Jewish Business Ethics: Proper Marketing and Selling
Wed, 04/24/2013
Jewish Week Online Columnist
Rabbi Shmuly Yanklowitz
Rabbi Shmuly Yanklowitz

There is a famous business concept called caveat emptor (buyer beware). In secular society, as long as a seller does not blatantly lie or actively conceal a defect, it is the full responsibility of the buyer to exercise due diligence and to inspect what is being purchased. Jewish law takes a totally different approach: It is presumed that no defects or problems exist in a product or property if they are not disclosed explicitly by the seller.

We are well aware of fictional examples in literature and old movies of the quack doctor who promises miracle cures. This goes further back than you might think, and was prevalent in the entire Western world. One of the more famous comic Italian operas is Gaetano Donizetti’s L’Elisir d’Amore (“The Elixir of Love”), in which quack Dr. Dulcamara (“Bittersweet”) touts an elixir that cures everything from apoplexy to diabetes, though it is actually just repackaged Bordeaux wine. In this country, the creation of the Food and Drug Administration (FDA) in 1906 regulated the drug industry in a helpful way, so that drugs no longer contained dangerous substances like cocaine, heroin, and opium. However, new marketing schemes have continued to emerge and flourish as long as people were unaware of the deception. In the 1920s, for example, numerous “miracle” cures based on radium were sold to the general public in everything from water to bread to suppositories. Today, of course, companies sell radon detectors so homeowners can tell if there is radon gas (and thus a risk for lung cancer) in their basements.

In looking back to these bygone eras, we should not feel smug about how sophisticated we are today, for we still are fooled by deceptive marketing practices. You may think that that bottled water has to come from a pristine spring in the wilderness, that “natural” is just as good as “organic,” or that the FDA has accurately defined and regulated all these terms. If so, you are in error.

For example, many people drink bottled water, unaware that the source of that water is ordinary tap water.  Nestlé’ Waters’ 5-gallon bottles of water come from the municipal tap water of Woodridge, Illinois, while Aquafina (owned by PepsiCo) also bottles its water from municipal tap water. Even worse, a Coca-Cola subsidiary makes “Vitaminwater,” which sounds like healthful, vitamin-fortified water, but at 130 calories and 33 grams of sugar it is quite the opposite. To make matters worse, several government- and privately-sponsored studies have concluded that tap water is more closely regulated than the bottled water industry. (Additional benefits of drinking tap water instead of bottled water include less waste disposal and lower spending.) In our search for healthy food products, we see labels such as “natural” as well as “organic.” The U. S. Department of Agriculture regulates and certifies the production of organic food, and excludes many harmful substances: “Synthetic fertilizers, sewage sludge, irradiation, and genetic engineering may not be used.” For multi-ingredient food items, a label of “organic” means that at least 95 percent or more of the content must be organic.

What about “natural” food? The FDA has this to say about “natural”: “[The] FDA has not developed a definition for use of the term natural or its derivatives.” Thus, all those pesticides, genetically modified food, and “sewage sludge” that are excluded from organic food may well be in “natural” food, and these are not required to be listed on the nutrition label. Unfortunately, many large agribusinesses have subsidiary companies that sound small and organic, but which use food that have pesticides and other harmful substances.

Finally, many people are concerned about consuming too much sodium, but will “reduced” or “low” sodium products be a better option? Fortunately, there are definitions here, but you may still take in far too much sodium. Of the two, “low sodium” is often the best option, as it means 140 mg of sodium or less per serving (don’t forget to check the serving size as well). “Reduced sodium” means at least 25 percent less than the regular product. Thus, if a “normal” soup contains a staggering 900 mg of sodium per cup, the reduced sodium version can have 675 mg per cup, which in a 2.5-serving can would still give you nearly 1,700 mg of sodium, already more than the daily suggested serving for children, older adults, and people with diabetes or advanced kidney disease.

In consumer cases, the Federal Trade Commission sometimes catches the more outrageous marketing schemes. In 2012, for example, they successfully ordered Oreck to stop claiming that their vacuum cleaners could reduce the risk of flu, asthma, and other airborne illnesses, and forced Nivea to stop claiming that its skin cream could make people lose weight. However, the FTC also acted against a more insidious trend to mask commercials as news stories.  The FTC forced the cessation of fake news sites such as “News 6 News Alerts” and “Health News Health Alerts” by six companiesselling acai berry weight-loss programs. These companies used fake news sites to pretend that major media organizations had aired stories confirming the false claims of weight loss.   

The American concept of caveat emptor is unjust, as it presumes that the consumer has as much power and ability to find good information as huge corporations do to spread the bad kind. We should be smarter consumers but the onus ultimately should be, as in Jewish law, almost completely on the seller to actively reveal any problems. If the owner does not disclose problems or defects, they have violated the prohibition of geneivat da’at, deception (Choshen Mishpat 228:6). If a product has a defect that is not actively disclosed then the buyer has the right to return the item for a full refund (Choshen Mishpat 232:3), since the transaction was a mekach ta’ut, false sale. This disclosure may not be broad but must be very specific to the problem (Choshen Mishpat  232:7). To determine whether or not a certain type of defect needs to be disclosed, we employ minhag hamakom, the customs and norms of the land/region (Choshen Mishpat 232:6). With the marketplace as complex and convoluted as it is, it is only just to shift responsibility for improper marketing to the seller.


Rabbi Shmuly Yanklowitz is the Founder and President of Uri L'Tzedek, the Senior Rabbi at Kehilath Israel, the Founder and C.E.O. of The Shamayim V’Aretz Institute and is the author of "Jewish Ethics & Social Justice: A Guide for the 21st Century.” In 2012 and 2013, Newsweek named Rav Shmuly one of the top 50 rabbis in America."

 

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Rav Shmuely,
Great article. Thank you. I'd say though that "American Law", particularly in practical application in many (and maybe all) states has more to say on caveat emptor. For instance, under the consumer protection statutes (in many states), common law fraud, various statutes, equity and other causes of action, a seller can certainly be liable (and possibly even have to pay the other side's attorneys fees and face punitive-like damages as well) for selling a product with undisclosed defects. Deceptive conduct and even inactive fraud and misrepresentation can be actionable. Further, product liability cases can have strict legal liability standards imposed on sellers, manufacturers and wholesalers. As always, thank you for getting the discussion going! Brem Moldovsky, Washington Crossing, PA

Send this to the OU.

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