ethical issue
also requires an appeal to values. Philosophers have developed five different approaches
to values to deal with moral issues.
The Utilitarian Approach
Utilitarianism was conceived in the 19th century by Jeremy Bentham and John
Stuart Mill to help legislators determine which laws were morally best. Both Bentham
and Mill suggested that ethical actions are those that provide the greatest balance of good
over evil.
To analyze an issue using the utilitarian approach, we first identify the various
courses of action available to us. Second, we ask who will be affected by each action and
what benefits or harms will be derived from each. And third, we choose the action that
will produce the greatest benefits and the least harm. The ethical action is the one that
provides the greatest good for the greatest number.
Utilitarianism is based on the 18th-century ideas of Jeremy Bentham’s belief in
empiricism and the work of John Stuart Mill (Rosenstad, 1997; Velasquez, 1998), and is
46
founded on the importance of basing knowledge on objective, physical evidence.
Utilitarianism, as a teleological approach, takes a societal perspective on costs and
benefits of ethical choice, suggesting that
an action should be evaluated according to how much good or harm it causes and should
consider
the effects on all parties. Utilitarianism is meant to promote the welfare of all persons by
minimizing harm and maximizing benefits, that is, using the criterion of achieving the
greatest good for the greatest number, thus taking precedence over concerns of duties,
rights, or justice. An example of a utilitarian-driven public policy decision would be to
change U.S. health care policy from a system that provides services primarily to insured
individuals, leaving more than 43 million people without basic care, to a system that
provides fundamental health and illness services to everyone.
The Rights Approach
The second important approach to ethics has its roots in the philosophy of the
18th-century thinker Immanuel Kant and others like him, who focused on the individual's
right to choose for herself or himself. According to these philosophers, what makes
human beings different from mere things is that people have dignity based on their ability
to choose freely what they will do with their lives, and they have a fundamental moral
right to have these choices respected. People are not objects to be manipulated; it is a
violation of human dignity to use people in ways they do not freely choose.
Of course, many different, but related, rights exist besides this basic one. These
other rights (an incomplete list below) can be thought of as different aspects of the basic
right to be treated as we choose.
47
•
about
The right to the truth: We have a right to be told the truth and to be informed
matters that significantly affect our choices.
•
choose in
•
unless we
The right of privacy: We have the right to do, believe, and say whatever we
our personal lives so long as we do not violate the rights of others.
The right not to be injured: We have the right not to be harmed or injured
freely and knowingly do something to deserve punishment or we
freely and
•
those with
knowingly choose to risk such injuries.
The right to what is agreed: We have a right to what has been promised by
whom we have freely entered into a contract or agreement.
In deciding whether an action is moral or immoral using this second approach,
then, we must ask, Does the action respect the moral rights of everyone? Actions are
wrong to the extent that they violate the rights of individuals; the more serious the
violation, the more wrongful the action.
The rights perspective, associated with the ideas of Locke, Kant, Mill, and Rawls,
is founded on a movement throughout history to overcome basic social injustice and/or
constraints on personal freedom. Human rights, also referred to as natural rights, include
those rights contained in the Bill of Rights of the U.S. Constitution (1791) or the
Universal Declaration of Human Rights of the United Nations (1948; see Appendix),
delineating fundamental
and unconditional rights to be respected because they are based on universal tenets in
nature. Human rights are universal rights that individuals are born with, regardless of
status, intelligence, or nationality. For example, the Universal Declaration of Human
Rights of the United Nations states that everyone has the right to life, liberty, and security
48
of person; no one shall be held in slavery or servitude; and no one shall be subjected to
torture or to cruel, inhuman, or degrading treatment or punishment. Basic rights of one
kind can override rights of another kind; for example, employees’ right to a safe work
environment overrides employers’ right to cut costs and ignore safety in theworkplace.
Human rights may be based on moral principles and/or a legal system of rights, and
whereas we may judge certain acts as immoral, the laws may permit such acts (Smith,
Forbes, & Extejt, 1988). Here are two examples: (a) in the United States during the
period from the 16th to the 19th centuries, Whites had the legal right to own slaves; (2) in
the United States until 1920, women were prohibited by law from voting. Rights are
aligned with justice and often asserted to overcome or correct some fundamental
injustice. The U.S. legal system demonstrates that rights serve justice, and justice takes
rights into account.
The Fairness or Justice Approach
The fairness or justice approach to ethics has its roots in the teachings of the
ancient Greek philosopher Aristotle, who said that “equals should be treated equally and
unequals unequally.” The basic moral question in this approach is: How fair is an action?
Does it treat everyone in the same way, or does it show favoritism and discrimination?
Favoritism gives benefits to some people without a justifiable reason for singling
them out; discrimination imposes burdens on people who are no different from those on
whom burdens are not imposed. Both favoritism and discrimination are unjust and wrong.
A justice approach to ethics uses universal principles such as reciprocity and
equality of human rights and respect for the dignity of all human beings as individual
49
persons. Persons, situations, and dilemmas are to be judged in a fair, objective, equitable,
and impartial manner, not, contrary to an ethic of care, swayed by circumstances. In a
system of justice, individuals have moral autonomy within the context of a social contract
and are expected to use reason to discern which principles should be followed. Society
provides a hierarchy of rules, rights, and obligations that protect the infringement of
individual rights. Systems of justice in society, and the grievance process in
organizations, aim to incorporate these ideals. There are three types of justice principles:
Distributive justice is a way to distribute benefits and burdens so that equals will be
treated equally and nonequals will be treated unequally. The allocation of benefits and
burdens may include equal shares to each person based on need, effort, merit, or social
contribution (Fritzsche, 1997). An example is equal pay for equal work, including
compensating women and men equally when performing the same job.
Retributive justice is for the punishment of wrongdoing, proven through due process. The
severity of the punishment is to be in proportion to the magnitude of the wrongdoing. A
conviction of corporate executives for knowingly leaking toxic chemicals into ground
water would lead to some form of retributive justice.
Compensatory justice is concerned with compensating the injured party equal to the loss
thatwas suffered. When compensation cannot be adequately provided, for example, in the
case of lost life, property, or proprietary information, then compensation is for a fair
estimate of damage. An example is the multibillion dollar settlement paid by tobacco
companies to states and individuals
50
for the loss of life and damage to health caused from cigarettes.
The Common-Good Approach
This approach to ethics presents a vision of society as a community whose
members are joined in the shared pursuit of values and goals they hold in common. This
community comprises individuals whose own good is inextricably bound to the good of
the whole.
The common good is a notion that originated more than 2,000 years ago in the
writings of Plato, Aristotle, and Cicero. More recently, contemporary ethicist John Rawls
defined the common good as “certain general conditions that are... equally to everyone’s
advantage.”
In this approach, we focus on ensuring that the social policies, social systems,
institutions, and environments on which we depend are beneficial to all. Examples of
goods common to all include affordable health care, effective public safety, peace among
nations, a just legal system, and an unpolluted environment.
Appeals to the common good urge us to view ourselves as members of the same
community, reflecting on broad questions concerning the kind of society we want to
become and how we are to achieve that society. While respecting and valuing the
freedom of individuals to pursue their own goals, the common-good approach challenges
us also to recognize and further those goals we share in common.
The Virtue Approach
The virtue approach to ethics assumes that there are certain ideals toward which
we should strive, which provide for the full development of our humanity. These ideals
51
are discovered through thoughtful reflection on what kind of people we have the potential
to become.
Virtues are attitudes or character traits that enable us to be and to act in ways that
develop our highest potential. They enable us to pursue the ideals we have adopted.
Honesty, courage, compassion, generosity, fidelity, integrity, fairness,
self-control, and prudence are all examples of virtues.
Virtues are like habits; that is, once acquired, they become characteristic of a
person. Moreover, a person who has developed virtues will be naturally disposed to act
in ways consistent with moral principles. The virtuous person is the ethical person.
In dealing with an ethical problem using the virtue approach, we might ask, What
kind of person should I be? What will promote the development of character within
myself and my community?
Virtue ethics, grounded in the Western philosophy of Aristotle (384-322 BCE) and the
Eastern philosophies of the Buddha (ca 500 BCE) and Confucius (ca 551-479 BCE),
prescribes living one’s life and behaving according to recognized virtues. Virtue, among
other things, includes living in moderation, according to the “Golden Mean,” or in
Buddhism, the “MiddleWay.” It does not depend on rules or principles but rather motives
and actions of people who are intent on doing the right thing at all times. Acting with
virtue ethics depends on qualities, traits, or dispositions internal to an individual, or those
qualities, traits, or dispositions that a person strives to have or be.Virtue ethics is based on
being, emotion, and reason where one’s actions are an expression of one’s virtues. How
to be virtuous is primarily prescribed or proscribed by one’s culture, religion, and life
circumstances.
52
Philosophers and spiritual leaders have preached their preferred virtues. Aristotle claimed
that moral virtue involved both emotion and reason, including charity, courage,
truthfulness, friendliness, modesty, and righteous indignation—or having a sense of
justice (Rosenstad, 1997). St. Thomas Aquinas believed in both the intellectual virtues of
wisdom, justice, temperance, and
fortitude, and the religious virtues of faith, hope, and charity, claiming that virtue is
learned, not innate. Confucianism teaches that one should cultivate the virtues of
patience, sincerity, obedience, and knowledge. Buddhism teaches that the right path to a
moral life involves practicing compassion, forgiveness, nonharming of others, honesty,
generosity, and equanimity, along with other practices. In all traditions, virtue focuses on
moral character, asking
questions such as, “What kind of person should I be?” “What kind of character should I
have?” The aim of moral life is to develop moral virtues or general dispositions. The
virtues provide criteria for evaluating individual actions, social institutions, and practices
(Velasquez, 1998).With an internal locus of control, an individual facing a moral or
ethical dilemma exercises
personal judgment rather than applying universal rules.
Ethical Problem Solving
These five approaches suggest that once we have ascertained the facts, we should
ask ourselves five questions when trying to resolve a moral issue:
53
•
What benefits and what harms will each course of action produce, and which
alternative will lead to the best overall consequences?
•
best
What moral rights do the affected parties have, and which course of action
respects those rights?
•
Which course of action treats everyone the same, except where there is a
morally
justifiable reason not to, and does not show favoritism or
discrimination?
•
Which course of action advances the common good?
•
Which course of action develops moral virtues?
This method, of course, does not provide an automatic solution to moral
problems. It is not meant to. The method is merely meant to help identify most of the
important ethical considerations. In the end, we must deliberate on moral issues for
ourselves, keeping a careful eye on both the facts and on the ethical considerations
involved.
54
References
Fritzsche, D. J. (1997). Business ethics: A global and managerial perspective. San
Francisco: McGraw-Hill.
Markkula Center for Applied Ethics. A Framework for Thinking Ethically. Retrieved
May 18, 2006 from http://www.scu.edu/ethics/practicing/decision/framework.html
Rosenstad, N. (1997). The moral of the story: An introduction to ethics (2nd ed.).
Mountain View, CA: Mayfield.
Smith, J. E., Forbes, J. B., & Extejt, M. M. (1988). Ethics in the organizational behavior
course. The Organizational Behavior Teaching Review, 13, 85-95.
United Nations. (1948). Universal declaration of human rights. Retrieved January 4,
2004, from http://www.un.org/Overview/rights.html
Velasquez, M. (1998). Business ethics, concepts and cases (4th ed.). Upper Saddle River,
NJ:
Prentice Hall.
Velasquez, M., Andre, C., Shanks, T., S.J., & Meyer, M. J. (1996, Winter). A framework
for moral decision making. Ethics, 2-5.
Judith White, J., & Taft, S. (2004). Frameworks for teaching and learning business ethics
within the global context: Backgroujnd of ethical theories. Journal of Management
Education, 28, 463-477.
55
The following is from Big Brother: Hatch, Mike. "The Privatization of Big Brother:
Protecting Sensitive Personal Information From Commercial Interests in the 21st Century."
William Mitchell Law Review, 27, No. 3, 2001, p. 1457-1502.
A. Defining An Opt-In and Opt-Out System.
“Opt-in” and “opt-out” are terms that create presumptions. Under an opt-in system,
information will remain private unless a person consents to its disclosure. “Opt-in”
provides an opportunity for consumers to weigh in--to say “yes”--before their
information is shared.225 By contrast, under an opt-out system, information may be shared
and made public unless a person instructs the entity to keep it confidential. An opt-out
system allows unlimited sharing of private information unless and until a consumer says
“stop.”226 Conservative commentator William
Safire describes the difference between opt-in and opt-out as “the difference between a
door
locked with a bolt and a door left ajar.”227
35
B. The Inherent Problems With An Opt-Out System.
There are three fundamental problems with an opt-out system that undermine its ability to
adequately protect an individual’s privacy interests concerning the treatment of sensitive
personal information. First, a successful opt-out system is conditioned upon individuals
being
able to understand how companies are using their personal information. Second, a
successful
opt-out system is conditioned upon individuals getting meaningful notice that they have a
right to
opt-out of this information sharing. Third, a successful opt-out system is conditioned
upon
consumers being able to effectuate their preference without undue convenience. An optout
system cannot operate effectively because there is no true individual control over the
exchange
of personal information.
1. Consumers do not understand how personal information is being
disclosed.
The secrecy surrounding how personal consumer information is used by commercial
entities limits the potential for consumers to act.228 Companies routinely fail to disclose
the
manner in which they use sensitive information. Unless an individual notices an
unauthorized
charge or some other irregularity, the information sharing will continue indefinitely
regardless of
the individual’s desire to keep that information private. Even companies that provide
some
notice of their information-sharing practices typically fail to disclose who will receive the
information, how it will be used, whether the information will be merged with another
databased
or networked information, and the manner a company may use to solicit a consumer
56
whose
information has been shared.
In addition, the opt-out notice is usually surrounded by confusing and misleading
information that prevents individuals from understanding how their personal information
may be
36
disclosed. For example, in the spring of 2000, The New Yorker, a national magazine, sent
a
lengthy, 44-question survey to “loyal” or “preferred subscribers.” The questionnaire
sought
information about everything from subscribers’ shopping habits to their medical ailments,
on
grounds that the magazine wanted “to maintain an open dialogue with our subscribers.”
Among
other things, the magazine publisher asked subscribers if they were clinically depressed,
menopausal, overweight, used birth control, had menstrual pain, gastritis or nail fungus.
In the
cover letter asking subscribers to return the survey, The New Yorker stated that this
personal
information would be shared with “select advertisers,” but failed to identify those “select
advertisers,” what criteria is used to select the advertisers, or the scope of its so-called
“Preferred
Subscriber Network.” Faced with a company’s incomplete, inadequate or deceptive
descriptions
of its information-sharing practices, consumers are left with little opportunity to exercise
meaningful, informed consent to opt out of such collection or sharing.
2. Consumers are not given meaningful notice that they have the right to
opt out.
Many Americans are unaware that they have a right to opt out, and companies make a
weak effort to give notice of that right.229 The failure of an opt-out system is
demonstrated by a
comparison of the vast number of individuals who want to protect their privacy with the
small
number of individuals who actually opt out. For example, Bank of America’s response
rate to its
opt-out notice is 0.2%, even though most public opinion polls suggest that upwards of 6080% of
individuals do not want their financial information disclosed.230 Of the 195 million
Americans
solicited by Acxiom Corporation, fewer than 300 people had opted-out by the end of
1997.231
Although banks, telemarketers, and internet companies claim that these opt-out notices
provide
37
consumers with a “choice,” such opt-out systems are plainly ineffective and far from
actual
57
“consent.” 232
An opt-out system encourages businesses to use misleading or vague privacy policies
hidden in the fine print of a policy agreement or contract:
At present, businesses have little incentive to disclose to consumers how their
personal information is used or that they can opt-out of its use. As a result, the
current system produces inefficient results. A change in the default rule [to an optin]
gives businesses an incentive to make disclosures and increases the likelihood
that an efficient market will result.233
A typical opt-out notice has been described as something that you need “the eyes of an
eagle”
and “a law degree” to find and understand.234 Typically, the opt-out is placed in the “fine
print
with other boilerplate terms.”235 Consumers do not take advantage of opt-out
opportunities
because they often do not know they can opt out, even if they are generally aware of the
information sharing practices of the company.
3. Opt-out systems currently utilized impose cumbersome procedures
upon the consumer.
The amount of time, inconvenience, and cost of exercising an opt-out right is
substantial.236 For example, the Federal Communications Commission (FCC) has found
that
subscription rates for different telephone maintenance plans are highly correlated to
whether or
not the seller used an opt-out system. When telephone companies obtained affirmative
consent
for optional maintenance telephone plans, about 45% of consumers selected the product,
but
when the telephone company used an opt-out the number of consumers who “selected”
the
product nearly doubled. Cable companies in the United States and Canada have also had
similar
experiences with the opt-out system when selling premium cable channels, with the
number of
people being billed for additional services 30% higher than if the company was required
to
obtain affirmative consent.237
38
In short, “[p]eople are too pressed in their daily routines to initiate, lead, or otherwise
control most consumer contracting.”238 An opt-out system places a cumbersome burden
on
consumers to inform a company that they do not want personal information shared, which
they
reasonably expect should remain confidential, when the burden should rest with the
company to
obtain consumers’ consent before disclosing highly personal information.
C. An Opt-In System Follows a Basic Premise of Contract Law Concerning
58
“Acceptance” of an “Offer.”
The right to privacy has alternatively been described as the “right to be let alone,” “the
right to individual autonomy,” and “the right to a private life.”239 Underlying each of
these
definitions is the desire of the consumer to control access to and use of personal
information.240
The most effective method of protecting an individual’s right to privacy is a system that
recognizes an individual’s ability to contract with companies as to how sensitive personal
information, such as financial records, telephone records, and the like, will be
maintained.
An opt-out system is a negative-option approach to contract law which undermines a
fundamental concept of contract formation under the common law--that silence does not
equal
consent.241 A contract requires both an offer and acceptance.242 Assuming that consumers
consent by their silence violates the consumer’s autonomy and freedom to contract.243 An
optout
system transforms silence into acceptance of a company’s information sharing practices,
contrary to the accepted norms of contract law.244
1. An opt-in system offers the consumer a meaningful opportunity of
“selection.”
An opt-in system offers consumers the legitimate opportunity to affirmative consent.245
It requires that the company give meaningful notice, and perhaps even pay consideration,
for the
use of the customer’s name and data. By “opting in,” the consumer has meaningfully
contracted
39
with the company concerning the private data. With affirmative consent, individuals are
afforded a procedural safeguard which gives the consumer control over their data.246
2. An opt-in system is consistent with consumers’ reasonable
expectations of privacy.
The surveys cited earlier make it clear that consumers do not reasonably expect that the
information they provide to facilitate a loan or credit card transaction will be collected
and later
shared with other commercial entities. This is a secondary use of information beyond the
reasonable expectations of consumers who provide the information for a different
primary
purpose. An opt-in system is consistent with these expectations, as it requires commercial
entities to obtain consent before information is shared for secondary uses.
A banking opt-in law does not interfere with transactions initiated by the customer, such
as writing a check, applying for a loan, or using money from an ATM machine.247 Indeed,
depository and ATM account agreements already require the customer to “opt in”
because the
customer agrees that such information may be shared.248 However, if a company wants to
use
information, beyond servicing a customer’s request, for whatever reason, then it should
explain
59
such information-sharing practices in the depository account agreement. If businesses
have
worthwhile reasons for disclosing a customer’s personal records for secondary uses, then
consent
should not be difficult to obtain.249 Indeed, there is nothing to prevent a bank from
refusing to
service the customer if he does not agree to opt in to the arrangement. An opt-in
provision gives
notice to the customer that information collected about them for one use will be disclosed
for a
different, secondary use.
40
3. An opt-in system better balances bargaining power between
businesses and consumers.
Information sharing is often justified as necessary to provide an individual with valuable
information about quality products and services. Yet, under an opt-out system, individual
consumers are not allowed to determine for themselves whether the information is
actually
valuable or whether the products and services are of high quality. An opt-in system gives
the
individual power to control distribution of their personal information, which in turn
increases the
individual’s bargaining power by allowing him or her to effectively set the market price
for
personal financial or credit information. In order for the consumer to provide consent, the
potential products and services must be of sufficient value to offset the corresponding
invasion of
the consumer’s privacy. Opt-in empowers the consumer to decide whether waiver of
privacy
rights is justified by corresponding benefits of information flow.
4. An opt-in allows businesses to find consumers favorably disposed to
marketing.
Information allows businesses to focus their resources to avoid wasteful marketing of
products and services to uninterested consumers. An opt-in system identifies a pool of
consumers favorably disposed to such marketing, because individuals demonstrate their
desire to
receive marketing materials about specific products by exercising their right to opt in. An
opt-in
system thus improves the quality of information that does exist,250 making marketing of
products
ultimately more efficient.
Although an opt-out system may increase the quantity of information in the short-term,
over time both the quantity and quality of the information may diminish.251 Individuals
will not
make a purchase or apply for a job, credit, or insurance because they do not want their
privacy
60
41
invaded.252 Individuals may also provide false information requested on such applications
in
order to protect their privacy.253
For example, e-mail marketers used to send unsolicited marketing material, dubbed
“Spam,” to internet users without their consent.254 That method of marketing has resulted
in a
backlash from consumers, and possible litigation.255 Internet companies have now
concluded
that the best way to market their materials is through an opt-in system.256 An industry
leader in
on-line marketing, NetCreations, Inc., discovered that “empowering” consumers with an
opt-in,
and then giving them an opportunity to opt-out every time they are sent a marketing
message, is
the best method to maintain customer goodwill and sell products on behalf of companies
like
Dell Computer, Compaq, and J. Crew. 257258 The opt-in system is considered by some
internet
marketers to be the “best business practice.” 259
1 Gregory
Shaffer, Globalization and Social Protection: The Impact of EU and International Rules in the
Ratcheting
Up of U.S. Privacy Standards, 25 YALE J. INT’L L. 1, 2 (2000).
2 See Hippocratic Oath, Fifth Century B.C.
3 Samuel D. Warren & Louis D. Brandeis, The Right to Privacy, 4 HARV. L. REV. 193 (1890).
4 Id. at 193-95.
5 See Carey v. Population Servs. Int’l, 431 U.S. 678, 684 (1977) (noting that one aspect of liberty is a right
of
personal privacy, holding that this right includes “making certain kinds of important decisions”).
6 Loving v. Virginia, 388 U.S. 1 (1967).
7 Skinner v. Oklahoma, 316 U.S. 535 (1942).
8 Eisenstadt v. Baird, 405 U.S. 438 (1972).
9 Prince v. Massachusetts, 321 U.S. 158 (1944).
10 Pierce v. Society of Sisters, 268 U.S. 510 (1925).
11 Griswold v. Connecticut, 381 U.S. 479, 485 (1965) (holding Connecticut’s law that places restrictions on
providing information about contraception unconstitutional as it intrudes upon the right to marital privacy).
See also
Eisenstadt, 405 U.S. at 453 (evaluating the constitutionality of a law restricting the distribution of
contraceptives to
unmarried persons; broadening the Griswold privacy definition so that it includes single individuals as well
as
married couples).
12 Roe v. Wade, 410 U.S. 113 (1973).
13 See Planned Parenthood v. Casey, 505 U.S. 833, 887 (1992).
14 Id. at 851.
15 Board of Directors of Rotary Int’l v. Rotary Club of Duarte, 481 U.S. 537, 545 (1987).
16 Frisby v. Schulz, 487 U.S. 474, 484 (1988) (citing Carey v. Brown, 447 U.S. 455, 471 (1980)).
17 U.S. CONSTIT. amend. IV. See also Katz v. United States, 389 U.S. 347, 353 (1967) (noting that the
Fourth
61
Amendment protects not only areas against unreasonable searches and seizures, but also people).
18 Miranda v. Arizona, 384 U.S. 436, 459 (1966) (citations omitted).
19 See RESTATEMENT (SECOND) OF TORTS §§ 652A-652E (1977). William L. Prosser gave the right to
privacy
definition by separating the various court rulings that supported Warren and Brandeis’s theories into four
distinct
causes of action. W. PAGE KEETON ET AL., PROSSER AND KEETON ON THE LAW OF TORTS, §117, at 850-51
(5th ed.
1984).
20 See RESTATEMENT (SECOND) OF TORTS §§ 652A-652E (1977) (adopting Prosser’s privacy tort theory).
43
21 Id.
§ 652B.
§ 652C.
23 Id. § 652D.
24 Id. § 652E.
25 Pavesich v. New England Life Ins. Co., 50 S.E. 68, 71 (Ga. 1905).
26 See, e.g., Truxes v. Kenco Enters., Inc., 119 N.W.2d 914 (S.D. 1963); McCormack v. Oklahoma Publ’g
Co., 613
P.2d 737 (Okla. 1980); Hinish v. Meier & Frank Co., 113 P.2d 438 (Or. 1941). Other states, finding no
constitutional or common law basis for the invasion of privacy tort, have enacted rights to privacy by
statute. See,
e.g., MASS. GEN. LAWS ANN. ch. 214, § 1B (West 1989); NEB. REV. STAT. ANN. § 20-201 (West 1995);
N.Y. CIV.
RIGHTS LAW § 50 (1992).
27 Lake v. Wal-Mart Stores, Inc., 582 N.W.2d 231 (Minn. 1998).
28 Id. at 233.
29 Id. at 235. The Minnesota Supreme Court recognized the torts of intrusion upon seclusion, public
disclosure of
private facts and appropriation of one’s likeness. Id. at 236.
30 Id. at 235. For an extended discussion of Lake v. Wal-Mart Stores, Inc., see Jane E. Prine, No Longer
Living in a
Glass House: Every Minnesotan Is Entitled to a Right to Privacy, 25 WM. MITCHELL L. REV. 999 (1999).
31 MINN. STAT. § 144.69 (1998).
32 MINN. STAT. § 144.768 (1998).
33 MINN. STAT. § 290.611 (1998).
34 MINN. STAT. § 254A.09 (1998).
35 MINN. STAT. § 13.46 (1998).
36 MINN. STAT. § 13.32 (1998).
37 MINN. STAT. § 13.40 (1998).
38 MINN. STAT. § 13.44 (1998).
39 MINN. STAT. § 13.56 (1998).
40 MINN. STAT. § 13.531 (1998).
41 MINN. STAT. § 144.335, subd. 3a (1998). See also MINN. STAT. § 144.651, subd. 16 (1998) (“Patients and
residents shall be assured confidential treatment of their personal and medical records, and may approve or
refuse
their release to any individual outside the facility.”)
42 MINN. STAT. §§ 151.213; 151.23 (1998).
43 MINN. STAT. § 72A.502, subd. 1 (1998).
44 Video Privacy Protection Act, 18 U.S.C. § 2710 (1999).
45 Cable Television Record Privacy Act, 47 U.S.C. § 551 (1999).
46 Driver’s Privacy Protection Act, 18 U.S.C. § 2721, amended by Shelby Amendment, Pub. L. No. 106-96
(2000).
See also MINN. STAT. §§ 168.346; 171.12 (1998).
47 MINN. R. PROF. CONDUCT 1.6.
48 MINN. R. PUB. ACCESS TO RECORDS OF JUDICIAL BRANCH 4, subd. 1(a); MINN. R. JUV. PROC. 30.02,
subd. 3.
22 Id.
62
49 MINN.
R. JUV. PROC. 2.01.
R. CIV. PROC. 26.03.
51 MINN. STAT. § 595.02, subd. 1 (a) (1998). See also Lundman v. McKown, 530 N.W.2d 807, 829 (Minn.
Ct. App.
1995) (acknowledging that a spouse may assert the marital privilege to bar a witness spouse from
testifying).
52 MINN. STAT. § 595.02, subd. 1 (c) (1998). See also State v. Orfi, 511 N.W.2d 464, 469 (Minn. Ct. App.
1994)
(finding that portions of the defendant’s communication with ministers subject to clergy privilege).
53 MINN. STAT. § 595.02, subds. 1 (g); 1 (i) (1998).
54 Richfield Bank & Trust Co. v. Sjogren, 244 N.W.2d 648, 651 (1976) (finding that a bank is generally
under a duty
not to disclose the financial condition of its depositors). See also Cunningham v. Merchants’ Nat’l Bank, 4
F.2d 25
(1st Cir. 1925), cert. denied 268 U.S. 691 (1925); Milohnich v. First Nat’l Bank, 224 So.2d 759 (Fla. Ct.
App.
1969); Peterson v. Idaho First Nat’l Bank, 367 P.2d 284 (Idaho 1961).
55 MINN. STAT. §§ 325C.01-03 (1998).
56 See, e.g., Tenant Co. v. Advance Mach. Co., Inc., 355 N.W.2d 720, 726 (Minn. Ct. App. 1984); Creative
Communication Consultants, Inc. v. Gaylord, 403 N.W.2d 654, 657 (Minn. Ct. App. 1987).
57 See, e.g., Burlington N. R.R. Co. v. Omaha Pub. Power Dist., 888 F.2d 1228 (8th Cir. 1989); Minnesota
Mining
& Manuf. Co. v. Kirkevold, 648 F. Supp. 661 (D. Minn. 1980).
50 MINN.
44
58 MINN.
STAT. § 325C.05 (1998).
U.S.C.A. § 405 (1999) (“Social security account numbers and related records that are obtained or
maintained
by authorized persons pursuant to any provision of law… shall be confidential, and no authorized person
shall
disclose any such social account number or related record.”)
60 Fair Credit Reporting Act, 15 U.S.C. 1681 (1999).
61 Privacy Act, 5 U.S.C. § 552a (1999).
62 Bank Secrecy Act, 12 U.S.C. §§ 1951-1959 (1999).
63 Access to Telephone Records Act, 18 U.S.C. § 2709 (1999).
64 Taxpayer Browsing Protection Act, 26 U.S.C. § 7213(a) (1999).
65 Universal Declaration of Human Rights, art. 12, 1948.
66 Convention for the Protection of Human Rights and Fundamental Freedoms, art. 8, 1950.
67 S. AFR. CONSTIT., §14, 1996.
68 ARG. CONSTIT., arts. 18, 19.
69 Parliament and Council Directive 95/46/EC on the Protection of Individuals with Regard to the
Processing of
Personal Data, 1995 O.J. (L281) 1.
70 Ordinance No. 81 of 1995 (H. K.).
71 Privacy Act of 1993 (N. Z.).
72 Law of the Russian Federation on Information, Informatisation and Information Protection, January 25,
1995.
73 Data Protection Act of 1973 (Sweden).
74 Protection of Computer Processed Personal Data Held by Administrative Organs Act of 1988 (Japan).
75 See id.
76 The Act on the Protection of Personal Information Managed by Public Agencies of 1994 (S. Korea).
77 GEORGE ORWELL, NINETEEN EIGHTY-FOUR 4 (1949).
78 See id.
79 CHARLES SYKES, THE END OF PRIVACY 4 (St. Martin’s Press 1999). See also John Caher, Privacy
Initiative Aims for Consumer Protection, N.Y. L.J., Jan. 24, 2000, at 1 (“It is not big brother that we now
have to be
afraid of, but big browser.”) (quoting New York Attorney General Eliot Spitzer).
59 42
63
80 Jane
Bryant Quinn, The Spies in Your Pocket, NEWSWEEK, Aug. 16, 1999, at 43.
O’Harrow, Jr., Data Firms Getting Too Personal?, WASH. POST, Mar. 8, 1998, at AO1.
82 William J. Fenrich, Common Law Protection of Individuals’ Rights in Personal Information, 65
FORDHAM L.
REV. 951, 952 (1996).
83 Id.
84 Acxiom Corp., Marketing Materials, in JOEL R. REIDENBERG, NAT’L ASS’N ATT’YS GEN.,
EXAMPLES
OF THE SALE OF PERSONAL INFORMATION (Privacy Working Group, Sept. 23-24, 1999)
[hereinafter
EXAMPLES].
85 Id.
86 Medical Marketing Service, Inc., Marketing Materials, in EXAMPLES, supra note 84. See also Medical
Marketing Service, Inc. (visited July 6, 2000) <http://www.mmslists.com/>.
87 Medical Marketing Service, Inc., Marketing Materials, in EXAMPLES, supra note 84.
88 Id.
89 Id. Other examples of the misuse of medical information include the partnership between CVS pharmacy
and
pharmaceutical companies, and the partnership between a law firm and a hospital.
In 1998, pharmaceutical companies solicited customers of CVS Pharmacies who were identified by the
pharmacy
as suffering from specific medical conditions. Weld v. CVS Pharmacy, Inc., No. CIV. A. 98-0897F, 1999
WL
494114, at *1-2 (Mass. Super. Ct. June 29, 1999). On behalf of several pharmaceutical companies, CVS
allegedly
searched their customer database to find customers who suffered from high blood pressure or diabetes. Id.
Then,
CVS allegedly downloaded names and addresses of those customers onto a separate diskette, and gave the
disk to a
direct marketing firm. Id. On behalf of various pharmaceutical companies, those individuals were mailed
advertisements about particular drugs and were encouraged to speak with their physician. Id. Litigation
against
CVS Pharmacies is currently pending. Id.
In 1993, Warren General Hospital in Ohio entered into a partnership with a local law firm to electronically
search
its medical records for patients who might be eligible for Supplemental Security Income reimbursement of
medical
expenses. Biddle v. Warren Gen. Hosp., No. 96-T-5582, 1998 WL 156997, at *1-2 (Ohio Ct. App. Mar. 27,
1998).
81 Robert
45
The hospital’s database included the patient’s address, birth date, employment information and their
admitting
diagnosis. Id. The law firm would contact patients about having their medical treatment paid for by the
Social
Security Administration. Id. The law firm would then receive a percentage of whatever money they
generated for
the hospital. Id.
90 Student Marketing Group, Inc., Marketing Materials, in EXAMPLES, supra note 84. See also Student
Marketing
Group, Inc. (visited July 6, 2000) <http://www.studentmarketing.net>. Student Marketing Group also sells
the
names and addresses of preschool children ages 2-5. Id.
91 Venture Direct, Marketing Materials, in EXAMPLES, supra note 84. See also Venture Direct (visited
July 6,
2000) <http://www.venturedirect.com>.
92 Adam L. Penenberg, The End of Privacy, FORBES MAG., Nov. 29, 1999, at 183.
64
93 Id.
94 Id.
Steven Vonder Haar, Data Chase, BRANDWEEK, Sept. 6, 1999, at IQ17 (“Call it the Golden Age
of Online
Data. More than ever before publishers, marketers and advertising service companies all are racing to
compile
mounds of information… ”)
96 Wayne W. Eckerson & Lynne Harvey, Customer Intelligence Drives Next-Generation Web
Personalization (Feb.
25, 2000) <http://www.customers.com>; Kayte VanScoy, Get Inside Your Customers’ Heads (and Their
Wallets
Too), SMART BUS. FROM ZDWIRE, June 1, 2000, available in 2000 WL 2000378 (describing data
mining and
rules for customer interaction).
97 Nina Bernstein, Lives on File: Personal Files via Computer Offer Money and Pose Threat, N.Y. TIMES,
June 12,
1997, at A1.
98 Id.
99 Id.
100 Eckerson & Harvey, supra note 96, at 2-3.
101 Mark Allan Baginskis, Telemarketing Fraud upon the Elderly Shows No Signs of Slowing, 11 LOY.
CONSUMER L. REP. 4 (1999); Patrick E. Michela, “You May Have Already Won…”: Telemarketing
Fraud and
the Need for a Federal Legislative Solution, 21 PEPP. L. REV. 553, 574 (1994).
102 Privacy first emerged as an issue of public policy and concern with the publication of Warren and
Brandeis’
article, The Right to Privacy, written over one-hundred years ago. 4 Harv. L. Rev. 193 (1890). The authors
advocated for the creation of a new tort that protected the private lives of ordinary people from intrusion or
appropriation. Id. at 195. The computer has made their words even more applicable and insightful today.
The majority of states have now adopted the common-law right to privacy, but the law does not adequately
protect
individuals in the information age. Lake v. Wal-Mart Stores, Inc., 582 N.W.2d 231, 235 (Minn. 1998)
(becoming
one of the last states to adopt the common-law right to privacy).
103 Robert O’Harrow, Jr., A Postscript on Privacy, WASH. POST, Nov. 5, 1999, at EO1.
104 Senator Richard Shelby, Coalition for Financial Privacy (Oct. 13, 1999)
<http://www.senate.gov/shelby/
press/prsrs307.htm>.
105 Id.
106 Clyde Mitchell, Privacy and Gramm-Leach-Bliley’s Financial Services Modernization, N.Y. L.J., Apr.
19, 2000,
at 3 (outlining current disputes as a result of Gramm-Leach-Bliley and formation of Congressional Privacy
Caucus).
107 Senator Richard Shelby, Congressional Privacy Caucus (Feb. 10, 2000)
<http://www.senate.gov/shelby/
press/prsrs315.htm>.
108 Comments from the National Association of Attorneys General on Gramm-Leach-Bliley Act (Mar. 31,
2000).
Comments were signed by Attorney General Bruce M. Botelho (Alaska), Janet Napolitano (Arizona), Bill
Lockyer
(California), Kan Salazar (Colorado), Richard Blumenthal (Connecticut), Robert A. Butterworth (Florida),
Stephen
H. Levins (Hawaii Office of Consumer Protection), Alan G. Lance (Idaho), Jim Ryan (Illinois), Tom Miller
(Iowa),
Carla J. Stovall (Kansas), Andrew Ketterer (Maine), J. Joseph Curran, Jr. (Maryland), Tom Reilly
(Massachusetts),
95 See
65
Jennifer Granholm (Michigan), Mike Hatch (Minnesota), Mike Moore (Mississippi), Jeremiah W. Nixon
(Missouri),
Joseph P. Mazurek (Montana), Frankie Sue Del Papa (Nevada), John J. Farmer (New Jersey), Patricia
Madrid (New
Mexico), Eliot Spitzer (New York), Heidi Heitkamp (North Dakota), W.A. Drew Edmondson (Oklahoma),
D.
Michael Fisher (Pennsylvania), Sheldon Whitehouse (Rhode Island), Paul Summers (Tennessee), Jan
Graham
(Utah), William H. Sorrell (Vermont), Iver A. Stridiron (Virgin Islands), Christine O. Gregoire
(Washington),
Darrell V. McGraw Jr. (West Virginia).
46
109 Jeff
Sovern, Opting In, Opting Out, or No Options at All: The Fight for Control of Personal
Information, 74
WASH. L. REV. 1033, 1057 (1999) (citing 1996 survey commissioned by Equifax).
110 Julie Tripp, Information-Selling Crushes Depositors’ Faith, PORTLAND OREGONIAN, June 20, 1999,
at B05
(“‘Appalling’ and ‘horrifying’ were some of the other adjectives that got a workout last week when readers
learned
the details of what the Minnesota attorney general alleges U.S. Bancorp has been doing with their account,
credit
card, and Social Security numbers.”)
111 Wal-Mart, 582 N.W.2d at 235 (“The right to privacy is an integral part of our humanity: one has a public
persona, exposed and active, and a private persona, guarded and preserved. The heart of our liberty is
choosing
which parts of our lives shall become public and which parts we shall hold close.”) See also Griswold v.
Connecticut, 381 U.S. 479 (1965) (recognizing the right to privacy as a fundamental right).
112 Sovern, supra note 109, at 1057.
113 Jedediah Purdy, An Intimate Invasion, USA WEEKEND, June 30-July 2, 2000, at 7 (stating that 62% of
the
respondents believed that too many people have access to their driving record, and 61% say that too many
people
have access to their medical records).
114 Id. (noting that 65% of respondents believed that internet companies who track computer use and
transactions
have invaded their privacy, and 60% of respondents consider junk mail an invasion of their privacy).
115 Id.
116 N.Y. SENATE, THE SENATE MAJORITY TASK FORCE ON THE INVASION OF PRIVACY 12
(2000)
[hereinafter SENATE]. See also Albert R. Hunt, Bright Past Kindles America’s Hope, WALL ST. J., Sept.
16,
1999, at A9 (describing poll results).
117 SENATE, supra note 116.
118 Id.
119 Id. (citing Grant Lukenbill, Consumers Most Worried About Privacy, DM NEWS, Dec. 29, 1999)
120 Id.
121 Id. (citing Mary Alice O’Brien, State Legislative Chair, American Association of Retired Persons,
Testimony
before the New York State Senate Majority Task Force on the Invasion of Privacy (Apr. 15, 1999)). See
also AM.
ASS’N RETIRED PERSONS, 39 DATA DIGEST, February 1999 (reporting December 1998 survey
results with a
+/- 4 % margin of error).
122 Id.
123 Id.
124 Mark E. Budnitz, Privacy Protection for Consumer Transactions in Electronic Commerce: Why Self-
66
Regulation
Is Inadequate, 49 S.C. L. REV. 847, 849 (1998) (citing Dr. Alan F. Westin, Testimony before the Financial
Institutions and Consumer Credit Subcommittee of the House Banking and Financial Services Committee,
Electronic Payment Systems, Electronic Commerce, and Consumer Privacy, FED. NEWS SERVICE, Sept.
18,
1997).
125 Id.
126 Id.
127 Carol Krol, Consumers Reach the Point over Privacy Issues: A Hot Marketing Concept is Running
Smack into
Big Concerns About the Extent of Company Usage of Personal Information, ADVERTISING AGE, March
1999.
128 Id.
129 Id. at 850 (citing Drew Clark, Worries About Privacy Rain on Net Commerce Parade, AMER.
BANKER, July 3,
1997, at 14). A 1999 AT&T study that found that Internet users are more likely to provide information
when they
are not identified. Melinda Reid Hatton & Mark Paulding, Online Privacy - Some Milestones for the
Millennium,
587 PLI/PAT 823, 825-26 (2000). The AT&T study also found that 79% felt that it was important to their
decision
to use the internet if the company shares information with other companies or organizations.
130 Id.
131 SENATE, supra note 116, at 12.
132 Id.
133 Id.
134 Id.
135 Sovern, supra note 109, at 1062.
136 Id.
137 Id.
47
138 Conrad
deFiebre, Minnesotans Make Public Their Desire for More Privacy Proposals to Restrict
Telemarketers,
Others Find Broad Support, STAR TRIB., Apr. 6, 2000, at B1. See also Jim Ramstad’s 2000
Questionnaire
Results, RAMSTAD REP., Summer 2000, at 3 (finding that 84% of Congressional District 3 respondents
favored
“new regulations to prevent businesses from sharing your personal information with other businesses”).
139 See deFiebre, supra note 138, at B1.
140 Budnitz, supra note 124, at 849.
141 Id.
142 Id.
143 Joshua D. Blackman, A Proposal for Federal Legislation Protecting Informational Privacy Across the
Private
Sector, 9 SANTA CLARA COMPUTER & HIGH TECH. L.J. 431, 447 (1993).
144 Id.
145 Id.
146 Id.
147 Hatton & Paulding, supra note 129, at 840.
148 Id.
149 Privacy Din Sparks DoubleClick Deal, ADVERTISING AGE, March 6, 2000.
150 Id.
151 Id.
152 Id.
153 Id.
154 CHARLES SYKES, THE END OF PRIVACY 4 (St. Martin’s Press 1999).
67
155 Id.
156 Id.
157 Rachel
Zimmerman & Glenn R. Simpson, Lobbyists Swarm to Stop Tough Privacy Bills in States,
WALL ST. J.,
Apr. 21, 2000, at A16.
158 Id.
159 Id. (quoting Washington Attorney General Christine Gregoire).
160 Id.
161 Id.
162 Id.; Conrad deFiebre, House Commerce Panel Puts Telemarketing Measure on Hold, STAR TRIB., Apr.
19,
2000, at B5.
163 Zimmerman & Simpson, supra note 157, at A16 (quoting Washington Attorney General Christine
Gregoire).
164 Glenn R. Simpson, Financial-Privacy Legislation Expected Today, WALL ST. J., May 4, 2000, at A2
(outlining
President Clinton’s proposal to label financial-privacy violations as unfair trade practices).
165 Id.
166 William Safire, Stop Cookie-Pushers, N.Y. TIMES, June 15, 2000.
167 Michael Schroeder, Groups Seek to Pre-Empt Wave of Rules to Protect Consumer-Finance Data,
WALL ST. J.,
Feb. 10, 2000, at A2.
168 Id.
169 Id.
170 See JOHN DUGAN, FIN. SERVS. COORDINATING COUNCIL, THE NEW FEDERAL FINANCIAL
PRIVACY LAW: A COMPREHENSIVE APROACH THAT SHOULD BE GIVEN TIME TO WORK
(2000)
(listing member organizations “representing America’s Diversified Financial Services Community” on
booklet
header).
171 Gregoire Waters Down Her Consumer Privacy Proposal, SEATTLE POST-INTELLIGENCER, Mar. 2,
2000.
172 Id. Opponents of privacy legislation have advanced three principal arguments against the various privacy
proposals. First, industry representatives argue that most people are not concerned about privacy; it is just a
political
or media created issue. This argument is made despite contrary public opinion polls and bi-partisan support
of
enhanced privacy protection.
Second, opponents argue that the various privacy proposals will chill the economy. Yet, at a hearing on a
financial privacy bill in Minnesota (S.F. 3000), legislators pressed lobbyists to provide a specific example
of how
the privacy proposal would interfere with conducting business, but no person in the room could provide a
specific
48
example. See Testimony of Subcommittee on Data Privacy of Minnesota Senate Judiciary Committee (Feb.
24,
2000).
Third, lobbyists claim that privacy is complex and thus deserves to be studied before any action is taken.
To that
end, Rep. Asa Hutchinson (R-Ark) recently proposed a $2.5 million dollar commission to study privacy.
However,
a study is unnecessary because it represents yet another excuse to delay substantive enforcement and
legislative
action and it duplicates what everyone knows--that companies collect a lot of information and disclose it
without the
consumer’s knowledge or meaningful consent, and that people want real privacy protections now. See
68
Minnesota
Attorney General Mike Hatch, Testimony submitted to the U.S. House Subcommittee on Government
Management,
Information and Technology (May 15, 2000) [hereinafter Hatch].
173 Zimmerman & Simpson, supra note 157, at A16.
174 While critics of privacy legislation often point to the “democratization of credit” as a benefit to lowincome and
middle-income consumers, the availability of credit has also come at a cost. See FRED H. CATE, FIN.
SERVS.
COORDINATING COUNCIL, PERSONAL INFORMATION IN FINANCIAL SERVICES: THE
VALUE OF A
BALANCED FLOW 17 (2000) (writing in opposition to California privacy initiatives). The wide
dissemination of
consumer information touches upon the increasing prevalence of predatory lending practices. The subprime
mortgage market has grown from $10 billion in 1993 to over $150 billion in 1998. Michael Schroeder,
Summers
Calls for Legislation to Curb Predatory Lending in Mortgage Markets, WALL ST. J., Apr. 13, 2000, at A2.
Consumer organizations and HUD Secretary Andrew Cuomo are concerned that the growth in the subprime
market
is partially due to financial institutions pushing minorities into subprime loans when they actually qualify
for the
lower interest rates and fees typical of a prime loan. Id. Subprime loans accounted for the majority of
home-loan
refinancings in predominantly African-American neighborhoods in 1998, but only 9% in white
neighborhoods. Id.
African-Americans in high-income neighborhoods are also twice as likely to receive a subprime loan than
families
in low-income white neighborhoods. Id. See also Dee DePass, Feds Likely to Target Wells Fargo’s Web
Site, STAR
TRIB., June 24, 2000 (alleging that bank uses information about customers’ existing ZIP codes to direct
them to
certain other ZIP codes based on their current neighborhood’s racial profile).
175 U.S. GEN. ACCOUNTING OFFICE, IDENTITY FRAUD: INFORMATION ON PREVALENCE,
COST,
AND INTERNET IMPACT IS LIMITED 4 (May 1998) [hereinafter IDENTITY FRAUD]. The actual
estimate of
the costs of identity fraud is difficult to determine. Id. The IRS recently detected $137 million in fraudulent
refund
schemes. Id. The Secret Service estimates that actual losses to victimized individuals and institutions are
$745
million. Id. Officials at VISA U.S.A., Inc. and MasterCard International estimate that it cost its member
banks’
$407 million in 1997. Id. The American Bankers Association reported that large banks had dollar losses
averaging
about $20 million per bank in 1996. Id.
176 FED. TRADE COMM’N, IDENTITY THEFT: WHEN BAD THINGS HAPPEN TO YOUR GOOD
NAME 2
(February 2000).
177 Id.
178 Id.
179 Margaret Mannix, Getting Serious About Identity Theft, U.S. NEWS & WORLD REP., Nov. 8, 1999;
Michelle
Singletary, Laws Are Failing to Keep Pace with Rate of Identity Theft, SUN-SENTINEL, May 15, 2000, at
19.
(citing California Public Interest Research Group (CALPIRG) and Privacy Rights Clearinghouse study
regarding the
69
victims of identity theft).
180 Singletary, supra note 179, at 19.
181 IDENTITY FRAUD, supra note 175, at 3-4.
182 Id.
183 Id. at 55.
184 William Safire, ‘Identity Theft’ Demands Legislation, HOUSTON CHRON., May 12, 2000, at A42.
185 Id.; Singletary, supra note 179, at 19.
186 IDENTITY FRAUD, supra note 175, at 5 (quoting representative from the Associated Credit Bureaus
regarding
revenue generated from sale of information).
187 Michela, supra note 101, at 573-74.
188 The AARP, Council of Better Business Bureaus’ Foundation, Department of Justice, Federal Bureau of
Investigation, Federal Trade Commission, National Association of Attorneys General, Security and
Exchange
Commission, and the U.S. Postal Inspection Service began a joint effort called the “kNOw Fraud” program.
KNOW FRAUD, TELEMARKTING FRAUD: WHAT YOU NEED TO KNOW (1999) (pamphlet
providing tips
49
consumer information). The kNOw Fraud program is designed to educate consumers about telemarketing
and
marketing fraud through videos and brochures. Id.
189 Telemarketers may also purchase the ability to debit an individual’s checking account or credit card
account.
Although the telemarketing firms may theoretically not possess the account numbers, in reality they have
complete
control over a consumer’s account.
190 The reading of a credit card number or providing written authorization symbolizes the “meeting of the
minds”
required by contract law. In the past, consumers would know that they are actually purchasing a product
and will be
billed for that product if they provide affirmative authorization. Pre-acquired account telemarketing
eliminates that
safeguard, and creates an environment where the consumer is at the mercy of the telemarketer.
191 FTC ADVISORY COMM. ON ONLINE ACCESS AND SECURITY, FINAL REPORT 17 (May 15,
2000)
(describing authentication of credit card purchases). The advisory committee notes that merely using an
individual’s
maiden name, birth date, and Social Security number is a risky form of verification because they are so
widely
available. Id.
192 Hatch, supra note 172.
193 Id.
194 See Hatch v. MemberWorks, Inc., Civ. Action No. MC99-010056 (D. Minn. Apr. 18, 2000).
195 Id.
196 Id.
197 Id.
198 Id.
199 Federal Deposit Insurance Corporation, Symbol of Confidence (last modified July 27, 1999)
<http://www.fdic.gov/about/learn/symbol/index.html>.
200 Id.
201 Id.
202 Ed Mierzwinski, New Bank Laws May Increase Threats to Consumers’ Privacy, U.S. PIRG, Fall 1999,
at 4
(“Earlier this year, Congress had a golden opportunity to address the financial side of this [privacy]
problem, as it
enacted a sweeping rewrite of financial law that will allow banks, insurance companies and stock
70
brokerages to
merge with each other. Yet the law passed by Congress not only failed to better protect consumer privacy,
it may
have made things worse.”)
203 In the Matter of NationsSecurities and NationsBank, Admin. Proc. File No. 3-9596, Securities Act
Release No.
7532, Exchange Act Release No. 39947, 67 S.E.C. Docket 143 (May 4, 1998).
204 Id.
205 See Mierzwinski, supra note 202, at 4. After the U.S. Securities and Exchange Commission (SEC) was
alerted to
the practice, it brought a claim against NationsBank. The SEC and NationsBank settled in 1998 for $7
million,
because of a violation of investment laws. Id. The private class action lawsuit eventually settled for $40
million.
See Leslie Wayne, Privacy Matters: When Bigger Banks Aren’t Better, N.Y. TIMES, Oct. 11, 1998
(describing
NationsBank case and settlement).
206 Paul Beckett, Comptroller Warns Banks on Practice of Giving Telemarketers Customer Data, WALL
ST. J.,
June 8, 1999, at A4.
207 Id.
208 Henry Gilgoff, Private Matters: More Banks Now Selling Personal Consumer Data, NEWSDAY, July
25, 1999
(“[T]he deals are widespread among the country’s biggest banks, Hawke said in a recent interview.”) A
statement
by a USBancorp spokesman said that the cooperative marketing programs are “common practices.” Id.
209 Hatch, supra note 172.
210 See Hatch v. US Bank Nat’l Ass’n, Civ. Action No. 99-872 (D. Minn. June 9, 1999).
211 See Hatch v. US Bank Nat’l Ass’n, Civ. Action No. 99-872 (D. Minn. Jan. 25, 2000). See also Dee
DePass, US
Bank Kills Marketing Deals: But Still Plans to Fight State Lawsuit, STAR TRIB., June 11, 1999, at D1.
212 Marcy Gordon, Chase Privacy Pact May Prompt Trend, WASH. POST, Jan. 28, 2000 (stating that as
many as 22
million consumers nationwide have been affected by Chase Manhattan’s decision to disclose personal
customer
information).
213 DePass, supra note 211, at D1, D4 (“Now Wells Fargo, which for three days after Hatch’s suit didn’t
reveal
details of its telemarketing relationships, said it is [suspending its relationship with telemarketers].”).
50
supra note 208, at F07 (describing Citibank’s decision to implement a moratorium on
information
exchanges with telemarketers).
215 Gordon, supra note 212.
216 See Tania Padgett, Report Says Good Merger Targets in Short Supply, AMER. BANKER, June 1, 2000
(“On
average, the five largest players hold 73.2% market share in the 40 attractive growth markets. In 13 of the
areas,
deposit market share held by the top five is 80% or more.”)
217 Gilgoff, supra note 208, at F07 (quoting Comptroller Hawke, “Although financial conglomerates may
profit from
the cross-marketing opportunities and consumers may benefit from the availability of a broader array of
customtailored
products and services… there is a serious risk that these developments may come at a price to individual
privacy.”)
218 Beckett, supra note 206, at A4. In 1997, the OCC logged 16,000 consumer complaints. Id. In 1998, the
214 Gilgoff,
71
number
of complaints rose to more than 68,000 and in 1999 it reached over 100,000. Id.
219 Jeff Leeds, Bank Sold Credit Card Data to Felon, L.A. TIMES, Sept. 11, 1999.
220 Id.
221 Id.
222 Id.
223 Id.
224 In articles and testimony in front of legislators, opponents have claimed that privacy legislation will raise
the
price of financial services, reduce the availability of credit, and interfere with a person’s ability to make
purchases
with a check. See CATE, supra note 174, at 17 (claiming severe economic hardship). They fail to mention
that the
State of South Dakota has had an “opt in” law for banks for over 15 years and has experienced no difficulty
with the
system.
225 Hatch, supra note 172.
226 Id.
227 William Safire, America Hasn’t Gone Far Enough to Protect Privacy Rights, STAR TRIB., Sept. 26,
1999.
228 William J. Fenrich, Common Law Protection of Individuals’ Rights in Personal Information, 65
FORDHAM L.
REV. 951, 963 (1996) (“[S]ecrecy surrounding how personal consumer information is used limits the
potential for
consumer action… ”)
229 Id.
230 Barbara A. Rehm, B of A Chief: Privacy Shields Harm Customers, AMER. BANKER, May 3, 2000. See
also
Richard A. Barton, Testimony at the Financial Privacy Hearings before the Subcommittee on Financial
Institutions
and Consumer Credit of the Committee on Banking and Financial Services, 106th Cong., 1st Sess. (July 21,
1999)
(stating that less than three percent of the U.S. population utilizes the Direct Marketing Association’s optout
system).
231 Robert O’Harrow, Jr., Data Firms Getting Too Personal?, WASH. POST, Mar. 8, 1998, at AO1.
232 William Safire, Stop Cookie-Pushers, N.Y. TIMES, June 15, 2000 (“The word choice is used by banks,
hospitals,
and Internet companies to conceal their intrusions into the personal lives of their consumers.”)
233 Sovern, supra note 109, at 1104-05.
234 Robert K. Heady, Don’t Let Anyone Sell Your Privacy, PIONEER PRESS, Oct. 3, 1999.
235 David J. Klein, Keeping Business Out of the Bedroom: Protecting Personal Privacy Interests from the
Retail
World, 15 MARSHALL J. COMPUTER & INFO. L. 391, 398 (1997).
236 Sovern, supra note 109, at 1075.
237 Peter Bowal, Reluctance to Regulate: The Case of Negative Option Marketing, 36 AM. BUS. L. J. 377,
384
(1999); Dennis D. Lamont, Negative Option Offers and Consumer Service Contracts: A Principled
Reconciliation
of Commerce and Consumer Protection, 42 UCLA L. REV. 1315, 1330 (1995).
238 Bowal, supra note 237, at 378.
239 FRED H. CATE, PRIVACY IN THE INFORMATION AGE 21 (1997).
240 SENATE, supra note 116, at 12.
241 Bowal, supra note 237, at 389.
242 Lamont, supra note 237, at 1350.
243 Id.
72
244 Id.
at 1351.
supra note 232.
245 Safire,
51
246 An
opt-in system does not mean that information may never be shared, it only means that there should
be
consent. Once there is consent, then a commercial interest can share information pursuant to that consent.
An optin
also has the beneficial effect of providing a business with a list of individuals who are actually interested in
what
is being sold.
247 Deron H. Brown, Book Note, Privacy in the Information Age by Fred H. Cate, 22 Thomas Jefferson L.
Rev. 251,
254 (2000).
248 Id.
249 Cost is always an issue that is raised with an opt-in system, but these concerns are unwarranted. The
picture
drawn by most industry representatives is a mailbox filled with hundreds of notices asking an individual to
consent
to the sharing of their information. This picture is incorrect for two reasons. First, a well-crafted opt-in will
not
require consent for every transaction. Individuals will be asked once, and if they grant permission then the
consent
will last for a specific period of time. Second, an opt-in will only apply if the commercial entity wants to go
beyond
the scope of a consumer’s reasonable expectations. If a bank or retailer does not share information with
non-related
affiliates or third parties, then no consent is required.
250 Richard S. Murphy, Property Rights in Personal Information: An Economic Defense of Privacy, 84
GEO. L.J.
2381, 2406-08 (1996).
251 Id.
252 Id.
253 Id.
254 Carol Patton, Weaving your E-mail Marketing Web: Mass Mailing Done Right Can Be Golden, but
Done Wrong,
It’s Just Spam, CRAIN’S DETROIT BUS., June 12, 2000, at E1.
255 Id.
256 Id.
257 Internet Marketers Vote In Favor of Opt-In Email: NetCreations Inc. Sponsors Key Internet Marketing
Surveys,
BUS. WIRE, Mar. 9, 2000.
258 Id.
259 Id. (“The second poll, an informal survey of attendees taken at the Direct Marketing Association’s
(DMA)
Internet marketing show in Seattle last week, also found that marketers overwhelmingly favored opt-in
email
marketing services as the right means to reach consumers.”) At the same marketing show, the DMA’s own
Association for Interactive Media publicly stated its preference for “opt out” as the industry’s best practices
for
email marketing despite the opinions of its members and evidence to the contrary. Id.
73
Prohibited in other countries:
Negative option marketing is not allowed in all countries. For example, Finland
(Consumer Ombudsman, Consumer Complaint Board in Finland, 2005)
Consumer Ombudsman, Consumer Complaint Board in Finland. (2005, January). New
Legislation Does Not Allow Negative Option Marketing. Retrieved May 18, 2006,
from http://www.kuluttajavirasto.fi/user/loadFile.asp?id=5790
Three Canadian provinces have banned negative option marketing: British Columbia,
Quebec, and Nova Scotia http://www.legassembly.sk.ca/Hansard/23L1S/96-03-27.pdf
Prohibited in South Africa
Cokayne, Roy (2004, September 7). Government set to declare inertia marketing illegal.
Retrieved May 18, 2006, from
http://www.busrep.co.za/index.php?fSectionId=561&fArticleId=2214842
However, the consumer affairs committee concluded in its report that inertia selling was
an unfair business practice and "an unacceptable marketing method which cannot be
justified in the public interest".
It said inertia selling was unfair because some customers might not receive, read or
understand the marketing material, notification, brochure or letter and might acquire a
product or service without even being aware of this.
In addition, inertia selling imposed a positive obligation on consumers who, should they
fail to take positive steps, would be charged. "It is unfair to expect a consumer who does
not wish to enter into a transaction to take active steps to prevent the transaction from
going through," it said.
The committee added that inertia selling forced some particular products on consumers,
discouraged comparative shopping and produced sales of unwanted goods.
This article presents some ethical frameworks:
Toward an ethical framework for political marketing
Nicholas O'Shaughnessy. Psychology & Marketing. Hoboken: Dec 2002.Vol.19, Iss. 12; pg. 1079
» Jump to full text
» Translate document into:
Select language
» More Like This - Find similar documents
Subjects:
Ethics, Marketing, Politics, Theory
Classification Codes
1210 Politics & political behavior, 9190 United
74
States, 7000 Marketing, 9130 Experimental/theoretical, 2410 Social responsibility
Locations:
United States, US
Author(s):
Nicholas O'Shaughnessy
Document types:
General Information
Publication title:
Psychology & Marketing. Hoboken: Dec 2002. Vol. 19, Iss. 12; pg. 1079
Source type:
Periodical
ISSN:
07426046
ProQuest document ID: 252991151
Text Word Count
6751
Document URL:
http://proquest.umi.com/pqdweb?did=252991151&sid=1&Fmt=3&clientId=52326&RQT=309&VName=PQD
Abstract (Document Summary)
This article seeks to focus and organize the public and academic debate on the ethics of political
marketing by soliciting answers in the application of ethical theory. Principal ethical theories of interest
to marketing and the particular illumination they lend to political marketing are discussed. Often the
answer they yield is ambivalent (not least because ethical propositions can only be argued, never
resolved). It is concluded that, although utilitarians and others tip the balance in favor of political
marketing practice, the strength of the contractarian critique means there is no closure in this debate.
Full Text (6751 words)
Copyright Wiley Periodicals Inc. Dec 2002
[Headnote]
ABSTRACT
This article seeks to focus and organize the public and academic debate on the ethics of political marketing
by soliciting answers in the application of ethical theory. Principal ethical theories of interest to marketing
and the particular illumination they lend to political marketing are discussed. Often the answer they yield is
ambivalent (not least because ethical propositions can only be argued, never resolved). It is concluded that,
although utilitarians and others tip the balance in favor of political marketing practice, the strength of the
contractarian critique means there is no closure in this debate. (c) 2002 John Wiley & Sons, Inc.
Everyone has an opinion on the ethics of political marketing, and often it is an unflattering one: from
jeremiads on the "shallow science of imagistics" (Philo, 1993) to meditations on the chicaneries of
"spin" (Jones, 1995), political marketing and its ready public associations with the idea of manipulation
has become one of those things it is fashionable to worry about, the political face of a cultural
"dumbing down." Numerous ad watchers in the American press testify that this is a matter of public
concern. One area of anxiety, for example, is the idea that opinion is being "bought" by the richest
rather than the best, and this offends democratic notions.
That there are thus ethical problems associated with political marketing is thus not in doubt. But what
problems-and whose ethics? Are they worthy of serious attention, and even legislation? If the wrong
problems are defined, the wrong solutions are embraced, yet the real dangers of political marketing
may be the more hidden and less publicly discussed ones, forexample, the extensive focus on
negativity may blind us to other things such as the short-term decision making it may engender. Such
debates also have political consequences if sufficiently arousing. Public policy may enact, for example,
controls of electoral expenditure or espouse the public funding of political parties.
Ethical theory will not answer these questions, but it might clarify them, illuminating those areas where
there should be real worry and offering reassurance when anxieties have been unnecessary, replacing
a vague moral superstition about the entire area of political marketing with more focused concerns
75
organized within a coherent structure.
In this article, therefore, the aim is to review some of the principal contemporary and classical ethical
theories of interest to marketing, as summarized by O'Shaughnessy (1995): that is, Kantian, utilitarian,
contractarian, communitarian, objective, and cultural relativist. Can they discriminate usefully among
the mass of criticisms of political marketing, and offer enlightenment as to where the common interests
are really being served and where anxieties should truly lie? The deontological approach is addressed
first.
THE DEONTOLOGICAL APPROACH
Although Greek did not actually have a direct a word for duty perse, they possessed a term that
referred to the imperative-the thing one must do; but in English the word means connected with duty.
Immanuel Kant (1724-1804) argued that action should flow from elemental principles that are both the
moral basis for the action and the universal principles upon which all should act. This is actually an
argument for moral absolutism, for the basing of all actions on rules to which all reasonable people
should seek to conform: It is a nonnegotiable morality formulated as an antidote to the potential
dominance of all our lives by pleasure-seeking behavior. How society actually arrives at these rules is
left rather vague by Kant, and he appears to believe that they can be formulated by a process of
reasoning alone.
The problem with the Kantian approach is that it is insensitive to context, defining the limits of what is
permissible with no regard to circumstance; but in questions of political ethics-in ethics
generallycontext is all important. Even duplicity can on occasion be justified, and the Kantian
imperative is therefore of limited value in formulating an ethical basis forthe conduct of political
marketing. For example, if one were seeking to formulate such rules, the layperson might immediately
suggest an agreement to eschew negative advertising. As will be seen, even negativity has its
articulate defenders on the grounds that characteris a legitimate issue.
Yet the criticism of political marketing sometimes seems rather Kantian, grounded as it sometimes is in
normative models or ideals of democratic behavior (Franklin, 1994; Jamieson, 1992). An example of
this would be the normative model of voting decision making based on objective information and full
deliberation. For the convinced Kantian, any deviation from this would be unacceptable once it had
been endorsed as universal law. Yet voters are not in the end particularly rational decision makers, but
respond to gut feel and emotion. They cannot follow this model because of the intrinsic complexity of
the decisionmaking task; therefore they use the cognitive shortcuts and cues provided by political
advertising, journalism, etc., in order to facilitate a decision (Newman & Sheth 1987; Reid, 1988;
Popkin, 1994; Sniderman, Body, & Tetlock, 1993).
THE CONSEQUENTIALIST TRADITION
This tradition emphasizes results of action as the criteria for evaluating their ethical base-in the political
context, is the result good government (but what is good government-responsiveness to public
opinion? In that case there might be some vindication of the marketing conceptualization of politics).
Utilitarianism is one form of this tradition, with its claim that the truth of ethics can be objectively
established via rational means, and Benthamite-derived utilitarianism was popularly expressed by J. S.
Mill (1806-1873) as that which conduces to the greatest good for the greatest number. There are
different forms of utilitarianism: For example, Act Utilitarianism claims that actions are justified by their
contribution to the increase in welfare, whereas Rule Utilitarianism would seek out the corpus of rules
that would lead to the maximizing of welfare. Other forms of utilitarianism include motive utilitarianism,
where the worth of motives is the issue, though this may be ascribed to a different system of ethics
called teleological ethics, which incorporate the virtue of the motive, the argument being that there is a
critical distinction between intentional and unintentional consequences. There is, however, a
vagueness about how to operationalize these precepts: How is the worth of these motives evaluated,
and what is "welfare"? It raises as many questions as it solves.
76
Both utilitarianism and the deontological approach can be reconciled by an argument that says the
moral base on which one take a particular action should be universal, and yet at the same time one
must be guided by the consequences of that action for others (Hare, 1981).
Yet utilitarian perspectives are possibly the richest field of ethical critique of political marketing. In
particular:
1. Bogus issues may be incentivized. A commercial organization, the political consulting firm,
perceives a political issue as a marketable commodity, and there is therefore an incentive for it to
create and merchandise issues selected on the irrelevant criteria of their dramatic appeal: Important
but perhaps less value-symbolic issues may as a result be bypassed.
2. Such issue entrepreneurship may in fact be divisive, with deliberately polarizing issues selected as
the best strategy. As Ansolabhere and Iyengar (1995) suggest in the case of negative advertising, an
optimizing strategy may be to deliberately seek to freeze out the political center from any political
participation. Motive utilitarians would certainly condemn this.
3. Decisions may be made with no reference to the long term, because a business-derived
conceptualization of politics may lead to the thrust to maximize market share (measured by votes)
without considering other consequences. Issues that cannot be publicly dramatized get neglected until
it is too late (the savings and loan imbroglio?). Although it may be assumed that the mass electorate
could reasonably be said to know where its own interest lies, on issues that have an inevitable though
distant future impact, such as energy consumption and the environment, the electorate may be
irresponsible.
4. Political marketing methodologies also tempt people to use communication to fill the space vacated
by ideas and ideology (Sherman, 1987): Communications substitute foraction, creating a world of
professional campaigners and amateur statesmen.
5. A ".x-it" mentality is created, with pressure for instant, mediafriendly solutions to elaborate problems.
These are utilitarian-derived criticisms, because the claim is that they lead to worse government and
therefore a failure to achieve the greatest good for the greatest number. Another criticism would be
that the costs of political marketing create the need for a wealthy paymaster, normally a string of
political action committees, because 70% of campaign costs in the United States now go on
advertising. The favor is returned by benevolent legislation, and this can be seen as undermining the
efficiency of government in terms of its ability to deliver the best for the most. Vested interests, whose
concerns are seldom identical with those of the majority, can frustrate the service to that majority of its
elected representatives. The NRA and the tobacco industry are cases in point, where the political
struggle against them has had to be carried out in the courts, since legislators seem either bribed or
intimidated.
Yet it would be dishonest to pretend that the phenomenon of marketed politics had nothing useful to
deliver. It is ironic that the phenomenon can nevertheless be defended in utilitarian terms as a
contribution to public information. Ansolabhere and Iyengar (1995) review the evidence that political
advertising increases public knowledge of salient issues by increasing the amount of information in
circulation. Banker (1992) argues that "they can be viewed as supplying voters with alternative
perspectives for understanding political reality," they enable us to "reframe political facts, to allow the
public to see it from a different perspective." Second, and in reply to the earlier criticism about issue
entrepreneurship, their locus in opinion research can introduce legitimate public concerns into the
election that might otherwise have been missed, because no issue can be successfully manufactured
and sold without meeting an underlying resonance in public opinion. To argue otherwise is perhaps to
entertain the notion of a naive, jejeune electorate and a crude stimulus response or hypodermic model
of political communication (Kraus & Davis, 1976). Banker discusses a case in point, where polling
revealed that an incumbent candidate (Senator Denton) was perceived as rich and aloof: Projective
polling suggested his rival focus on Denton's use of official monies to pay country club membership
77
and on his anti-social security vote. In this context, the negative advertising can be justified as a
legitimate awareness exercise that led to a more informed, if more, embittered contest.
Flanagan (1996) makes several significant criticisms of the above philosophical approaches. Both
Kantianism and utilitarianism are vague; Kantian and utilitarian arguments occur, for example, on both
sides of the abortion controversy, and the key problem is therefore that abstraction needs embodying
in coherent, workable precepts to guide actions. The respective theoretical variables of duty and
happiness need grounding in more precise values to give direction. Utilitarians are constantly debating
the meaning of what the goods are and how they are ordered to maximize the greatest good overall,
whereas what Kantians have trouble doing is articulating the categorical obligations in a detailed way.
THE CONTRACT VIEW OF ETHICS
Utilitarianism has had many critics from its very beginnings as a coherent philosophy (as Cardinal
Newman wrote in the nineteenth century, "The philosophy of Utility, you may say, Gentlemen, has at
least done its work; and I grant it,-it aimed low, but it has ful.lled its aim"). For example, Rawls (1972)
points out how the mantra of the greatest good for the greatest number could lead to the sacrifice of
individual liberty: indeed, communism itself could be seen as constructed on such an argument, for the
"dictatorship of the proletariat" represents precisely that. Thus an important source of criticism has
been human rights perspectives, because the pressures of crude majoritarianism can sometimes be
seen as overriding the liberty of the individual. Theories of rights were thus developed to protect the
autonomy of the individual; Rawls regards the right to equal liberty as being the basis of all other
freedoms and rights. But ethics involve both rights and duties-as if in fact there were a societal contract
in operation between individuals, institutions, and society. These contractarian perspectives posit a
bargain struck with each otherforthe benefit of all, an exchange that includes the acceptance of some
restrictions on individual liberty.
There are of course important limitations to this perspective-what, forexample, happens when rights
conflict? But if one can imagine such an invisible contract, then clearly some of the things political
marketers do would be illegitimate in the sense that they would violate exchanges based on rights and
duties. One area where this clearly emerges would be that of fraud and fakery-the extent of
manipulated imagery in political marketing that could easily be called deception, such as the
controversial George W. Bush subliminal television advertisement that flashed "DemocRATS" at the
boundary of perception. Thus a University of Oklahoma study of over 2000 political advertisements
from the 1950s onward found that more than 15% were manipulated in some way (USA Today, May
23, 1996). And a study of the 1996 presidential campaign found that 28% of 188 advertisements
analyzed revealed questionable use of technology: "news conferences that were never held, debates
that never took place, use of audio or video tricks to stereotype or ridicule opponents" (Johnson,
1997). The numberof ads using altered images, according to the National Science Foundation, rose
from 13% of those made 1950-1962 to 70% post 1980 (USA Today, May 23, 1996). Such manipulation
has become customary-the lowering of George Bush's voice in a 1988 advertisement would seem to
be rather typical. In anothercase a Senatorwas actually dying but sufficient shots of his reelection
announcement were pasted together to hide the fact (O'Shaughnessy, 1990). Image manipulation can
of course be quite open. The appeal in this case is not to reason; rather the target is being invited to
share in a mutual fantasy of vilification as co-partners in the production of hyperbolic meaning. These
techniques include "morphing," such as in a 1996 California ad that merged the face of child murderer
Richard Allen Davies with that of incumbent Vic Fazio; another ad ran Davies with Democrat Walter
Capps as a kind of double ticket (Johnson, 1997).
These are clear instances of obvious manipulation, but, more generally, political marketing may appear
to give permission to be rather more generally evasive. If, for example, the entire area of spin control is
admitted into the domain of political marketing-and there is certainly an argument for saying that this
belongs to a separate conceptual realm-then its ethical critics must be heeded. Thus in the London
Times (July 4, 2000) Michael Gove criticized what he called the manipulation of public spending
announcements by the government: "the practice of double-counting, or triple-announcing, by which
rises in ex penditure are trumpeted, re-trumpeted and then orchestrated again for brass band and
pulled strings, has created a deep rooted cynicism towards all government initiatives. . . . When Alan
78
Milburn announced . . . that ward sisters would be given L5000 to improve their patients' environment it
was welcomed . . . butsixweeks laterthe Department of Health informed hospital trusts that the policy
was to be funded by a cut in theircapital allocation." Another example was the introduction of "nurse
consultancies"-forwhich howeverno new money was forthcoming. This critique is typical of many that
have appeared in the British press with increasing regularity-and all relaying similar examples. Another
of numerous instances is when the British government chose to include the compulsory tuition fees
levied on the parents of students (an amount that within the next three years will reach L1.2 billion) as
part of public investment in higher education (Times Higher Education Supplement, November24,
2000).The functionaries of the British state have jettisoned their old bureaucratic language for the new
hyperbole, but reading it-as in this example-leaves one perhaps no wiser than before: "Mr. Milburn will
be creating a top-level NHS modernisation board to drive through the changes in the NHS. In a move
designed to overturn traditional Whitehall bureaucracy and hierarchy, board membership will include
the brightest and best modernisers in the health service. The changes signal a vote of con.dence in
frontline clinicians and managers who are consistently trailblazing new ideas. These are the people at
the rockface with the experience and enthusiasm to drive home the modernisation programme"
(Times, February 23, 2001).
No contractarian perspective on political ethics could accept this kind of institutionalized evasiveness,
where governments repeatedly violate theirside of the bargain that is assumed to be implicit between
citizen and state. Problems, insofar as they are solved, are solved rhetorically. Perhaps politicians
actually come to believe their own verbalizing and confuse communication with action. Political efficacy
comes to reside exclusively in communication skill, arguing away real-world problems as they multiply.
Another potential problem from the contractarian perspective is the criticism that politicians are ceasing
to try to enlist the direct physical participation of citizens in politics: There is no real incentive for them
to do so now that marketing can perform the persuasion task. The argument is that marketing makes
redundant the kind of proselytizing organization that Ellul (1973) reckons to be central to the learned
commitment to a cause. People internalize adherence by participating, therefore engaging in selfpersuasion and retrospectively justifying actions, and the lack of active participation in politics today
(Richardson, 1995) makes for a superficiality of support, quickly lost, and no direct link between
governors and governed. An extreme case of this was Forza Italia: "Slickly presented, adopting
American political techniques in a context devoid of American restraints, Berlusconi used television
with a skill that made the enigmatic arts of the Christian Democrat Giulio Andreotti as redundant a
political weapon as the letters of Cicero . . . Veneziani explains that Berlusconi built his instant
movement, Forza Italia, on a base which was both apolitical and non-ideological. Its structure is not
that of a political party but of a network of football supporters' clubs"(Times Literary Supplement,
January 6, 1995). People are less likely to be involved in politics at a personal level: Britain's Labour
Party found it could create a substantial "credit card" membership through advertising, but it was also
later to discover the fickleness of its new membership base.
Another area of potential interest to contractarians, which flows out of this, is the changing nature of
the individual's relationship with the state. Perhaps there is a loss of dignity if governments come to be
seen as just big service organizations, and an erosion of loyalties and ties is a consequence of being
taught at the aggregate level to be consumers in everything we do. Political marketing may be viewed
as involving this learning, at a higher level of abstraction, in which we are teaching people to think of
themselves as political consumers, and perhaps, merely as political consumers.
It would perhaps seem natural to discuss negative advertising also here, and present it too as a form
of contractual violation. In fact, the ethical argument over negative advertising is a complex one and
does not admit any easy resolution. As Banker argues, argument and argument form need to be
distinguished from one another: "an individual 'negative' political ad is an argument, at least implicitly.
As an argument it may be reasonable or unreasonable. That does not mean that all 'negative' ads, the
argument form, should be discouraged." What though is clear, as discussed earlier, is that the effect of
negative advertising is to reinforce partisanship and remove the political center: That may be the
effect, and it is presumably sometimes the intent as well. It is this aspect contractarians might object to
on the ground that the tactic may represent a deliberate seeking of the self-disenfranchisement of
79
large numbers of people, thus undermining the ethos of democracy.
COMMUNITARIANISM AND VIRTUE ETHICS
Communitarianism locates virtue within the context of some parochial social setting. Virtues are traits
and they are formed by a long process, underpinned by emotionally driven conviction (MacIntyre,
1981). Ethical traditions and sensitivities are seen as arising out of community. Aristotle argued that
virtue was not a rule book, but a skill whose art lay in negotiating circumstance (Soloman, 1993). Yet
these propositions are rather vague as a source of potential ethical guidance. Certainly it is true that
some of the practices of political marketing are more acceptable to some cultures rather than others. If
virtue is what the community teaches, it is apparent that different communities teach different things,
as will be clear from the very mixed reception given to the export of American political marketing
techniques in different countries, with notable rejection in for example Greece and Scandinavia,
although Johnson (1997) makes clear this is more a rejection of the idea of American-influenced
elections than of the ethos of political marketing per se. Tradition legitimates, and the American
tradition is to place an almost nonnegotiable value on freedom of speech: It is this value that has stood
in the way of legislative attempts to (forexample) control expenditure on campaign advertising. It may
be argued that other countries value freedom of expression less, and social integration more: There is
a trade-off. The origins of political marketing and some of its associated practices, such as negative
advertising, do in fact go back a long way in America, because they arise out of the particular value
that culture has traditionally placed on the idea of liberty: The first negative campaign using modern
media appeared fully formed in the California gubernatorial campaign of 1936 (Mitchell, 1992) in which
Upton Sinclair was the unfortunate victim, while the first advertising agencies were enlisted in 1916
(O'Shaughnessy, 1990). A second, related, tradition is the value Americans place on market freedoms:
The state should not tell people how to spend theirmoney, and this includes more generous freedom
than elsewhere to spend it on political involvement-as is the case, forexample, with political action
committees. Cultures with greater traditional intolerance of market freedoms have also tended to
restrict the access of finance to politics more (in the U.K., for example, expenditure per parliamentary
seat is limited to around L5000).
Community tradition is one locus for virtue ethics, but it is not the only one, because some
philosophers have criticized community both for conservatism and excessive belief in the merit and
possibility of communal consensus. Organizations are also viewed as relevant communities, with role
relationships generating obligations. These philosophers reject notions of hard and fast rules: The key
thing is to sponsor a cultural climate supportive of ethical behavior: "if the cultural climate is not openly
supportive of ethical behavior, the motivational climate for ethical conduct will be missing"
(O'Shaughnessy, 1995). More rules are not seen as particularly illuminating, and value is placed on
developing skills to weigh up conflicting interests.
These contemporary moral theories-utilitarian, contractarian, virtuetheoretical (communitarianism)
have focused attention on significant aspects of moral life, but they have perhaps obscured some of
the salient features of morality and the problem of finding, at the real level, a particular solution to a
particular moral dilemma. There is an obscurantism: there is still a need to know what are the key
moral issues today and what magnitude of importance is attached to them: "I do not believe that
morality has a nature that can be revealed by moral philosophy-betterto talk of actual and possible
worlds and visions of human flourishing therein" (O'Shaughnessy, 1995).
MOTIVATION TO COMPLY
ForBenedict Spinoza any system of ethics must be internalized and not just verbally endorsed. The
key is motivation. Under the deontological position and utilitarianism, motivation arises from the appeal
of reason and from a wish to behave in an ethically sound way. Contractarians perceive it as elevated
self-interest, virtue theorists as the emotions arising out of community-based custom, value, and
tradition.
But David Hume (1711-1776) spoke of the necessity of having an emotional base to ethical conduct.
80
Others, such as the economist Frank (1988), endorsed essentially the same view, that ethics cannot
be apprehended at the level of reason alone, but needed emotional commitment, because emotions
engender, energize and direct response: Otherwise expedient "short-termism" will rule. He claims that,
in the long run, ethical conduct, by building up trust, is linked to success. In fact it is a fallacy to divorce
emotion from reason as completely as is so often done, because, forexample, it is only through
emotion that we can convert decision into action or choose among the competing claims presented by
reason. Indoctrination and social conditioning are more relevant here than abstract knowledge: As
Aristotle said, you get a virtuous adult by training a child do the right thing.
For those who would seek a way forward on the ethics of political marketing, the question is whether to
anchor those ethics in reason, for example, enlightened self interest, or find some way of getting
politicians to internalize this emotional adherence to ethical values. It is not, however, easy to think of a
way of achieving this, because unethical behavior has sometimes been rewarded-in 1988 for example,
Banker argues "Dukakis was skilfully portrayed as a weak, liberal, do-gooder lacking in common
sense. The man who demonstrated moral restraint paid for that restraint by losing the election" (the
name "Willie Horton" is evidence enough here).
Self-interest is probably a much stronger argument, however-arguably any tendency to moral drift in
American politics is held in check by the fact that negative ordishonest political advertisements can
backfire. First, they can incite a counterattack from opponents, who now have access to instant
rebuttal facilities via the Internet. Second, all political marketing may be subject to arbitration by an
independent source they cannot control, the free media, with its ad-watches, etc. Media can fix a
maligned interpretation on a text that is quite different from that which the party or candidate intendedfor example, when the Canadian press accused the Tory Party of attacking a facial defor mity of the
Liberal leaderJean Chretien. Whetherornot this was intentional on the part of the Tories, for most
voters their only exposure to the advertisements was through the interpretative framework attached by
television, and it suddenly became "politically incorrect to be a Tory" (Whyte, 1994). In fact the Tories,
previously the largest party in Canada, were left with just two seats.
To undertake political marketing is to undertake a journey but not to control its destiny. The system
may perhaps be seen as possessing an in-built self-corrective mechanism in which extremes of
unethical behavior, or even as in the Chretien case the mere suspicion of them, will be punished. For a
political marketing text stands in its own right as an autonomous political event with independent
political consequences; it is not merely a paid messenger or conduit of persuasive information from
encoder to decoder. The fact that harshly negative advertising is such a volatile weapon thus brings its
own restraints. For example, a 1996 candidate for Alabama Supreme Court, Harold See, was subject
to one of the most vicious negative campaigns of recent years (Johnson, 1997). Commercials featured
a skunk morphing into Harold See's face, and claims (strongly disputed) that he had abandoned his
wife and children years before, etc. But See still won: A negative ad is as much as statement about the
values of the attackeras the defender, and extremes have a tendency to alienate. Yet, as Johnson
remarks, "when othercapable and civic-minded citizens contemplate the ridicule and vilification
endured by See and his family, many will conclude that running for office today is not worth the price."
OBJECTIVE RELATIVISM
Objective relativists (Putnam, 1981) claim that the right ethical decision is relative to circumstance.
This is a position that might provide some justification for the ethos, and many of the practices, of
political marketing, because there is a credible argument that it has been propelled forward by
circumstance; for in common with all voluntary civic activities, the willingness of people to be actively
involved as citizen activists has been in sharp decline in America and Europe (Richardson, 1995), and
this coerced privatization of hitherto public activity serves to create a need for persuasion to be
electronic, and purchased. Put simply, it is difficult to persuade people to become volunteers.
Moreover, with voting behavior no longer driven by inherited class loyalties to the extent that it once
was (a phenomenon of dissolving class barriers), the task of persuasion is greater, because
partisanship is less. In addition, there has been a significant decline in the willingness of U.S. media to
coverpolitics as competition for ratings becomes more intense and entertainment values become ever
more dominant on television. According to some authorities, television news has reduced its purely
81
political coverage by as much as 60% since 1995. Consequently, it is suggested that circumstance
actively compels resort to marketing methods where the media abrogates its traditional responsibilities.
Banker (1992) has argued: "when considering whether a particular communication act was ethical the
situation must be considered. Political campaigns are a competitive situation; there is just one winner.
It is ridiculous to expect the same standards to apply to such a situation as apply to polite social
discourse." Context prescribes ritual and rhetoric, and a political context is ultimately about the
leadership and future direction of the nation, and therefore may merit higher levels of rhetorical
aggression than are legitimated by other communications situations, including commercial ones.
Banker would include in this the ad hominem attacks that make the critics of political marketing so
indignant: "an election campaign is not just about what issues candidates favor and oppose, it is also,
by its very nature, concerned with who we elect-the motives and characterof the man orwoman who
will lead us." Perceived character is an integral part of the political product that is exchanged for votes:
It is important because any publicly visible persona is probably perceived as symbolic of values of one
kind or another, and in practice it is less easy therefore to create some neat dichotomy between
character and issue and declare the one off-limits to public curiosity.
These points are a valuable corrective to the tendency in much of the literature to dismiss negative
advertising as an unqualified loss for American public culture, but they are not an entirely satisfactory
answer to the critics of political negativity: by the early 1990s 50 states with 62% of the voting age
population suffered full negative campaigns (Ansolabhere & Iyengar, 1995), and negativity on that
scale probably needs a stronger defense than this.
CULTURAL RELATIVISM
Cultural relativism resolves ethical conflicts between one culture and another by accepting that ethical
standards are relative to culture (O'Shaughnessy, 1991). But, while accepting that legitimate
intellectual and moral differences and traditions exist, not least in regard to the differing values placed
on the needs of individualism versus the demands of community, cultural relativism becomes more
difficult to accept once one gets down to the level of individual practices (e.g., institutionalized bribery
and "kleptocracy"). At its worst, cultural relativism is simply an excuse to suspend the operation of
judgement. As O'Shaughnessy (1995) argues: "There is evidence from both anthropology and history
demonstrating the essential ethical similarities among different cultures. In accepting ethical relativism,
we put up a rival standard, namely, universal ethical tolerance as the absolute virtue. To make ethical
tolerance the absolute virtue means treating public wellbeing, honesty and justice as of secondary
concern. This cannot be acceptable." In a sense, to tolerate all is in fact to believe in nothing.
But for the extreme cultural relativist, American political marketing might indeed present no problems
at all-for surely that's America, part of its gaudy, vigorous way of being: Though the relativists might
balk at its export to countries with no such tradition, on the grounds that it represents an alien cultural
graft. But, there may indeed though be some merit in permitting elements of cultural relativist critique
to creep into the ethical analysis of political marketing. The different political traditions of different
countries must be seen as embodying value systems that differ but contain an internal coherence, so
that to change one variable in an integrated system is to change the interrelationships of all its
components. Thus elements that might be objectionable on an individual basis, like the role of money
in American politics, may be justified as a structured part of some overall workable pattern. Political
marketing is pre-eminently American, in invention and operation, conceived and energized by
American culture, values, and tradition. First, although speech in America has never been absolutewitness the current laws on hate speech or earlier generations' prohibition on pornography, the bias
toward this as a desirable social end has been strong, with some support in the constitution, even to
the extent of the American Civil Liberties Union defending the rights of Nazis to demonstrate. This
might be contrasted with its U.K. counterpart Liberty (formerly NCCL), which has neverdefended this
orany otherfr eedom of the far orindeed near right.
The use of money to purchase political persuasion is part of this tolerance, with money seen as a
legitimate expression of power, although it is often difficult for even the richest in the land to merely
buy political office: Michael Huffington lost $20 million in his bid to become a senator for California
82
(Daily Telegraph, June 7, 2000), and as for another multimillionaire "the more he spent, the more
obscure he got" (Daily Telegraph, June 9, 2000). Another American tradition is to recognize that power
in a democracy is not only a function of the numbers of those who feel, but of those who feel most
intensely: 80% of Americans have consistently favored more gun control, but the 20% who oppose this
are vehemently opposed, and so farthey have usually gotten their way (O'Shaughnessy, 1990). In a
sense this represents elements of a stakeholder approach to social ownership of American politics, an
approach that is manifest also in the powerof political action committees in the American polity: In the
last U.S. presidential election, 150,000 prochoice women were contacted by the pro-choice movement
in Pennsylvania alone (Independent, October27, 2000).
Moreover another historic feature has been the acceptance of a relatively free market in most things,
including religion, as Moore (1994) outlines in his book, and this is combined with the nearuniver
salization of the business ethos; as Moore argues, churches from the early days in America learned to
sell themselves. The transfer of a marketplace ethos, that is, conceptualization and techniques, applies
to many areas of American life, where in other countries commercialization might be perceived as
some kind of devaluation. John Corzine, who paid $140 per voter to win the 2000 Democratic Senate
primary in New Jersey (Daily Telegraph, June 9, 2000) used similar marketing techniques to those
other wealthy candidates Forbes and Perot before him, "bombarding voters with television and
billboard advertisements and showering down contributions on every level of his state's Democratic
Party machine . . . " Toward the end of the presidential election itself Republicans had made 62 million
phone calls, issued 110 million pieces of direct mail, and spent $40 million on getting supporters to the
polls (Daily Telegraph, October 31, 2000).
Yet it is possible that a cultural relativist with an educated knowledge of American history would claim
to see a coherence here with other aspects of American life and tradition: The amounts are
exceptional, but the practice is not. Another ideological trajectory for the cultural relativist to follow
would be that of postmodernism, claiming that political marketing was just another category of
postmodernist culture, reflecting and reinforcing its core themes. Such a critic would be troubled less
by the notion that political marketing has tended to lead the political agenda into a focus on symbolic
goals and the serial creation of meaning. Thus Axford and Huggins (2002) see political marketing as
part of a broad postmodernist culture of signs and symbols, a phenomenon of dissolving class barriers
where people are bereft of traditional anchors. They take the example of Forza Italia as an extreme
case of this, a media-created party that seemed to answer a huge appetite for change, a party people
were comfortable with. They see political marketing as simply part of a world of serial symbolism and
media saturated imagery, whose self-referentiality is captured in a scene from Murphy Brown, where
she watches Dan Quayle criticizing her giving birth outside wedlock.
CONCLUSIONS
The application of ethical frameworks does not generate any final answers, as no ethical debate is
ever final. Ethical questions can only ever be taken further, not answered: What the process does seek
to achieve is further clarification of the nature of the moral issues associated with political marketing,
and some sort of ordering among them as a magnitude of priorities.
But the overall direction of the ethical critique is clear-that it is an error to proclaim a general anathema
against political marketing and the key generic practices such as negative advertising most commonly
associated with it. What is morally questionable is not so much the genre and its derivatives, but
particularized individual cases of application, the specific instance that embodies the idea of excess;
toxic individual negative campaigns, legislative seats merely purchased, allegation and video image
merely fabricated. But utilitarians, objective relativists, cultural relativists, and communitarians would
place the balance in favor of political marketing as it sharpens debate (utilitarian), arises out of culturalpolitical tradition (cultural relativist), is legitimated by competitive context (objective relativist), and the
nature of the postmodern condition enforces it (cultural relativist), as it is a response to and not a
cause of the social and economic phenomena of these times. And freedom of speech, including
economic speech, would be an argument of particular interest to communitarians.
But against these there are certain strong contractualist arguments: where the generation of imagery
83
can be a substitute for political action and for the direct civic participation of citizens, the contractviolation criticisms cannot be dismissed as merely trivial. There is no final resting place forthe ethical
debates on political marketing.
[Reference]
REFERENCES
Ansolabhere, S., & Iyengar, S. (1995). Going negative. New York: The Free Press.
Axford, B., & Huggins, R. (2000). Political marketing and the aestheticization of politics: Modern politics and
post-modern trends In N. O'Shaughnessy (Ed.), The idea of political marketing. New York: Praeger.
Banker, S. (1992). The ethics of political marketing practices, the rhetorical perspective. Journal of Business
Ethics, 11, 843-848.
Daily Telegraph (June 7, 2000). Report.
Daily Telegraph (June 9, 2001). Report.
Daily Telegraph (October 31, 2001). Report.
Ellul, J. (1995). Propaganda New York: Alfred A. Knopf.
Flanagan, O. (1996). Mind, morals, and the meaning of life. New York: Oxford University Press.
Frank, R. (1988). Passions within reasons New York: W.W. Norton.
Franklin, R. (1994). Packaging politics. London: Edward Arnold.
Hare, R.M. (1981). Moral thinking. Oxford: Clarendon Press.
Independent (October27, 2001). Report.
Jamieson, K.H. (1992). Dirty politics. Oxford: Oxford University Press.
Johnson, D. Political communication in the information age. Seminar, Feb. 5 1997, Wissenchaftszentrum,
Berlin.
Jones, N. (1995). Soundbites and spin doctors. London: Cassell.
Kraus, S., & Davis, D. (1976). The effects of mass communication on political behavior. University Park, PA:
Pennsylvania State University Press.
MacIntyre, A. (1981). After virtue. London: Duckworth.
Mitchell, G. (1992). The campaign of the century. New York: Random House.
Moore, R. L. (1994). Selling God. New York: Oxford University Press.
Newman, B. I., & Sheth, J. N. (1987). A theory of political choice behavior. New York: Praeger.
O'Shaughnessy, N. J. (1990). The phenomenon of political marketing. New York: Macmillan.
O'Shaughnessy, J. (1995). Competitive marketing a strategic approach. London: Routledge.
Philo, G. Political. Media, culture and society (Vol. 15). Thousand Oaks, CA: Sage.
Popkin, S. L. (1994). The reasoning voter. Chicago: University of Chicago Press.
Putnam, H. (1981). Reason, truth and history. Cambridge: Cambridge University Press.
Rawls, J. (1972). A theory of justice. Oxford: Oxford University Press.
Reid, D. Marketing the political product. European Journal of Marketing, 22, 1988.
Richardson, J. (1995). Interest groups: Challenges to political parties. West European Politics, 18, 116-139.
Sherman, Sir A. (1987). The ad man cometh. Guardian (London).
Sniderman, P. M., Body, R. A., & Tetlock, P. E. (1993). Reasoning and choice, explorations in political
psychology Cambridge: Cambridge University Press.
Soloman, R. C. (1993). Corporate roles, personal virtues: An Aristotelian approach to business ethics. In E.
R. Winkler & J. R. Coombs, Applied ethics: A reader. Oxford UK: Basil Blackwell.Whyte, K. (1994). The face
that sank a thousand Tories. Saturday Night, Canada, p. 14.
Times (London) (February 23, 2001). Report.
Times (London) (July 4, 2000).
Times HigherEducation Supplement (November24, 2000). Report.
Times Literary Supplement (January 6, 1995).
USA Today (May 23, 1996). Report.
84