McGraw-Hill/Irwin

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

Chapter 15

Consumerism
This chapter:
Defines and discusses the idea of consumerism.
Describes the protective shield of statutes,
regulations, and consumer law that has risen to
protect consumers since Harvey Wileys era.
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Harvey W. Wiley
Opening Case
In the late 1800s, Harvey W. Wiley, a professor at
Purdue University, began working with Indiana state
officials to detect adulteration in food products.
A large, highly competitive food industry applied new
food chemistries using preservatives, colorings,
flavorings, texturizers, and other additives.
With few laws to police dishonorable operators, dangerous,
fraudulent, and cheapened products made their way to
market.

At age 39, Wiley took charge of the Bureau of

Chemistry in Washington, D.C.

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Harvey W. Wiley
Opening Case (continued)
Wiley began to agitate for a national pure food law.
Wiley set up an experiment whose participants
were nicknamed the poison squad.
In 1906, Congress finally passed the Pure Food
and Drug Act.
The Bureau of Chemistry evolved into the Food
and Drug Administration, a powerful agency that
protects public health.
Americas memory of Dr. Wiley has dimmed, but his work still
touches our lives. The law he fought for is the foundation of
modern food and drug regulation.
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Consumerism
Consumerism is a word
with two meanings:
A movement to promote
the rights and powers of
consumers in relation to
sellers.
A powerful ideology in
which the pursuit of material
goods beyond subsistence
shapes social conduct.

Consumer
A person who uses
products and
services in a
commercial
economy.

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

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The Rise of Consumerism

in America
In the 1800s, a commercial economy began to
appear.
Consumerism in America began with a confluence of
events at the turn of the 20th century.
Railroads
Great merger wave of 1896-1904
Mass production of consumer goods
Electricity and other new technologies
Movement of people
People began to express role and status through
products they consumed.
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Consumerism in Perspective
Marketing research reveals a widespread,
profound effort to find love, status, and individuality
in products.
Materialism is an emphasis on material objects or
money that displaces spiritual, aesthetic, or
philosophical values.
Thorstein Veblen, in his book The Theory of the
Leisure Class, challenged the conventional
economic wisdom that consumers bought goods
for their functional utility.

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

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The Global Rise of

Consumerism
The ideology of consumerism has risen in
Russia, Asia, Latin America, the Middle
East, and even Africa.
It may be less a Western than a universal
phenomenon, coming with human nature,
economic progress, and cultural change
interact at a certain moment in a
modernizing society.
Once it takes hold, consumerism seems
irrepressible, but resistance continues.
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Consumerism as a
Protective Movement
The idea of collective interest in protecting
consumers dates back to the earliest transactions
between merchants and customers.
1870s when Populist farmers attacked railroads
Food and Drug Act of 1906
The 1960s and 1970s prompted another wave of
legislation to protect consumers and expand their
rights.
Consumer protection is today a major function of
government.

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

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The Consumer Product

Safety Commission
Created by Congress in 1972.
Directed by six major statutes that mandate it to:
Protect the public against unreasonable risks of injury and
death associated with consumer products
Help consumers evaluate the safety of products
Develop uniform safety standards for products
Promote research and investigation related to productrelated deaths, illnesses, and injuries.

Often cooperates with business.

Regulates every consumer product except guns,
boats, planes, cars, trucks, foods and drugs,
cosmetics, tobacco, and pesticides.
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The National Highway Traffic

Safety Administration
Created by Congress in 1966 to:

Mandate minimum safety standards for

automobiles, trucks, and their accessories.
Establish fuel economy standards.
Administer state and community highway safety
grant programs.
Conduct research on, and development and
demonstration of, new vehicle safety techniques.

No other agency has such extensive

controls over a single product.
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The Food and Drug

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

The Federal Trade Commission

The Environmental Protection Agency
Occupational Safety and Health Administration
The Food and Safety Inspection Service
The Securities and Exchange Commission
The Department of Health and Human Services
The Equal Employment Opportunity Commission
The Federal Deposit Insurance Administration
The Pension Benefit Guaranty Corporation
Transportation Security Administration

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Product Liability Law

Beyond regulation, a major restraint on
business is the ability of consumers to file
product liability lawsuits when they are
harmed.
The tort system is designed to provide
compensation to victims and to deter future
misconduct.
Product liability is the branch of tort law
that covers redress for injuries caused by
defective products.
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Negligence
A tort involves either an intentional or a
negligent action that causes injury.
Obstacles to consumers in early product liability
law:
Caveat emptor
Narrow interpretation of the doctrine of privity,
which held that consumers could sue only the party
that sold them the product

This legal protective wall for manufacturers was

broken down by the milestone case of
MacPherson v. Buick Motor Co. in 1916.
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Warranty
A warranty is a contract in which the
seller guarantees the nature of the
product.
An express warranty is an explicit
claim made by the manufacturer to the
buyer.
An implied warranty is an unwritten,
commonsense warranty arising out of
the buyers reasonable expectations.
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Strict Liability
The doctrine of strict liability established that
anyone who engages in a dangerous activity is
liable for damages to others, even if the activity is
conducted with utmost care.
The key to strict liability is that the injured person
need not prove negligence to prevail in court.
Under strict liability an injured plaintiff must prove
only that:
The manufacturer made a product in a defective condition
that made it unreasonably dangerous to the user
The seller was in the business of selling such products
It was unchanged from its manufactured condition when
purchased

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

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

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