IN BRIEF
- Corporations would do well to prioritize customer safety and privacy issues.
- Corporations should embrace a CSR outlook and view proactive efforts to enhance customer safety and privacy as opportunities for market differentiation and innovation.
- Investing to prevent problems will benefit corporations more than paying to solve or settle problems later.
This article is based on the chapter entitled “Customer Health and Safety, Marketing and Labeling, and Customer Privacy” written by the authors in the forthcoming ABA Deskbook on CSR. Authors of a companion chapter in the book have written on CSR and cybersecurity.
Product responsibility and customer care are core issues when discussing corporate social responsibility. Good corporate citizens must acknowledge, understand, and incorporate appropriate compliance on issues related to a company’s main business purpose: to sell goods or services to customers. That means that for companies that sell products, those products must be safe and must inform and sometimes warn customers of any potential issues with such products. Additionally, marketing and advertising for goods and services should also reflect the overall CSR policies of a corporate entity, including truthfulness and fairness of such materials. Finally, companies should also plan for and acknowledge potential or possible privacy issues when it comes to their customers’ data.
Corporate social responsibility is, at least in name, a relatively new phenomenon, although for lawyers it has always been a “thing.” Traditionally, members of the bar were expected to support their associations and their communities by contributing pro bono time and services. This can involve providing representation to indigent clients accused of crimes; assisting persons at or near the poverty line with no-cost legal assistance pertaining to credit, housing, or employment matters; or serving on, or advising, the boards of nonprofit organizations established to support need-based, educational, religious, or other assistance to the communities they have been established to serve. Viewed through this lens, corporate social responsibility has been, in a real sense, a long-standing component of law practice in the United States.[1]
The history of corporate social responsibility is generally seen as a product of the later 20th century,[2] but actions taken by corporations as early as the mid-19th century already demonstrated a desire by some companies to address criticisms of the new British factory system by supporting employee-oriented concerns.[3] Questions of motivations (whether employers were truly concerned with employee welfare, or had in mind business considerations such as enhanced employee productivity) and even legality aside (whether a corporation could properly discharge its duties to shareholders by expending sums for the benefit of employees), the arguments of reformers and the responses of some business owners at that time mark even those early dates as an arguable beginning for a kind of corporate social responsibility.
If an early vision of such a corporate social responsibility encompassing employee welfare became evident in the mid-19th century, it took longer before there was widespread recognition that customers at large should have some expectation of health and safety with regard to products now mass-produced by industrialized businesses. The development of product liability law in a modern sense can be traced to MacPherson v. Buick Motor Co.,[4] in which Benjamin Cardozo, then Chief Judge of the New York Court of Appeals, wrote a decision that dispensed with the doctrine of privity in negligence cases. Previously, the requirement that there be contractual privity between an injured party and the party which it sued had forced those injured by faulty products to sue parties which were usually distributors but not the manufacturers or parties ultimately responsible for the defect. Cardozo’s decision made it possible for a plaintiff to pursue the manufacturer because, with the requirement for privity removed, the harm from a defective item was now the responsibility of the manufacturer.[5]
Still, although McPherson eliminated one hurdle, others remained in place, including the ongoing difficulties of proving a close causal connection between the manufacturer and the injured party, the prevalence of a narrow view of the concept of product defects, and a somewhat welcoming view of defenses based on plaintiff misconduct or assumption of risk.[6]
It was not until later, during the 1960s, that a broader conception of products liability was realized. Many commentators[7] point to two prominent cases, Henningsen v. Bloomfield Motors, Inc.[8] and Greenman v. Yuba Power Products, Inc.,[9] and the final approval of Restatement (Second) of Torts § 402A,[10] as marking the arrival of a “modern” era in strict products liability law.
In Henningsen, the New Jersey Supreme Court struck down the notion put forward by the defendant manufacturer that it should benefit from private limitations on warranties. In Henningsen, the conclusion reached was that these sorts of limitations were not in the public interest; thus, manufacturers should not be shielded by such limitations from the harms caused by the products they had sold into the marketplace.[11]
In Greenman, the California Supreme Court embraced the theory that recovery for products liability, without regard for fault, should be grounded in tort law, not contract law.[12]
With the formal approval of section 402(A) of the Restatement in 1964 by the American Law Institute, there came into existence a set of fundamental rules to address the issue of strict products liability in tort.[13]
Although we now take these developments for granted, it has been only a little more than 50 years since these developments redefined issues of product safety and liability for corporations engaged in manufacturing goods.
Today, it is likely that notions of product liability or responsibility can be found as one of the component pieces of a large company’s statement of policy or commitment to “product responsibility,”[14] “extended producer responsibility,”[15] or “product stewardship.”[16] What originally began as a fundamental but relatively straightforward treatment of risk allocation and responsibility questions with regard to manufactured products is now evolved to a more nuanced and comprehensive approach to reducing health, safety, and environmental risks associated with consumer products. CSR can even be found in the impulse of some companies to take a lifecycle approach to these problems, which focuses not only on sustainable end-of-life management, but also incorporates waste management solutions that are the result of product design innovations and negotiations among multiple stakeholders.[17]
With regard to voluntary efforts at CSR, nonprofit organizations are at the forefront of some of the initiatives in this area and work closely with member corporations and governments to develop not only voluntary initiatives, but also recommendations about legislative solutions to issues related to product or producer responsibility.[18]
In the area of compulsory extended producer responsibility (EPR), the lead generally has been taken up by U.S. states, given that Congress has not been particularly active in this area.[19] Certainly, lawyers for corporate clients, regardless of whether working in-house or for external law firms, will already be aware of the growth of these initiatives and the need to be prepared to provide detailed feedback on existing legal requirements[20] as well as creative inputs when assisting their clients with the design and implementation of voluntary EPR programs.
Given that CSR can also be extremely contextual, lawyers have to understand the specific legal and regulatory environments which impact their clients’ businesses. For example, a lawyer representing an oil and gas company may have a different kind of marketing and labeling focus than a lawyer representing a food company, even while both are working to understand laws and regulations which are oriented around a focus on safety. In the same way, it is also possible that a lawyer working for or representing a company in one industry may be faced with a host of CSR-related questions and issues that are quite different from those coming across the desk of a colleague who works for or represents a corporate client in a different industry. Using the same examples noted above, a lawyer for an energy company may find that her client will benefit that company’s CSR programs account for and respond to current environmental concerns, whereas a retail food company lawyer might be more focused on issues relating to the safe sourcing or production of food in its stores, or on community-based initiatives related to the neighborhoods where its stores are located.
Another issue for lawyers to consider is that notions of what is voluntary or required are constantly evolving. In the case of food labels, the U.S. government has stipulated certain minimum requirements familiar to anyone checking a label for fat, sugar, or protein content, or parents looking to see which is the proper dosage of a children’s cough medicine, and these mandatory (regulatory) requirements are part of the cost of doing business in that particular industry. Separately, however, some companies have been able to differentiate themselves by going beyond what is required and using the platform of a label as a chance to essentially advertise the extra “goodness” of their product, either because of the quality or source of ingredients or other variables. However, consumers may also have something to say about whether a type of labeling should be mandatory. In this context, consider the example of the rejection by voters of Proposition 37 in California, which would have required, among other things, the labeling on raw or processed food offered for sale to consumers if the food was made from plants or animals whose specific genetic material had been altered in specific ways, and which would have prohibited the labeling of any such items as “natural.”[21]
With regard to voluntary actions, lawyers of a certain age will remember the Tylenol poisoning murders in the Chicago area in 1982, which resulted from drug and package tampering. All of the victims thought they were taking Tylenol, but actually died from ingesting tablets laced with potassium cyanide. Johnson & Johnson mobilized a comprehensive response that included introducing tamper-proof packaging to help restore customer confidence in the product. However, this was a classic case of a reactive solution to a problem that (at least in hindsight) was foreseeable. In the wake of the revelations following the Cambridge Analytica and 2016 election scandal that have enveloped Facebook, it is worth considering that a proactive approach may still benefit corporations focused on CSR and consumer safety and customer privacy. The fact that laws and regulations, such as product labeling requirements, become necessary in certain cases where voluntary self-regulation or self-assessment is absent or has failed, seems a cautionary tale. Corporations willing to embrace a CSR outlook and to view proactive efforts to enhance customer safety and privacy as opportunities for market differentiation and innovation may find that they are able to benefit from investing to prevent problems rather than waiting to find out the cost of solving or settling problems later if customer safety and privacy issues are not prioritized.
[1] Indeed, the history of the development of professional standards for lawyers in the United States can be traced back to at least 1836, when David Hoffman developed “50 Resolutions in Regard to Professional Deportment” and published them in a book entitled A Course of Legal Study.
[2] Archie B. Carroll, “A History of Corporate Social Responsibility: Concepts and Practices” in Andrew Crane, Abigail McWilliams, Dirk Matten, Jeremy Moon & Donald Siegel, eds., The Oxford Handbook of Corporate Social Responsibility 19–46 (Oxford University Press 2008).
[4] 217 N.Y. 382, 111 N.E. 1050 (1916).
[5] Richard A. Epstein, The Unintended Revolution in Product Liability Law, 10 Cardozo L. Rev. 2193, 2199 (1989).
[7] See, e.g., id. at 2199–2203; Kyle Graham, Strict Products Liability at 50: Four Histories, 98 Marquette L. Rev. 555, 556.
[9] 377 P.2d 897, 900 (Cal. 1963).
[10] Restatement (Second) of Torts § 402A (1965).
[11] Epstein, supra note 5, at 2200–01.
[12] Graham, supra note 7, at 556; Greenman, 59 Cal. 2d at 61, 377 P.2d at 901, 27 Cal. Rptr. at 701.
[13] Restatement (Second) of Torts § 402A (1965) (although approved in 1964, section 402A was not formally published until 1965); Graham, supra note 7, at 556.
[14] See, e.g., BMW Group, Product Responsibility (last visited Apr. 3, 2018); Daimler, Product responsibility (last visited Apr. 3, 2018).
[15] DHL, Extended Producer Responsibility (last visited Apr. 3, 2018).
[16] Dow-Dupont, Product Stewardship (last visited Apr. 3, 2018).
[17] Product Stewardship Institute, Overview and Mission (last visited Apr. 3, 2018).
[18] Id.; GRI, About GRI (last visited Apr. 3, 2018).
[19] Jennifer Nash & Christopher Bosso, Extended Producer Responsibility in the US: Full Speed Ahead?, 17 J. Indus. Ecology, 2, 175–85 (2013).
[20] Product Stewardship Institute, State of U.S. EPR Laws (last visited Apr. 3, 2018).
[21] Ballotpedia, Text of California Proposition 37 (November 2012) (last visited May 21, 2018).