Thursday, June 08, 2006

Questions on product liability and government

In the debate over amendments to the Trade Practices Act during 1992, there were a lot of statistics thrown about regarding the number of injuries and deaths arising from defective products in Australia. For instance, Senator Powell of the Democrats said, 'In relation to injury, illness and incapacity, it has been estimated that the figures indicate around 10,300 permanent injuries or illnesses for the whole of Australia for the few years covered by the survey [by the Trade Practices Commission], and around 500 deaths for the same period...An estimated 1,800 to 3,600 children are injured each year as a result of physical product failure with a higher, but unfortunately unquantifiable, number injured because of unsafe design. Figures for adults injured as a result of physical product failure ranged between 9,500 and 19,000.'

Last year I wrote that:
It is instructive to first look at what situations self-regulation would generally work. The great philosopher Montesquieu wrote in his Spirit of the Laws that "it is almost a general rule that wherever manners are gentle, there is commerce; and wherever there is commerce, manners are gentle." Samuel Richard added that "commerce makes him who was so proud and haughty, suddenly turn supple, bending and serviceable. Through commerce, man learns to deliberate, to be honest, to acquire manners, to be prudent and reserved in talk and action." This is not surprising when we consider the incentives at work in a business.

The first and foremost objective of a business is to make profits. Without the profit motive, no entrepreneur would take the risk of setting up a business in the first place. To achieve profits a businessperson needs to know what the market, or the consumer, wants. Hence, it is in the interest of the businessperson to be ethical in his or her relations with customers, largely due to reputational effects. One can regard this as true with one important qualification: there must be competition. In the absence of competition – a monopolistic situation – the incentives that pushed the businessperson towards, for instance, adopting corporate social responsibility, will no longer be strong enough to ensure ethical behaviour and human nature will take over.
In our daily dealings with businesses, reputational effects are ordinarily quite powerful. This is why franchises prize the 'good-will' factor so highly. But evidently there are numerous careless manufacturers causing pain and suffering, and reputational incentives aren't working to the degree they should - that is, 99.99% of the time. The inclusion of the strict liability mechanisms in the Act have had the effect of causing a large number of cases to be settled before they get to court. Companies are understandably more cautious now that it has been made much easier for a consumer to recover compensation.

Product liability laws impose a cost on a manufacturer that is perhaps a part of the government's legitimate role as impersonal arbitrator. With freedom comes responsibility, and if businesses cannot meet a reasonable standard then it is justifiable to have the government intervene. But where to draw the line? And why? If a 'balance' is to be struck how can we objectively decide this? In the speech linked above Powell proposes the onus of proof to demonstrate whether a product has a defect be placed upon the manufacturer rather than the consumer. It seems difficult to justify this sort of heavy-handedness, yet the fact that injuries and deaths are presumably continuing (I don't have the data on hand to show if they have reduced after the amendments to the TPA) suggests something should be done.

I tend to think that the government's role should be minimal. We need ways for people to sue and recover compensation for their injuries, but there is an important role for groups like the Australian Consumer Association which, according to Powell, highlights around 50 unsafe products each year. In other areas, and under circumstances where it's not a matter of life and death, I would strongly support these sorts of consumer associations. Government control of film classification for example, should be scrapped. People should be able to go to whichever voluntary association's ratings best fit with their morals and values. Associations of this nature are more likely to have an interest in the welfare of the people they serve. However in the case of product liability I am still unclear as to the appropriate role for government.


At June 09, 2006 11:00 pm, Blogger skepticlawyer said...

Part of the problem seems to stem from the increasingly sloppy nature of the duty test in negligence. The 'reasonable foreseeability' requirement became so broad that the imposition of strict liability represented an improvement - at least it had the merit of clarity.

OTOH, Senator Powell's figures seem inflated, or at least not finely calibrated. I'd be interested to what extent (if any) they include deaths and injuries from workplaces that in themselves were unsafe, quite apart from any unsafe product in use at the time.

This instantly raises issues (to a lawyer) of causation and apportionment, and doesn't really leave much scope for reversing the onus of proof. I'd need to see more recent figures and put in some careful think time before I'd support taking such a large step.

At June 12, 2006 12:09 pm, Anonymous Anonymous said...

I think my confusion was self-created. Product liability laws are justified by applying F.A. Hayek's test (found in The Constitution of Liberty):

'The requirement that the rules of true law be general does not mean that sometimes special rules may not apply to different classes of people if they refer to properties that only some people possess. Such distinctions will not be arbitrary, will not subject one group to the will of others, if they are equally recognized as justified by those inside and those outside the group.'

That is, if corporations producing goods recognise the need for special safety laws in relation to products (which the vast majority do) and the public, as represented by parliament, also recognises this need, then that law is just. You could apply the same analogy to restaurants, which invite special health laws. This idea makes sense, mostly because businesses implement this kind of stuff in their voluntary codes of practice anyway.

At June 14, 2006 5:33 am, Anonymous Nigels dirty nappy said...

My op's August 1st Mooey!

*handless cartwheels*

get on line!

At July 20, 2006 12:11 am, Anonymous Daniel Haszard said...

I took zyprexa starting in 1996 the year the FDA approved it, which was ineffective for my condition and gave me diabetes.

Zyprexa is the product name for Olanzapine,it is Lilly's top selling drug.It was approved by the FDA in 1996 ,an 'atypical' antipsychotic a newer class of drugs without the motor side effects of the older Thorazine.Zyprexa has been linked to causing diabetes and pancreatitis.

Zyprexa, which is used for the treatment of psychiatric disorders, such as schizophrenia and bipolar disorder, accounted for 32% of Eli Lilly's $14.6 billion revenue last year.

Did you know that Lilly made nearly $3 billion last year on diabetic meds, Actos,Humulin and Byetta?

Yes! They sell a drug that can cause diabetes and then turn a profit on the drugs that treat the condition that they may have caused in the first place!

I was prescribed Zyprexa from 1996 until 2000.
In early 2000 i was shocked to have an A1C test result of 13.9 (normal is 4-6) I have no history of diabetes in my family.

All the psychiatrist I've interviewed and the information on line presents zyprexa as a worse offender than the other Atypicals such as seroquel.My doctor has stopped prescribing zyprexa altogether.

The PDR classifies zyprexa as 'severe' for causing weight gain and diabetes and seroquel as 'moderate'.

Of course the 50 year old Thorazine didn't cause diabetes and is many times cheaper but it could cause tardive dyskinesia.

Where Eli Lilly's negligence comes in,is their KNOWING and not informing consumers (black box warning) until the FDA demanded it.

Lilly's incentive not to readily disclose is they had billion$ coming in from state medicaid scripts.
Daniel Haszard


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