This morning I had to buy cigarettes at my local corner store. And yes, I mean "corner store". I live far enough out in the sticks* that I have a privately owned little sandwich, drink, snack and cigarette shop instead of a nice shiny 7-11 or Wa-Wa, High's, Royal Farms or Sheetz. (Those are the local versions, I know other areas have others, such as Little Sue, Rutter's and the like.) Anyway, in going to a small shop I ran into the common problem of cigarette smokers in such stores, the absence of my usual brand. Having to buy Marlboros for the first time in several months, maybe longer, I was struck by the strange writing on the little strip used to remove the cellophane. Instead of just being a normal white or gold strip, this one had writing along it reading "Nothing about this cigarette, packaging, or color should be interpreted to mean safer." over and over again.
Obviously, this was an attempt by Phillip Morris to avoid any lawsuit liability based on those silly claims that they had misled people into thinking "light" meant "safer", and thus shake down the big cigarette makers for yet another state and lawyer windfall, likely smaller than the first attempt at multistate extortion ("The Truth"), but still profitable. All of which led me to think about the legal theory behind such suits, and our thoughts on advertising and product liability in general.
The original law was simple, and consistent, though at times people might find the results of its application objectionable. Advertising was unlimited, you could say anything you liked. It was up to the customer to cut through the claims to judge which were likely true and which just hype. Or, if he could not, he had a second recourse, he could ask you to put it in writing. You see, despite the criticism of the principle of "caveat emptor" in sales, it did offer the buyer one protection. He could insist the sales contract embody the claims of the seller. If you said your tonic grew hair, he could ask that the contract guarantee hair growth. if you refused, then he had a pretty good idea how true your claims were.
Of course, the burden was symmetrical, the burden was on the buyer to also make sure the contract contained everything he wanted to buy, as the seller was only obligated to provide what was offered in the contract. ("In Praise of Contracts") If it wasn't in the contract, the assumption was that neither party had agreed to exchange it. It could be harsh at times, if you bought, say, medicine from a manufacturer and failed to notice there was no promise of safety in the contract, and thus suffered ill effects with no recourse, but it was the logical extension of contract law.
Contracts, for lack of a better description, were the means for creating private law. With the law itself covering a relatively small percentage of human interactions, mostly the criminal violation of rights and a handful of unintentional injuries occurring between strangers, the contract filled in to provide rules governing part of the remaining interactions. But, being consensual agreements between individuals the law had little to say about how contracts were written or interpreted. It required that both parties agree ("offer" and "acceptance" in contract terminology), that something of value be involved ("consideration"), at least if it was to be legally enforceable, but beyond that, the law largely left the terms up to the parties. However, one consequence of this was the assumption that the terms reflected the full intention of the parties, that they had discussed the agreement and that everything they wanted was embodied in its terms. And so, if something was omitted, then the assumption was made that neither party had agreed to that item. Presuming guarantees that were not written would have amounted to forcing parties to exchange something more than they had agreed, and that ran contrary to the whole concept, and so the courts decided if one party wanted such a guarantee, it would have been included.
It was a very simple law, and easily understood, and, most important of all, it was consistent. A contract written one hundred years ago could still be enforced today exactly as intended at the time, since the terms were entirely defined by the contract itself. But that was all to change, and consistency was about to fall before compassion. After a number of cases tailor-made to create public sympathy, from cars with collapsing wheels to medicines sold dissolved in a lethally toxic solvent, the principle of "caveat emptor" was strenuously attacked by those who sought to reform the law to make it more compassionate.
The argument offered was that, with the dawn of the modern industrial age, the buyer was not in a position to bargain for himself, he could not insist on contracts guaranteeing his security, and so it was in the interest of society to enact laws to protect him. The first step being the elimination of the old principle of buyer beware, and the substitution of certain legal assumptions, most notably the assumption of a an implied warranty of safety.
At this point, some readers may wonder what my objection is to this change. After all, it is simple a shift in the burden of the contract. Before we assumed there was no promise of safety unless stated, now we assume one unless excluded. How does this endanger the buyers, the sellers or the nation as a whole? After all, there were horrible problems, such as poisonous medicines and defective goods, why not protect against them?
For the moment, I will ignore the later consequences, though as I will show later, they were inherent in the assumption of safety. And for the moment I will also skip the other problems inherent in the principle adopted. Instead, I want to look at one other problem with this argument, the incorrect assumption that the state had no choice but to intervene, that caveat emptor was inherently dangerous and needed reform.
The problem was not so much caveat emptor, nor the size of the companies involved, not even the inherent nature of large scale consumer culture. The real problem was that we were in an age of transition, which also happened to correspond with an age of political activism, and thus problems arose which had never before been encountered, and before the market could adjust,t he government dove in and made changes.
For example, the common complaint of the reformers that buyers could not negotiate for warranties of safety shows nothing so much as an ignorance of the market. The fact was, these issues only truly arose with the much publicized cases in question. Prior to that, the public had not expended much thought on the generic sales contracts of the new age. However, once the problem of defective goods leaving no recourse for the buyer became common knowledge, the public would begin to ask for such changes, and, as the industrial sector grew and new sellers began to compete, these sort of guarantees would become a means of competition. If the public wanted such warranties, there would be a seller willing to provide them, they were only missing at the time as they had not previously been considered important.
Similarly, truth in advertising laws were adopted just slightly later, basically on the same principle, the assumption that the public was unable to demand advertisers reflect the true qualities of their goods. However, in this case, I think the state may have adopted a cause the public at large cared little about. If anything, the advertising of the early industrial age was tame compared to advertisements going back to colonial days. The new ads were much more common, and received more attention, but they were no more dishonest than advertisements had always been. And the public, for the most part, did not seem to care. They hardly avoided those who placed the most absurdly excessive ads, nor did they favor those whose ads were the most restrained. It seems, despite the claims of many reformers that the public was easily misled**, that the public, for the most part, could see through the hyperbole of advertisement, and didn't mind a bit of hucksterism.
However, had the public been unhappy, and wanted the reforms the government enacted, then the solution would have been, not to involve the state, but for the public to frequent those who offered the most honest advertisements, and eschew those who made excessive claims. History, and modern experience, shows the public is completely capable of organizing such boycotts on its own, or even doing so on an informal basis, with individuals deciding to avoid those sellers with whom they have complaints. So there was no need for the state involvement.
However, needless or not, did the changes do any harm? I would argue they did.
First of all, they introduced a certain amount of inconsistency into the law, an arbitrary decision. What is a safe product? What is a dangerous one? What is a defective good? At first this simply meant goods which deviated from the formal design, but that was too narrow for the reformers, and they declared certain designs inherently defective. However, this leaves the manufacturer in a bind. How can he know in advance if his design will be seen as unacceptably dangerous? Under the principle of caveat emptor, he knew what he sold, and knew what he was promising, but under this principle, he could be found liable even though he delivered precisely what he promised.
Which gives us the second problem. The law became a shifting target. A given design could be acceptably safe today, when I sold it, and even safe in a year, but in two years it be found unacceptable. Or perhaps the idea of what was promise din a sale might change and I might be found to have not delivered on some implied warranty. Suddenly, a contract could be acceptable one year and could support a liability suit the next. I could not know in advance if I was subject to a suit. And worse, I might think the courts had cleared me only to find in a future suit it was not true. By changing the law from a contract containing only what I promised to one containing implied promises, a seller could find himself on the hook years after the sale for an implicit promise he never made, and one he could not have waived as the principle upon which it was based was not known at the time of the contract.
And yet the laws became even worse. As I mentioned, truth in advertising was the next step, but that was just the beginning. After a time, implied warranties were not enough. Sellers began to add waivers and thus avoid liability. And thus, because it was assumed buyers could not protect themselves in this unequal bargain, the law began to ignore waivers arguing, on the same principles that justified ending caveat emptor, that buyers were either incapable of understanding the waivers, or else lacked the bargaining power to make a valid agreement. And so, sellers were not only on the hook for explicit promises they made, or for implied warranties, they also could not waive these warranties, even if they and the buyer wished to do so.
And it just gets worse from there. Year after year, based upon the assumption of a powerless, incompetent, easily misled consumer, the law extended ever wider the liability of anyone selling a good or providing a service. Eventually reaching the point where the assumption of incompetence leads to the disclaimer that started this all.
Think about that disclaimer and ask yourself what it means. It means, at its most basic, that Phillip Morris is worried that they will be sued without such a disclaimer. And on what basis? On the basis that the color or name of their product might, in the mind of some attorney, somehow hint that their product is safe, and thus they would be subjected to lawsuits dunning them for millions, even billions of dollars. It is something that no one would have even imagined a century ago, and yet today, it is largely ignored. We are so used to nuisance suits, to the presumption of consumer incompetence and the malevolence of sellers, that we mostly ignore the endless disclaimers, waivers and warning labels around us. It is a troubling fact to realize, how much we accept and how little we think about the true meaning of these things.
Then again, perhaps I am reading too much into a cigarette wrapper. Though I am not so sure. After all, if the lack of such a wrapper could cost a company billions of dollars, it seems that wrapper should deserve at least a little bit of thought on my part.
* Actually, when I lived in "the big city" (Baltimore), I had a corner store as well. It is funny that the backwoods and big city have that one thing in common, a preponderance of small, privately owned little convenience stores and grocers. To be fair, I am only 10 minute from downtown Annapolis (depending on traffic), but any Marylander (outside of Baltimore, where they seem to forget the rest of the state exists) will tell you, the South River divides Anne Arundel County neatly in half between the relatively developed northern half and my much more rural southern half. So, despite being in what amounts to an Annapolis suburb, it is still the sticks for all intents and purposes.
** As I have written elsewhere (eg "Liberalism, Its Origins and Consequences") the assumption that the majority is incompetent and needs to be told what to do lies at the root of most forms of intervention and modern authoritarian states.
My earlier thoughts on liability law can be found at "The Virute of Novelty and the Value of Tradition", "Still More on Liability Law", "Liability Law and Cost-Benefit Analysis", "Victim as Judge", "The "Right To Sue" As Our Only Right", "Skewed Perspective , or, How Big Government Becomes Inevitable".
Despite the obvious relevance, somehow I forgot to link my essay "Consumer Protection".