Wednesday, February 8, 2012

Daily Business Ethics Halacha #14

We are learning from Case Studies in Business Ethics by the late Rabbi Dr. Aaron Levine z"l professor of economics at Yeshiva University.


In chapter 2 Rabbi Levine deals with advertising and marketing. 

Questions: Should the law protect only reasonable, sensible, and intelligent customers who conduct themselves carefully in the market place?  Ir must it also protect ignorant consumers who conduct themselves carelessly?

On this issue American law has gone through a change.  Prior to 1914 the governing principle was the reasonable-man standard.  Accordingly, an advertiser could not be held liable for misrepresentation unless the court ruled that a reasonable man would rely on the false or deceptive message. 

In 1914 the Federal trade Commission (FTC) was established.  This independent government agency was given mandate to investigate unfair and predatory competitive practices, and to declare illegal all "unfair methods of competition and commerce."  In 1938 its mandate expanded to include preventing false and misleading advertising.

In its early history the FTC broke away from reasonable-man standard and adopted ignorant-man standard.  Professor Ivan Preston cites several examples, including a ruling that Clairol was forbidden to say that its hair dye would "color hair permanently."  The FTC deemed that the public would take this as a claim that all the hair that a person grew for the rest of their lives would emerge in the Clairol color.

Tomorrow we will discuss what standard Jewish law maintains in advertising.

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