Why ‘Buyer Beware’ Is Bad for Business

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An ethicist argues that we must abolish caveat emptor and mandate truth in advertising. If that can be done, he says, it’ll be good not only for consumers, but businesses and the economy as a whole.

Dr. Bruce Weinstein, known as The Ethics Guy, plainly says
“Let’s Abolish Caveat Emptor” in BusinessWeek. Ethically speaking, how can you argue with that? It’s wrong to mislead someone into buying a product that doesn’t work as expected. It’s called a rip-off, and it’s the way a lot of business is done. The smart consumer assumes this, and plans, researches, and triple-checks refund policies accordingly.

Dr. Weinstein is so bold as to imagine a world where the consumer can—get this—actually believe that the message presented by advertisers is the truth. How crazy is that?

It’s obvious why such a scenario would benefit the buyer. Why does Dr. Weinstein say truth-in-advertising would also be good for the seller? Because that’s the only way sellers have a prayer of gaining the trust—and therefore the business—of the buyers. Dr. Weinstein writes:

The full, unvarnished truth has been treated with such indifference by many in the business community for so long that taking advertisements at face value is ridiculous. But this is why it’s no longer feasible for businesses, whatever sector they’re in, to trade in less than the truth. Treating consumers with respect, which means, in part, telling them the truth, is the only way companies can hope to turn a cynical public around and restore their faith in commerce.

In theory, I love this idea. Every consumer must. Where he loses me is the word “restore.” I agree that people have lost their “faith in commerce,” but I’m not so sure all that many people really believed in it in the first place. Not in the sense that they actually accepted what was said by advertisers blindly. Maybe I’m naïve about just how naïve people can be.

The financial crisis, Weinstein says, “grew out of the false belief that not only does prosperity involve placing profits ahead of people—it requires this.” He brings up the example of subprime mortgages. Lenders had to know that high-risk clients weren’t going to be able to pay back their loans, and the banks didn’t seem to care. By the time the homeowner defaulted, the loan would be sold off to someone else, and therefore someone else’s problem. Of course, such loans are everyone’s problem now. Weinstein writes:

Making money without regard to how the money was made turned out to be not merely unethical; it was bad for business, plain and simple.

Unfortunately, many businesses don’t see it this way, and they never will. There are plenty of bank executives who are doing just fine nowadays. Few businesses would turn down easy short-term profits, even when they come at the price of long-term corporate feasibility, let alone any sense of the greater economic good of society. When the opportunity arises to make a buck, you make it: That, unfortunately, is the only business ethos.