In the Western moral tradition, buying and selling involves marketing of various products and services to various individuals and groups. Thus advertising is an essential part of business enterprise. The longstanding idea here that "fair" business transactions must be based on rationality and free will of both buyers and sellers; that is, both must know what is being offered and be able freely to reject or accept offers based on self-interest. Historically, marketing certain kinds of products and services to vulnerable buyers (that lack either rationality or free will) has been viewed as morally problematic. Potentially vulnerable buyers include: children, poor people, sick people, desperate people, people that speak other languages, and or old people.
Brain science now recognized two major systems in the brain that are responsible for all decisions, including buying decisions: System I (fast decision-making) is located, primarily, in the central regions of the brain which is responsible for emotions. Marketing experts induce consumers to purchase various products and services by manipulating emotions: usually fear and sex. System II (slow decision-making) is located mostly in the cerebral cortex and is responsible for slow, rationally-based decisions. Marketing based on System II, pleads to consumer rationality, and therefore tries to logically convince consumers, by arguing that the benefits outweigh the costs.
Traditionally, business ethics has focused on System II, whereby buying decisions must conform to the principle of informed consent, which means that forcing people to buy something they really don’t want (by telling lies) is regarded as fraud in the inducement a form of theft. Fraud usually involves the presenting false information to buyers in order to sell a given product or service. It is an intentional attempt to trick System II reasoning. A classic example of fraud involves telling potential buyers that you are selling a Cadillac when it’s really a Ford.
In recent years, a growing number of marketing strategies do not plead to rationality; but rather plead to System I emotions. Marketing home security systems, invariably, invokes the fear of strangers breaking into your home. Marketing erectile dysfunction drugs, invariably depict good-looking elderly couples that are about to engage in pleasurable sexual intercourse.
Effective marketing strategies usually involve the manipulation of both systems. But what are moral/legal limits of marketing? Are there limits on how far sellers can go in manipulating consumer rationality and emotionality?
Stockholder Theory argues that marketing ethics is bound by the Liberty Principle, and therefore rational competent buyers and sellers have a moral and legal right to engage in business transactions, based on their own self-interest. Its mantra is best described as “Buyer Beware.” Some buyers are cognitively unable to “beware” because of diminished rationality or free will. Diminished rationality might include low IQ, a lack of knowledge or education, or speaking another language. Diminished free will might involve physical/emotional addiction to various products and services, or the unwanted exercise of influence by third parties. Buyers, who lack either rationality and/or free will, often make purchases that others find irrational and/or harmful. In recent years, hoarders have become increasingly common; that is buyers who are especially vulnerable to System I and System II marketing. I have several friends who own 20-30 guitars, and cannot resist buying more. Do guitar stores have a moral obligation to ask prospective buyer, how many guitars they already own? If they already own 20 guitars, do those stores have a duty to refuse to sell them another one? Or at least contact the buyer's wife? What if the buyer is a multi-millionaire and also owns 10 homes? Stock holder theorists argue that sellers cannot reasonably, be held legally or morally accountable, unless there is outright fraud committed. Unwise transactions may, however, be subject to paternalistic intervention by other third parties; such as parents, friends, adult children, physicians, and others. However, laws are necessary only to the extent that they monitor and enforce rules against “fraud in the inducement.” Therefore, at most, Stockholder theorists argue that potential consumers must be warned of non-obvious risks. False advertising, invariably involves either lying about the quality or price of any advertised product or service. In the modern era, false and/or misleading marketing is often revealed by private consumer groups and the media.
Stakeholder Theory, argues that corporations have moral responsibilities to consumers beyond the Liberty Principle. Therefore, marketing products and services may involve other moral principles: especially, Utility, Non-Maleficence, and Justice. One might argue, for example, that marketing unhealthy breakfast cereals to children has contributed to our ongoing obesity epidemic, and therefore, this negative utility ratio suggests that cereal marketed to children violates the principles of non-maleficence and/or utility. The same hold true the marketing of tobacco, alcohol, and/or firearms to children. Sometimes toys are deemed unsafe for children of various ages. For example, toys with small parts might present a choking hazard for infants. Toy guns that look like real guns are also dangerous.
In a self-interested world dominated by mass communication and computer technology, false advertising is probably inevitable. Indeed, false advertising is partially supported by a longstanding traditions in the advertising industry that condones the telling of "white lies" in advertising. Sometimes these white lies make claims so outrageous that any rational person ought to know that they are false. For example, the old Keystone Beer commercials promised consumers a visit from the Swedish Bikini Team. Soft drink advertisers promise to make our lives more exciting, vitamin advertisers promise to make us feel and look younger etc. But the line between white lies and black lies is not always very clear.