WA, reply to post #276
WildAlaska said:
Quote:
the real problem is product liability law as it stands. It allows consumers to sue the manufacturers even when they misuse the product based on product liability law as it stands.
John is that true in EVERY jurisdiction...you have 50 different product liability rules ya know.
And almost all of you ignore the economic aspect which is the foundation of virtually all tort law as it stands.
WA,
product liability law is more severe in aviation industry AFAIK since it allows manufacturer to be sued if the operator's asset/insurance coverage was not adequate.
In general, product liability law allows manufacturer to be sued even if the consumer misused the product so long as consumer negligence/misuse was foreseeable.
The economic aspect of litigation was and is widely researched in peer reviewed journals. General findings are:
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1. acts like tax in creating a drag on economic growth...basically, it decreases economic growth.
2. more litigation there are in particular industry, lesser the growth in that industry
3. product litigation has negative effect on employment in that industry
4. points 2 and 3 has being found to apply across variety of industry, not just 1 or 2 industry
5. points 1-4 are expected according to general theory of finance and have being observed to be true.
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If FA spent $500K-$1M on this lawsuit, that means FA have that much amount less to spend on hiring new employees and developing new product. But this is not the only cost. In order to avoid future lawsuit, other firm will moderate their product line to avoid future lawsuit. Not only that, these kind of lawsuits raises insurance premium over the long run for companies in that industry. And in the end, it's the stockholders and consumers who will pay.
My expertise is in finance and economic. I have had only 1 graduate course in business law. In research literature in finance and economic, effect of litigation is widely studied and its negative effects are well known.
In case people are wondering how to keep shoddy companies in check, its competition and WOM(word-of-mouth) and negative publicity. Negative publicity depresses stock price and sometime sales. More competitive that particular industry is, greater accountability is enforced since other companies are striving to take business away from shoddy companies.
http://www.mallenbaker.net/csr/CSRfiles/crisis02.html
1982: when JNJ's product was contaminated by 3rd party and when it became known, their market value fell by $1B. When a similar incident happened in 1986, JNJ responded by creating a tamper proof package. Findings in peer reviewed research literature in finance is that negative publicity depresses stock price. According to research at Wharton (probably No. 1 business school), negative WOM results in significant loss of business to a retailer.
mallenbaker.net said:
In 1982, Johnson & Johnson's Tylenol medication commanded 35 per cent of the US over-the-counter analgesic market - representing something like 15 per cent of the company's profits.
Unfortunately, at that point one individual succeeded in lacing the drug with cyanide. Seven people died as a result, and a widespread panic ensued about how widespread the contamination might be.
By the end of the episode, everyone knew that Tylenol was associated with the scare. The company's market value fell by $1bn as a result.
When the same situation happened in 1986, the company had learned its lessons well. It acted quickly - ordering that Tylenol should be recalled from every outlet - not just those in the state where it had been tampered with. Not only that, but the company decided the product would not be re-established on the shelves until something had been done to provide better product protection.
As a result, Johnson & Johnson developed the tamperproof packaging that would make it much more difficult for a similar incident to occur in future.
http://knowledge.wharton.upenn.edu/...OKEN=70635062&jsessionid=a830a8aa764231630365
Stephen J. Hoch/Wharton said:
Results of The Retail Customer Dissatisfaction Study 2006 -- conducted by The Jay H. Baker Retailing Initiative at Wharton and The Verde Group, a Toronto consulting firm, in the weeks before and after Christmas 2005 -- show that only 6% of shoppers who experienced a problem with a retailer contacted the company, but 31% went on to tell friends, family or colleagues what happened. Of those, 8% told one person, another 8% told two people, but 6% told six or more people. "Even though these shoppers don't share their pain with the store, they do share their pain with other people, apparently quite a few other people," says Hoch.
Overall, if 100 people have a bad experience, a retailer stands to lose between 32 and 36 current or potential customers, according to the study.
--John
