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MODULE 41: Customer Deception: Who's to Blame?
Core Module Issues:
• When are customers “unacceptably deceived”?
• When customers are mislead, who is most to blame?
Module Teaching Notes
This module begins a new unit on special obligations to customers. No business can continue to
operate without customers, obviously. But, assuming that companies are able to stay in business,
do they have additional ethical obligations to treat customers well? Or do they merely need to be
“good enough” to keep customers from leaving?
If you like, you might return for a moment to stakeholder theory from unit 2 and recap some of the
highlights.
The six modules in this unit will examine that basic question from several angles.
In this module, we will examine deception. Lots of companies, at least to some degree, mislead
customers by exaggerating, through manipulative advertising, etc. But some are much worse than
others.
The scenario is inspired by the real Sears Auto Center case from the 90s. In that case, Sears went to a
commission-heavy system of compensation that paid more to workers who sold more repairs. In an
undercover operation, state of California were send to many store locations, and at nearly all of them,
unnecessary repairs were recommended.
When this kind of thing happens – when customers are sold goods and services that they clearly don't need
– who is to blame? Executives who set compensation policies in the first place? Store managers who are
in charge “on the scene”? Lower level employees who lie to customers' faces?
Or is it customers themselves who should be more savvy?
See if you can get students to describe situations in their own lives in which they felt taken advantage of.
Some students will vent in humorous ways.
If you wish, and if you are using all of these modules, you might also draw parallels between this module
and the one that featured the SUV fire. If the first person in the chain of events that leads to customer
deception most to blame? Are the store clerks who are last in the chain most responsible? Do the students
have the same ideas in the watch repair case and the SUV fire case?
Since I haven't mentioned this in awhile, a final point that I've raised before:
Try to get comments from students who have rarely participated in the course to this point. Even a few
contributions are good public speaking practice, and a goal of the course is to get the students exposed to
as many ideas and opinions as possible.
Discussion Points for Scenario Questions
1. If the company’s customers are misled and sold watch repairs that they do not need, assess
the amount of blame that falls on each of the following:
Person Little Blame --------------------------------→ Substantial Blame
Deputy CFO 1 ----- 2 ----- 3 ----- 4 ----- 5 ----- 6 ----- 7
Vince (repair tech) 1 ----- 2 ----- 3 ----- 4 ----- 5 ----- 6 ----- 7
Jenny (clerk) 1 ----- 2 ----- 3 ----- 4 ----- 5 ----- 6 ----- 7
Lewis (manager) 1 ----- 2 ----- 3 ----- 4 ----- 5 ----- 6 ----- 7
A. TO WHOM DID YOU ASSIGN THE MOST BLAME? WHY?
B. TO WHOM DID YOU ASSING THE LEAST BLAME? WHY?
2. In the background material, the example of a grocery store “hard selling” small items like
candy bars was raised. Is the watch repair practice any worse? Is there any difference between
aggressively selling simple items like candy bars and complex services like watch or auto repair?
A. SAME – BUT AREN'T YOU LESS CERTAIN OF COMPLEX ITEMS, AND
WHAT MAINTENANCE THEY MIGHT OR MIGHT NOT NEED?
3. If you paid $89 for a watch repair and afterward you saw a news report of the suspected
fraudulent overselling of watch repairs by the chain of stores, how would you react? Being
realistic, would you try to get your money back? Do nothing? Seek to sue? Would you ever go
back to the store? Would you complain to others about the store and encourage them never to go
there?
A. DO NOTHING – WHY? BECAUSE IT IS EASIER? DO YOU HAVE ANY
OBIGATION TO HELP OTHERS AVOID THE SAME FATE?
B. DO SOMETHING – WHAT? DEMAND A REFUND? SUE? WARN
OTHERS? ALLOF THE ABOVE?
4. Suppose that a lawsuit was filed and that you were selected as a juror. Suppose further that
the plaintiffs laid out a strong fraud case. In fraud cases, juries usually have two options. First,
they can choose to award plaintiffs only compensatory damages, which are meant to cover their
losses (pay them back for the money spent on unnecessary repairs, in this case). Second, juries
can award compensatory and punitive damages. Punitive awards are piled on top of
compensatory damages, and they are meant to punish a defendant beyond payment for the losses
actually caused.
As a juror, would you award compensatory damages alone to the fraud victims, or would you
add punitive damages as well? If you would award punitive damages, would they be small, large,
or extremely large?
A. REGULAR DAMAGES – WOULD YOU GIVE PUNITIVE DAMAGES IN A
MORE EXREME CASE?
5. What remedy should the Florida government seek against the business? A cash penalty?
Should it seek to prohibit them from operating in the state?
A. CASH PENALTY – IN WHAT AMOUNT?
