Examples of product liability in action: Two Maryland men decided to dry their hot air balloon in a commercial laundry dryer. The dryer exploded, injuring them. They sued the manufacturer and won. A two-year-old child being treated for bronchial spasms suffered brain damage from a drug overdose. The hospital staff had clearly exceeded the dosage level prescribed by the drug manufacturer. The child's parents successfully sued the manufacturer.
Every marketing organization's activities are influenced by legal factors that establish the rules of the game. These laws, agencies, policies, and behavioral norms are established to ensure that marketers compete legally and ethically in their efforts to provide want- and need-satisfying products and services. The various US legal issues of which marketers must be knowledgeable include the following:
Every facet of business is affected by one or more laws. We will briefly discuss the three areas receiving the most notice in marketing: product liability, deregulation, and consumer protection.
The courts are increasingly holding sellers responsible for the safety of their products. The US courts generally hold that the producer of a product is liable for any defect that causes injury in the course of normal use. Liability can even result if a court or a jury decides that a product's design, construction, or operating instructions and safety warnings make the product unreasonably dangerous to use.
Many feel that product liability law is now as it should be—in favor of the injured product user. Consumer advocates like Ralph Nader argue that for too long, product liability favored producers at the expense of the product user. Advocates claim that the threat of lawsuits and huge settlements and restitution force companies to make safe products.
Deregulation means the relaxation or removal of government controls over industries that were thought to be either "natural monopolies," such as telephones, or essential public services like airlines and trucking. When regulated, industries received protection from renegade competition.
Insulated from competition, regulated industries in the past often had little reason to lower costs;. they concentrated on influencing the regulators to make favorable decisions. There was an unhealthy tension and costs rose, industries sought price increases, and regulators resisted, often depressing industry profits. That, in turn, reduced new investment and perpetuated high costs and poor service.
Industries such as the airlines, banking railroads, communications, and trucking have long been subject to government regulation. A market place shock wave hit these industries as they were deregulated. Each of these industries saw the birth of many new competitors attempting to take advantage of market opportunities uncovered by deregulation. The result was that competition intensified, prices were lowered, and many once-stable organizations suffered huge financial losses.
As new competition was permitted, and rate regulation was loosened or abandoned, the vicious cycle began to reverse itself. For example, airlines, once freed of restrictions, organized "hub and spoke" systems–outing passengers via major transfer points that provided more connections. In 1978, about 14 per cent of all passengers had to change airlines to reach their destination; by 1995, this number fell to about 1 per cent.
Since the beginning of the 20th century, there has been a concerted effort in the US to protect the consumer. Perhaps the most significant period in consumer protection was the 1960s, with the emergence of consumerism. This was a grassroots movement intended to increase the influence, power, and rights of consumers when dealing with institutions.
Marketers must always be aware of applicable legislation to avoid running foul of the law and incurring heavy fines, payouts and settlements.
The deregulation of the airline industry in the US led to many new airlines, new routes, lower prices, and decreased connections for passengers.