250-759 Social Responsibility
of Business
Prepared by W. L. Dougan
© Prentice Hall, 2001
Ethical Theory and Business, 8th Edition
Tom L. Beauchamp & Norman E. Bowie
Chapter Five
Marketing and
Disclosure of
Information
© Prentice Hall, 2001
Overview
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Marketing and Disclosure
Advertising and Behavior Control 
Arrington
Information Disclosure in Sales 
Holley
Marketing to Vulnerable Audiences 
Brenkert
Legal Perspectives
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Ethics in Marketing
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Types of misconduct
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Due to information asymmetry
(knowledge gap)
Leads to questions regarding the effects
of trust by customer
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Withholding of information
Distortion of information
Bluffing (misrepresentation)
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Issues of autonomy
Issues of harm
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Considerations for
Determining Misrepresentation
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Sophistication of audience
Standard practices/expectations
Intention of informer
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Source: Mowen and Minor
Deceptive Advertising
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An advertisement which is potentially
misleading or literally false is deceptive.
Potentially misleading ads are difficult to
evaluate because miscomprehension may
often occur.
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Miscomprehension is a problem for firms because
the audience does not understand the message
being delivered.
The FTC regulates deceptive advertising, but
not miscomprehension.
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Tom L. Beauchamp
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Advertising should be persuasive, but should
be judged to be morally inappropriate when it
is manipulative
Three broad categories of influence:
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Coercion - When one party deliberately and
successfully uses force or a credible threat of
unwanted, avoidable, and serious harm in order to
compel a particular response from another person.
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Tom L. Beauchamp
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Persuasion - A successful appeal to reason in
order to convince a person to accept freely what is
advocated. Does not involve use of deception.
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Rational persuasion
Non-rational persuasion
Manipulation - The act of getting people to do
what is advocated without resorting to coercion
and without appealing to reasoned argument.
Involves use of deception.
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Tom L. Beauchamp
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Central issue of manipulation
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How or through what psychological process
a person responds to or is affected by an
attempt at influence
NOT what is done as a result of influence
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Manipulation
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BBA - Acceptable versus Unacceptable
manipulation
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Anheuser-Busch  false implications
Kellogg’s  false implications
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Continuum of free will
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Persuasion
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Manipulation
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Coercion
Justified
Manipulation
Unjustified
Manipulation
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Michael J. Phillips
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No sharp line between acceptable and
unacceptable behavior
Manipulative advertising
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Deceptive advertising
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Advertising that tries to favorably alter consumers’
perceptions of a product by appeals to factors
other than physical attributes or functional
performance
False or misleading assertions or omissions that
cause reasonable consumers to form erroneous
judgments about the nature of a product.
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Michael J. Phillips
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Associative advertising – Favorably
influencing a consumer’s perception of
a product by associating the product
with a non-market good (e.g. sex,
vigor, power, status, etc.) that the
product ordinarily cannot supply on its
own. One type of deceptive advertising.
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Robert L. Arrington
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“Advertising and Behavior Control”
“Is advertising information or creation of
desire?”
Considers whether or not advertising
illegitimately interferes with consumer
autonomy via manipulation.
The author argues that
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generally it does not.
advertising seldom controls behavior or creates
wants that are not rational or truly those of the
consumer
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Robert Arrington
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Puffery
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Autonomous Desire
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a) Based on knowledge of relevant information
Control or manipulation
Free Choice (Acting Freely)
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We act autonomously when we act in a manner consistent
with our second- order desires (which are desires regarding
first-order desires).
Rational Desire and Choice
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Exaggerated, fanciful or suggestive claims
Some argue that the use of puffery constitutes manipulation
a) We act freely when we do things for a reason
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Arrington
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Four concepts
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Autonomous desire
Rational Desire
Free choice
Control
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Manipulation
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Intention
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Causality
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C’s intention is causally effective in bring
about A
Guaranteed Control of Outcome
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C intends P to act in a certain way A
C intends to ensure that all of the
necessary conditions of A are satisfied
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Persuasive Advertising
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Persuasive advertising typically does not
undermine autonomy
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Such persons act freely (on reasons)
Such persons act on reasons they take to
be good ones
Such persons act on their second-order
desires
Such persons are not manipulated
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David M. Holley
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“Information Disclosure in Sales”
Obligations to disclose information on
the part of a salesperson
Opposed to professions where service
providers are obligated beyond their
economic interests
Salesperson’s role is as an advocate,
thus the salesperson has an obligation
to present a favorable story
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Five levels of disclosure:
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Minimal Information: Buyer is solely responsible
Modified Minimal Information: Disclose only what is
necessary to avoid risk of injury
Fairness Rule: Safety information plus unavailable
information
Mutual Benefit Rule: Safety information plus
information needed for a “reasonable judgment”
Maximal Information Rule: all relevant information
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Defending the Mutual Benefit
Rule
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Mutual Benefit Rule allows the
salesperson to meet his or her ethical
obligations
Allows all parties to protect their
obligations
Eliminates need to determine specific
types of customers
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Might be an exception where buyer
indicates he/she is uninformed
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Vulnerability
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Exception in the case of vulnerable
customers
Also, salesperson can be vulnerable as
well
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George G. Brenkert
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“Marketing and the Vulnerable”
Some consumers lack “market
competency” and such vulnerable
individuals should not be targeted by
marketers in ways that take advantage
of their vulnerability
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Three objectives
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Explore the notion of vulnerability
Design of marketing campaigns to
protect vulnerabilities in some
customers
Marketing programs which violate the
previous directive or morally unjustified
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Vulnerability as a four place
relation
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Person (P) is vulnerable to another
(moral or causal) agent (A) with respect
to harm (H) in a particular context (C)
Distinct from susceptible
Distinct from disadvantaged (but may
be overlapping)
Not generalized
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Vulnerable individuals
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Operate with conditions or incapacities
that impede their ability as normal
market participants
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Physical vulnerabilities
Cognitive vulnerabilities
Less able to protect their interests
Possess these vulnerabilities due to factors beyond
their control
Often unaware of their vulnerabilities
Vulnerabilities render them susceptible to harm
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Source: Mowen and Minor
Advertising to Children
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Both policy makers and marketing managers
have reacted to criticism of advertising
directed at children.
Some countries have banned advertising to
children under 12.
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Source: Mowen and Minor
Telemarketing Fraud
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The elderly are vulnerable to fraud by
telemarketers.
A program to combat this fraud is the Know
Fraud Program.
Organizations that fight telemarketing fraud are
the AARP, the FBI, the Post Office, and others.
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Source: Mowen and Minor
Negligent Consumer Behavior
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Negligent behavior is composed of
actions and inactions that may
negatively affect the long-term quality
of life of individuals and society.
This type of behavior can occur in two
different contexts:
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Product Misuse
Consumption of Hazardous Products
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Criteria for Determining
Market Competency
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The knowledge that one should shop
around
Ability to determine differences in
quality and the best price
Knowledge of legal rights
Knowledge of the products and their
characteristics
Appropriate resource
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Morally justified market
relations
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Competition is free
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Participants do so voluntarily
Competition is open
Deception or fraud are not used
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Morally justified market
relations
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Morally justified market relations
require that all participants be capable
of exhibiting market competency.
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a) Individuals who are simply lazy should
not count as vulnerable.
Not morally acceptable to market goods
to especially vulnerable people with the
intention of taking advantage of their
vulnerability
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Vulnerabilities
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Four types
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Physically vulnerable
Cognitively vulnerable
Motivationally vulnerable
Socially vulnerable
Due to factors beyond their control
Render them susceptible to harm
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Implications
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Does NOT mean don’t market to
vulnerable
When condition is temporary, wait
May not use a campaign that exploits
special vulnerabilities
May not rely on vulnerable to bring
pressure to bear on non-vulnerable
May not depend on others to prevent
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vulnerability from causing harm
Irving A. Backman v. Polaroid
Corporation
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Investors sued Polaroid for failing to
disclose unfavorable information about
their Polarvision product.
The court sided with Polaroid
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Sanfield, Inc. v. Finlay Fine
Jewelry Corp.
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A local jewelry company (Sanfield) sued
a national chain (Fine) for deceptive
marketing practices.
The practice in question concerns
pretending to offer large discounts on
jewelry.
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Coca-Cola Company v.
Tropicana Products, Inc.
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Coke (maker of Minute Made orange
juice) sued Tropicana for misleading
television commercials.
The court sided with Coke.
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Kasky v. Nike, Inc.
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Nike was accused of lying about its
labor practices.
Nike argued that all statements about
labor practices were protected political
speech.
The court disagreed and argued that
the speech was unprotected commercial
speech for which Nike is accountable.
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