Consumer Law And Deceptive Marketing Guidelines - Case Study Example

Corporate Responsibility: Towards Better Consumer Protection Forethought and temperance are the virtues which produced thrift, and with thrift the economic progress of society. And those are the virtues which today are gravely compromised. Adriano Tilgher Introduction Today, most of the marketing tricks adopted by all leading companies aim at luring the gullible consumer towards their newly launched product at any cost. Most of the times, the marketing techniques are so strong that one starts to feel incomplete without that product at home or in their pockets. With such fierce competition, it is impossible to accept that all products actually meet the standards prescribed or actually advertised by them. Most of the times, it is the same old product in a new wrapping. This leads to obvious dissatisfaction among the consumers, especially the more demanding or knowledgeable ones. So, when the product falls short of the specifications or expectations, they approach a forum called Consumer Court to resolve their grievances, both genuine and perceived. When the consumer approaches a redressing agency, all the efforts expended by the product manufacturer towards marketing have either failed or fallen well short of specifications or expectations, making the investment in marketing segment less effective, or at least not as profitable as expected. Most good companies would avoid such a situation and try to provide a product as per the specifications. Thus it would be wise to study both sides of the aspect and neutrally evaluate the outcome in best interests of society and individuals as well as reasonably for companies providing a service or a product, albeit with a rider that profitability than service is their prime concern. Aim The aim of this paper is to bring out salient aspects relevant to consumer protection in a modern market, and the corporate responsibility in this regard. History of Consumer Rights The history of consumer protection is not as old as that of the consumers. In 1962, President John F Kennedy introduced 'The Consumer Bill of Rights.' However, before 1965, there was no effective legal protection available for consumers across the world. The idea was first conceived by Garland Dempsey. In December 1965, probably the first refund of $ 787 was provided by a finance company to Mr. and Mrs. Henry Outlaw, the lucky neighbors of Garland Dempsey in North Philadelphia. Mr. Dempsey filed the complaint on their behalf in regard to a swindle of refinance of a loan. Another such case, the Gallman case got nationwide approval and led to passage of Consumer Credit Protection Act of 1968 by the Congress. This act was later aptly called "The Truth in Lending Act", the first in the series of consumer protection legislation. (Retrieved from: consumercrediteducation@ worldnet.att.net ) Today, across the world, consumer protection laws have evolved protecting consumers from all kinds of manufacturing and retailing defects, protection from fraudulent advertisements, invasion of privacy, deceptive marketing techniques and many such issues. Sections of population defend both sides of the arguments which lead to millions of litigations across the world with sometimes heavy penalties for defaulting companies in the event of intentional deception or even unintentional action leading to loss or damage to a consumer in financial/personal manner. The Corporate Responsibility With passage of time, certain conventions have emerged for the corporate sector to strictly adhere to, failing which they can be held guilty of consumer rights violation. The corporate responsibility towards individual consumers as well as society as a whole has been redefined, and consumer protection laws have assumed gigantic proportions across the world covering the entire spectrum from an individual to the society as a whole. Since the penalties in the event of conviction are prohibitive, not many market conscious companies today are willing to trade their reputations at any costs, and are willing to accept losses of unbelievable dimensions than compromise their brand names. A recent such major case in point being global product recall of Mattel toys due to suspected lead poisoning. The direct total cost for recall of 63 types of Chinese made toys by Mattel Company from across the world was about $30 million. (Burke, 2008) This was besides the 10% drop in company shares in a single day affecting millions of shareholders' confidence. Indirect cost due to dent in their reputation will be difficult to fathom. However, same market pressures of intense competition, high accountability and unbearable cost of misadventures have led to aggressive marketing techniques in terms of intense advertisement of a product, lowest possible margins of profit for retail sectors due to a belief in volume and unmanageable diversification to meet near-personal requirements of specific clients like urban children, middle-class women, elite class luxuries etc. These marketing techniques have to a certain extent had an adverse impact on the ethics of marketing strategies, and sole aim of business in most cases is the profit on the balance sheet rather than actual consumer satisfaction. I remember one placard in a shop which said, "In this age of fast moving products, don't expect quality." No wonder consumer rights and its awareness among the populace have assumed such gigantic proportions today. With experience, this dissatisfaction has also led to an equally aggressive retort by the consumer to the extent of offsetting the lobbyists among lawmakers and bringing in various kinds of consumer protection laws and forums for resolution of disputes. Today, the punitive actions awarded against guilty companies in most consumer cases are so prohibitive, that they result in complete shift in the very market strategies of companies in favor of the consumer. Offences against Consumers: Direct In normal terms, the offences against consumer mean various acts of commission or omission by the manufacturer, distributor or retailer through fraudulent behavior, neglect, denial of information and other such acts leading to a direct or an indirect loss to the consumer and even society as a whole, which could have been prevented in the first place through avoidance of negligence while manufacturing, marketing or retailing the product. Some such direct offences against consumer are enumerated below: a. Unfair Trade Practices. These are generally intentional frauds or misrepresentation of a product and falsely tempting a consumer to invest in a product despite knowledge to the seller regarding its limited utility. These are prohibited by law in most countries, but most sellers tend to get away in such cases due to limited knowledge of consumer in this field. Some such examples could be medical insurance with limited liability unknown to the insured, or purchase of products or services with deficiencies. b. Product Liability. These cover specific areas where manufacturers, distributors or retailers making product available to the consumer can be held liable for damage or injuries caused to the public or environment. Mattel's infamous plastic toys global recall case discussed earlier falls in this category. c. Privacy Invasion. Privacy is the right of an individual to seclude him/her or some personal information from the society or selectively disseminate it for personal reasons not required to be explained. For example, unsolicited calls for selling a product fall in this category and are punishable by law in some countries while most other societies discourage such privacy invasion. d. Fraud. This is deliberate deception by a manufacturer, a distributor or a retailer for his/her personal gains and is strictly punishable in most countries. However, across the world, the law has seldom dissuaded a criminal from committing a crime. Fraudulent intention with the sole aim of profit while selling a product is openly visible in most societies today. Offences against Consumers: Indirect Retrieved from: http://www.crimes-of-persuasion.com This is not a safe electronic world. Most innocent looking marketing email in your mailbox soliciting some petty and harmless information from you could be carrying a big pack of troubles for you as a person, causing you acute financial embarrassment or worse, forever involve you personally in a wide net of conspirators causing excessive damage to your reputation and standing in the society. Given below is an exhaustive list of economic, consumer or even criminal offences/frauds one is likely to face sooner or later in this modern age: a. Telemarketing Frauds. These include various sweepstakes, lotteries, magazine subscriptions, mortgage loans, charities etc. with offers that are difficult to resist unless adequate care and knowledge is exercised. Sharing credit card information with such agencies can forever jeopardize your financial security. Despite sufficient warnings to the effect, the number of innocent and first time victims to such frauds is astonishing leading to millions of costly litigations across the world. b. Consumer scams/Economic Crimes. Various chain letters, pyramid schemes, travel offers, home equity/renovation scams form part of this category leading to many unsuspecting first timers getting roped in and losing their valuable savings by a lure of earning large profits in short time frame. With advent of internet and its spread in developing and undeveloped societies, it is astonishing to see ingenuity and innovativeness of these dishonest marketers who manage to lure innumerable people from across the world with a click of a button. With considerable differences in legal and consumer protection structures of most countries, it is difficult to get a redressal too in most such cases. c. Work at Home Schemes. These offer lucrative pay scales working for one or two hours a day, or like quit your job and earn more money than your boss. These could be assembly projects, computer work, product testing, reading emails, stuff that housewives can do sitting in the comfort of their homes and earn more money than your husbands. But beware, not even one percent of such websites have ever remitted the kind of money they claim to have done so. The author speaks this from personal experiences. d. Money Problems. These include critical monetary aspects like identity theft, theft of credit card information, credit reports/repairs, or bankruptcy. Any individual affected by these frauds can suffer unimaginable direct or indirect losses. Besides, with many international groups involved in monetarily attracting information such as credit card numbers, bank account numbers, email addresses and passwords and other information from untraceable public cafes, their conviction has become very difficult. e. How-To manuals. Ever notice such advertisements in your email boxes like how to earn money on computers, find employment or avail grants in government auctions etc. They charge small fees from millions of gullible customers worldwide for some negligible service or an e-book written once with lifetime money back guarantees. Most people purchase the product they can never use, and due to negligible money involved, don't even seek refund. And the concerned seller makes unbelievable amount of money through unethical business practices. The list of such offences is endless and ingenuity of offenders growing with each passing year, and the only option out for a hapless consumer is to be cautious, and not to deal with strangers in so far as possible. The Corporate Side of the Argument It is advertising and the logic of consumerism that governs the depiction of reality in the mass media. Christopher Lasch The world not being a fair place, there are always two sides of a coin. Under these circumstances, the free market concept has been perceived differently by most people. Some valid arguments from the corporate sector being: a. Consumers fail to read the relevant clauses and indulge in unethical practices of seeking grievances when there should be none. b. Consumers know that some inherent risks exist in most deals which also exist on paper, but they still want to somehow benefit from the deal through inappropriate litigations. c. Many buyers are too much in a hurry when buying a product and are unwilling to give a patient hearing to the technician or salesman whose task is to bring out both positive and negative sides of the product. d. People buy a product looking at the positive side but when something goes wrong, they are completely overwhelmed by negative aspects such that positives are totally ignored. e. Injury aspects related to a product would make the insurances too expensive, much to the dislike of the consumer. Further, it may also make consumers exercise less care than it merits when handling a product. f. Negligence aspects from consumers' side while handling a product do not make much impression on the judges during a litigation leading to all the blame for a product's failure being borne by the company. g. A demarcation needs to be drawn between hype or publicity and deception. Any product has to be hyped up during a launch which is a valid marketing practice. However, it need not automatically become deception on some failures, as a small percentage of products can always to be expected to fail which are always compensated individually. The Consumer Protection Law While the history of consumer protection law is just about 4-5 decades, the first enacted legislation was John F Kennedy's The Consumer Bill of Rights during 1962 as a result of consumerism awareness. The first litigation was in 1965 as brought out earlier. While the consumer awareness in western countries is far more advanced and litigations far more effective, during past few decades, various consumer protection laws have been enacted in other parts of the world as well, which have certain basic common platforms towards consumer protection. These common points are discussed below: (Kapoor, 2008) a. Right to Safety: The law protects a consumer against goods or products which are dangerous to life and property. For example, all substandard electrical appliances sold in the market can be challenged under this clause. b. Right to Information: The law provides for information to the consumer regarding specifics like quality, quantity, weight etc. and its price in the market so that consumer is not cheated on these counts. c. Right to Choose: The consumer has a right to access to a variety of goods and services available in the market and to choose the one that suits his requirement at competitive prices. d. Right to be heard: He also has the right to be heard regarding his problems/grievances and that proper hearing would be granted at appropriate fora. e. Right to seek Redressal: The consumer has a right to seek redressal against unfair practices and exploitation. f. Right to Consumer Education. The consumer has right to consumer education to take necessary legal action against unfairness meted out to him by the company. With passage of time, many new offences have surfaced which may harass a consumer in a variety of ways. The consumer protection sphere is consistently expanding to cover all aspects of such harassment of individuals. With considerable emphasis on environment in modern era, even governments are likely to enter this field in a big way to penalize companies not adhering to legal environmental norms and provide for heavy penalties. The Future of Consumer Rights While the rise of Corporate Social Responsibility can be owed to a rise in popularity of ethical issues of consumers and lawmakers during past decades, the future challenges seem overwhelming. Environmental issues have become so important in past few years that all future industries will have to factor in environmental protection in their plans to save them from exemplary penalties from the governments themselves. With technical advances and global nature of development in all fields, industrialization in many developing is growing at an unimaginable growth rate. As a corollary, consumers are also becoming more and more aware of their rights, environmental and social implications of their day-to-day decisions, and are directly modifying their purchase decisions with these issues in mind. Though not universal, but this practice can be expected to spread globally during the coming decade, thereby requiring fresh look by future managements at the marketing techniques. Further on, role of corporate stakeholders, shareholders and investors are exerting pressure on corporations to behave in a conscientious and responsible manner. Non-governmental organizations have expanded well into the corporate territory, and can be expected to walk hand in gloves with many governments owing to serious environmental issues of contemporary times. Consequently, it can be expected that the future of Corporate Social Responsibility shall not be limited to some local people or community, but will be affecting much larger sections of people cutting across national boundaries. More responsibility can be expected from them and more exemplary litigations for breach of trust too. Conclusion While there is sufficient awareness among both sides of a product's sale, it can be reasonably said that while the company has an option to be fair or unfair, a consumer is normally on the weaker side of the deal. Consequently, during past 4-5 decades lawmakers have strived to improve the situation in favor of the consumer. While desirable results may still not be visible, the tilt is surely in favor of the consumer today and the situation can be expected to drastically improve with environmental issues becoming critical. On the other hand, the companies can be expected to be more aggressive in their attempt at market penetration through more aggressive advertising, better marketing of the product and hopefully a better product compared to the past experiences. However, harassment of consumer shall continue due to sole motive of profitability rather than consumer satisfaction in their minds. The future consumer litigations are likely to be more complex, less pleasant and affect larger sections of masses. Recommendations In this deceptive world, the best option remains to be an informed and knowledgeable consumer. As a consumer, one must spend time and energy to educate oneself regarding consumer protection laws and the extent to which frauds can be committed. Further, taking some basic precautions as mentioned below would go a long way in ensuring that one does not fall into a trap and learn lessons the harder way: a. One should always be careful while doing business with someone new or old. Prevention is always better than a cure. b. Always consult knowledgeable people around you and seek their recommendation whenever engaging into such a practice. c. Before buying a product, investing your money or doing business with a stranger, investigate credibility of that person through law enforcement agency. d. Educate yourself with all consumer issues by visiting related websites, reading newspaper articles or watching news relating to consumer protection and advice accordingly when so required. e. When you have a consumer problem, do give a fair chance to the company to resolve the issue first. Approach legally only if this recourse has failed to achieve desired result. f. Always read between the lines for aspects of warranty, guarantee and exchange rules. g. Avoid buying from sales, as warranties are null and void in most cases of discounted prices. h. Always maintain record of transaction slips and warranty cards till expiry of such periods. i. In case product is defective, do not hesitate to approach highest possible authority of the company if suitable hearing is not achieved from lower officials/customer service. j. Give wide publicity to fraudulent indulgences by writing to consumer pages of newspaper and send such cuttings to the company. k. When taking legal action, make sure all documents are in place. This alone would ensure speedy and accurate disposal of the matter. While these aspects do not guarantee consumer satisfaction per se, avoidable litigations can definitely be checked effectively through these measures. And despite no such intentions or initiative from a profit making company, a consumer will definitely be a more satisfied person. As for the corporate sector, it can only improve. While profit should definitely be a motive, it is a personal experience of most consumers that they stick to better marketing practices than product in the long run. We believe in loyalty to good. If you can attract consumers with better and friendly practice, then you have them with you for ever. Bibliography 1. Consumer Law and Rights. Retrieved on 30 Mar 08 from http://www.consumer-voice.org/consumerlaw.asp. 2. Deceptive Marketing Guidelines. Retrieved on 31 Mar 08 from http://krypton.mnsu.edu/schumann/www/teach/chapter_6.ppt#275,19 3. How do I Resolve Consumer Problems. Retrieved on 30 Mar 08 from http://www.agingcarefl.org/aging/consumerProblem 4. History of consumer Rights Movement. Retrieved 30 Mar 08 from http://www.consumercrediteducation.org/_wsn/page2.html 5. Mattel Recall of Lead-Tainted Chinese Toys Cost $30 Million. 02 Aug 2008. Heather Burke http://www.bloomberg.com/apps/news pid=20601087&sid=ah7cuhojMidI&refer=home 6. Self Help Through Consumer Protection. Retrieved on 30 Mar 08 from http://pib.nic.in. Read More