ethics and the golden arches
DESCRIPTION
McDonald's Advertising to Children and Healthy EatingTRANSCRIPT
Ethics and the
Golden Arches
by Trisha Bodenhemier
Chito Peppler
forProfessor John Dunfee
Business EthicsMarch 3, 2011
2
TABLE OF CONTENTS
Cover Page 1
Table of Contents 2
Executive Summary 3
Background1 General Atmosphere
42 McDonalds
6a. History
6b. Charity
6 3 Parham vs. McDonalds
7a. General
7b. Supporters
8c. Opponents
8
Conflicting Studies1 National Bureau Of Economic Research: Working Paper 15862
92 Fast Food FACTS: Evaluating Fast Food and Marketing to Youth
9
Ethical Evaluation 10
Conclusion 16
3
Executive Summary
A health crisis is sweeping the nation and if left unchecked, the economic health of
America could be crushed under its enormous weight. As portion sizes have increased
and exercise has decreased, the rate of childhood obesity has tripled in the last 30 years.
Last May, President Obama established the Task Force on Childhood Obesity1 to
eradicate this problem “within a generation.” Because children today are being
increasingly diagnosed with obesity-related illnesses previously only seen in adults,
health care costs have escalated and if allowed to go unchecked will grow to about 21%
of health care spending by 2018, according to a 2009 report conducted by the American
Public Health Association2. As health care costs have risen a spotlight is being shined on
the burgeoning fast food industry that many argue should be held responsible and liable
for this crisis.
Today McDonalds, the world’s largest fast food chain3, has been criticized for marketing
Happy Meals to children. Arguably no kid’s menu item has been more popular and
profitable in the world than the toy containing Happy Meal. McDonalds has released
thousands of varieties of toys over the last 30 years, many of which have become
treasured collector’s items. Over 2.5 million Happy Meals are sold each year, accounting
for nearly 40 percent4 of McDonalds’ profits. With $24.07 billion5 in annual sales,
McDonalds lovers from all around the world flock daily to the Golden Arches. However,
some question whether McDonalds is using deceptive marketing to get them through the
door?
1White House, First Lady Michelle Obama Launches Let's Move, 2010, 09 Feb 2010 <http://www.whitehouse.gov/the-press-office/first-lady-michelle-obama-launches-lets-move-americas-move-raise-a-healthier-genera>.2 Nancy Hellmich, "Rising Obesity Will Cost U.S. Health Care $344 Billion a Year," USA Today 17 November 2009.3 McDonalds Corporation, "McDonalds Corporation," Hoover's Company Records (Chicago: Hoover, 2011).4 RUNINDC, McDonalds Happy Me Leslie Patton, "Ronald McDonald Sidelined as Chain Touts Lattes," Bloomberg Businessweek 02 March 2011.al Toy Lawsuit Review, 28 Feb 2011, 1 March 2011 <www.RUNINDC.com>.5 Leslie Patton, "Ronald McDonald Sidelined as Chain Touts Lattes," Bloomberg Businessweek 02 March 2011.
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Background
To fully appreciate the environment that McDonalds and the plaintiffs are operating in,
first we must gain an overarching understanding of the “overweight/obesity crisis” within
the United States. We will begin by discussing this environment in general, followed with
background on the company. Finally, we will explain the Parham vs. McDonalds lawsuit
and discuss both arguments in their entirety.
1. General Atmosphere
Obesity can cause serious health issues and is one of America’s costliest diseases. Nearly
one of every five dollars spent on healthcare in the United States will be attributable to
obesity and obesity-related conditions within the next decade.6 The U.S. Department of
Health and Human Services defines a body mass index (BMI) of 25 through 29.9 as
overweight and one of 30 or greater obese.7 Additionally, 70% of Adults in America are
overweight or obese. The CDC estimates that approximately one in three American kids
and teens is overweight or obese.8 Table 1 shows information compiled from National
Health and Nutrition Examination Surveys (NHANES).
Table 1. Prevalence of obesity among U.S. children and adolescents aged 2-19, for 1963-1965through 2007-2008
Age
(years)
1963-1965
1966-1970
1971-1
974
1976-
1980
1988-19
94
1999-
2000
2001-
2002
2003-2
004
2005-2
006
2007-20
08
Total (3) 5.0 5.5 10.0 13.9 15.4 17.1 15.5 16.9
2-5 (3) 5.0 5.0 7.2 10.3 10.6 13.9 11.0 10.4
6-11 4.2 4.0 6.5 11.3 15.1 16.3 18.8 15.1 19.6
12-19 4.6 6.1 5.0 10.5 14.8 16.7 17.4 17.8 18.1
6 Kevin Sack, "Growing Costs; A Surging Obesity Rate," New York Times 18 Nov 2009.7 National Heart Lung and Blood Institute, National Institute of Health, 20 Feb 2011, <www.nihibisupport.com/bmi/>.8 CDC, Getting Healthy, 28 02 2009, <www.heart.org>.
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Source: National Health and Nutrition Examination Surveys (NHANES)
These figures are especially startling since, according to the American Heart Association,
children who are obese have a 70–80 percent chance of staying overweight their entire
lives.9 Thus it has become a cause for concern for both parents and the government. Both
parties have begun to focus their efforts on reforming the fast food industry. This
attention has been satirized in the movie Supersize Me and the book Fast Food Nation.
The amount of public attention on the fast food industry is appropriate given the fact that
every day, one-third of American children and adolescents eat fast food - contributing to
16% to 17% of adolescents’ total caloric intake.10 There are some, such as the parents in
the Parham vs. McDonalds suit who believe that one of the reasons is deceptive
marketing techniques. Fast food restaurants spend more than $660 million each year to
market their products and brands to children and adolescents.11 Table 2 (below) shows the
total nutrient content of items in TV ads viewed by youth every day.12
2. McDonalds
a. History
The McDonald brothers founded McDonalds in 1940. In 1948, the brothers revamped
their operation to focus on their best selling item, the hamburger. They also implemented
9 CDC, Getting Healthy, 28 02 2009, <www.heart.org>.10 Rudd Center for Food Policy and Obesity, "Fast Food FACTS: Evaluating Fast Food and Marketing to Youth ," (Rudd Center, 2010).11 ibid12 ibid
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their Speedee Service System, which allowed them to offer burgers both faster and
cheaper.13 In 1954, Ray Kroc bought the rights to expand McDonalds concept outside
California and Arizona. By 1959 over 100 restaurants were in operation and in 1961 Ray
Kroc bought out the McDonald brothers. McDonalds joined the Children’s Food and
Beverage Initiative (CFBAI), an industry-sponsored program to “change the landscape of
child-directed advertising.14 In doing so, McDonalds pledged to depict only “pledge-
approved, better-for-you” products in their child-directed measured media company-
owned websites and interactive games.15 Today, McDonalds has more than 32,400
restaurants serving more than 60 million people in 117 countries each day).16 Roughly
80% of these restaurants worldwide are owned and operated by franchisees or
affiliates.179
b. Charity
McDonalds charity of choice is the Ronald McDonald House Charities (RMHC). This
charity, dedicated to improving the health and well being of children, has three core
programs: Ronald McDonald House, Ronald McDonald Family Room and Ronald
McDonald Care Mobile.18 The Ronald McDonald House program makes it possible for
families to stay close by their hospitalized child at little or no cost while the Ronald
McDonald Family Rooms provide family members of sick children with a place to
regroup at the actual hospital (e.g., internet access, showers, beds).19 Finally, there are 40
Ronald McDonald Care Mobiles worldwide. These are vehicles used to provide medical,
dental and health services worldwide. Each mobile costs approximately $500,000 just to
get on the road.20 The charity also provides grants to non-profit organizations and
scholarships to high school graduates.
913 Wikipedia, <http://en.wikipedia.org/wiki/McDonalds>.14 Better Business Bureau. http://www.bbb.org/us/children-food-beverage-advertising-initiative. Accessed 20 February 201115 American Heart Association, Heart.org, 2010, <1. http://www.heart.org/idc/groups/heart-public/@wcm/@fc/documents/downloadable/ucm_304175.pdf>.16 McDonalds Corporation, "McDonalds Corporation," Hoover's Company Records (Chicago: Hoover, 2011).17 ibid18 McDonalds Corporation, RMHC, 2010, <http://rmhc.org/who-we-are/mission-and-vision/ >.19 ibid20 ibid
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California has 5 RMHC Chapters and 11 RMHC Houses.21 Since 1990, RMHCSC (1 of
the 5 RMHC chapters) has awarded more than $3.5 million in scholarship funds to local
students. Funding was made possible through the Southern California chapters of RMHC
and the fundraising efforts of local McDonalds owner/operators and corporate staff.22 In
Los Angeles, McDonalds sponsored the annual McDonalds(R) Steps for Success(TM)
College Workshop, a free bilingual workshop opened to high school students and their
parents. During the day, attendees attend seminars on the college application process,
applying for financial aid, and college scholarships.23 These activities and others like
them are largely made possible due to the hard work of local McDonalds chapters.
At the global level, McDonalds is the largest corporate supporter of Ronald McDonald
House Charities. However, members of the McDonalds family also donate generously.
For example, Joan Kroc, wife of Ray Kroc, donated more than $60 million to RMCH in
2003. This was in addition to the endowment gifts of $500,000 in stock to each Ronald
McDonald House open and operating in the United States that she gave in 1993.24
3. Parham vs. McDonalds
a. General Suit
In June of 2010, the Center for Science in the Public’s Interest (CSPI) notified
McDonalds of their intent to sue if the company didn’t cease using toys in their
advertisements of Happy Meals in California.25 In January of 2011, Monet Parham, a
mother of two from Sacramento, Calif., (with the assistance of CSPI) officially filed the
class action lawsuit in which she asserted that the “Defendants engage in the unfair,
unlawful, deceptive and fraudulent practice of promoting and advertising McDonalds
Happy Meal products to very young California children, using the inducement of various
toys”26.10There were three claims for relief: Engaging In Unfair Marketing And Business
1021 McDonalds Corporation, RMHC, 2010, <http://rmhc.org/who-we-are/mission-and-vision/ >.22 ibid23 McDonalds, "McDonalds and the Hispanic Scholarship Fund," (2010).24 McDonalds Corporation, RMHC, 2010, <http://rmhc.org/who-we-are/mission-and-vision/ >.25 Jan Skinner, "Center for Science in the Public Interest," Letter (Washington DC, 2010).26 Superior Court of the State of California, San Francisco, No. CGC-10-506178, San Francisco, 112011 Jan 2011.
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Practices; Engaging In Unfair Methods Of Competition And Unfair Or Deceptive Acts
Or Practices; Engaging In Unlawful Methods Of Competition And Unfair Or Deceptive
Acts Or Practices.27
b. Supporters
Supporters point to a study (referenced in the law suit) that states that children under
eight years of age do not understand the pervasive intent of advertising. This means that
advertising food with a toy to a child is inherently deceptive and therefore should be
illegal. Adding to the validity of their case is the fact that in recent years, several guides
and lawsuits have altered the way that corporations can market to children, e.g., a food
must have certain nutrition content or it can’t be advertised. Some supporters, such as the
Center for Science in the Public Interest (CSPI) have put forth that the advertising creates
discord between the parent and child. Finally, some believe that when a company markets
unhealthy food with certain products to children, such as toys as part of a happy meal, it
is unfair to its competitors that don’t participate in such activities (punished for being
“ethical”).
c. Opponents
Opponents of the movement argue that it is the parents’ responsibility to control what
their children eat, e.g., when a child asks to eat at an unhealthy restaurant the parent can
choose to say yes or no. Some opponents also argue that this is simply a stepping-stone to
government dictating what people can and can’t eat. Finally, many opponents believe that
prohibiting a company from advertising is unconstitutional.
Conflicting Studies
Much weight has been put on two points: the assumption that weight gain in children is a
relatively recent phenomenon (30-40 years) and the assumption that children desire to go
to McDonalds primarily for the happy meal toy. This section will introduce two studies
that provide conflicting evidence to them.
27 Superior Court of the State of California, San Francisco, No. CGC-10-506178, San Francisco, 112011 Jan 2011.
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1. National Bureau Of Economic Research: Working Paper 15862
This is a study that states that Americans have gradually gained weight much longer than
popular theories believe. The authors focus on the rate of change of BMI values by birth
cohorts stratified by gender and ethnicity born 1882-1986, whereas most studies focus on
calculating period effects. 2811
“In short, the emphasis has been on the 1980s as a pivotal point in the
history of the obesity epidemic…(but)…Weight gains could have
accumulated at anytime between birth and measurement…In contrast to
the consensus in the literature, we estimate trends by birth cohorts,
because BMI at the time of measurement reflects the cumulative weight
gains during the life course. After all, birth cohorts experienced similar
social, economic, and technological changes; this cannot be said of
measurement cohorts.”
2. Fast Food FACTS: Evaluating Fast Food Nutrition and Marketing to Youth
This is a study conducted by the Rudd Center for Food Policy and Obesity at Yale
University focused on determining the amount and impact of food marketing directed at
children and youth, specifically fast food. According to this study, parents have reported
that 47% of the time they go to the top four fast food restaurants (McDonalds being one
of the 4) it is because their child wants to go there. However, the majority of parents
reported that of that 47%, the majority of requests were because the children wanted the
food offered. Free toys and giveaways came in as the second reason – however, no
restaurant had a score higher than 19% for this reason. This same study reported three
other reasons parents choose a particular restaurant: convenience (25%), value (12%) and
healthy options (5%)29 The results of this study indicate that simply removing the toy
from a Happy Meal isn’t going to be as effective as supporters expect.
1128 Marek Brabec John Komlos, The Trend of Mean BMI Values of US Adults, Birth Cohorts 1882-1986 Indicates that the Obesity Epidemic Began Earlier than Hitherto Thought, Working Paper, National Bureau of Economic Research (Washington DC: National Bureau of Economic Research, 2010).
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Ethical Evaluation
We used several of Homer’s 6 steps to evaluate whether McDonalds was acting
unethically.
1. Define moral issue
The moral question is whether it is ethical for McDonalds to use toys to advertise their
happy meals directly to children. Section 3 above provides additional details relevant to
the case.
2. Missing Info
Being an overweight or obese child in America can be traced to several factors unrelated
to marketing fast food with a toy. One factor is the lack of exercise undertaken by
American’s today. Almost one in four children do not participate in any free-time
physical activity. Additionally, the average American child spends four to five hours in
front of the TV, computer or video games every day.3012The lack of exercise in our youth
is a main reason why Michelle Obama has launched her ‘Let’s Move’ campaign to ensure
that every family has access to healthy food and opportunities for recreation and physical
activity.
Another factor is that family dynamics have changed, e.g., the increase in single parent
households or the increase in two parent households where both parents work. This has
caused a decrease in the time that parents have to create home cooked meals or to sit at
the table as a family talking and eating slower. Additionally, in today’s fast paced life
style there is a stress on convenience (a need met by fast food restaurants) and on leaving
children to fend for themselves. Economic factors, such as the amount of wages a family
brings home, are also a significant factor. According to a statement from the White House
lack of access to nutritional food is also a reason and “more than 23 million Americans,
including 6.5 million children, live in low-income urban and rural neighborhoods that are
1229 Rudd Center for Food Policy and Obesity, "Fast Food FACTS: Evaluating Fast Food and Marketing to Youth ," (Rudd Center, 2010). 30 American Heart Association, Heart.org, 2010, <1. http://www.heart.org/idc/groups/heart-public/@wcm/@fc/documents/downloadable/ucm_304175.pdf>.
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more than a mile from a supermarket.” 3113
It is important to understand that McDonalds, with an advertising budget of almost 1
billion dollars, uses many additional forms of advertising that aren’t included in the
lawsuit including: radio spots, billboards, mobile marketing, social media, and marketing
within the restaurant.3214Some of these methods could be powerful ways to advertise to
children. For example, one of McDonalds three websites directed at young children
includes a section where the child can’t “unlock” extra features without entering a code
from a happy meal.331
3. What about me?
This is determined by who is identified as the whistle blower (i.e., “me”). If the
whistleblower is the plaintiff and members of the class action, then they should fear
public ridicule and assumptions that they are lazy, incompetent parents. However, the
whistleblower could also be the individual who views the suit as frivolous and
unconstitutional. This individual would speak out against the lawsuit. The primary
concern for this individual is that the attempt at increasing government control over
private industries and specific company succeeds. Another concern is that if the case
succeeds the ruling will have set a precedent for future lawsuits. We conducted an online
survey to gauge how students from both our Ethics and Business Public Policy class feel
about this case. (Table 3). Although technically statistically insignificant due to sampling
size and process, it shows that nearly 70% of the GWU respondents believe that
McDonalds should be allowed to include a toy in the Happy Meal.
1331 White House, Let's Move, 2011, <http://www.letsmove.gov/learnthefacts.php>.1432 Rudd Center for Food Policy and Obesity, "Fast Food FACTS: Evaluating Fast Food and Marketing to Youth ," (Rudd Center, 2010).33 ibid
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Table 3: Online survey given to 60 GWU MBA students in Feb 2011.
4. Ethical Framework
We applied two ethical frameworks in our analysis of this issue: consequentialism and
ethical relativism. Consequentialism is the belief that “the moral rightness of an act
depends only on the consequences of the action”.3415The question then becomes how is a
consequence identified as good or bad? Ethical relativism provides a starting point for
answering this question as it asserts that there are no absolute truths in ethics, that what is
morally right or wrong varies from person to person or from society to society.35@@ It is
our opinion that one can’t apply consequentialism without first applying ethical
relativism. Given this, we first analyzed this issue from the standpoint of two key
stakeholders. We then present what we believe the true answer to be.
This issue has many stakeholders: Plaintiff, members of the class action suit, California
residence, CSPI, McDonalds, McDonald employees, toy producers, RMCH, families
helped by RMCH and other businesses that market to children. We focused our analysis
on the plaintiff and McDonalds.
1533 Donald Hubrin, Professor Hubin. Introduction to Ethical Theory. , 20 Feb 2011 <http://people.cohums.ohio-state.edu/hubin1/ho/ethics130.pdf. >.34 Manuel Velasquez, et al, Ethical Relativism, 20 Feb 2011 <http://www.scu.edu/ethics/practicing/ decision/ethicalrelativism.html>
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Plaintiff
The plaintiff and CSPI have put forth that marketing directly to children under the age of
8 is “inherently deceptive and unfair”.3616In Parham vs. McDonalds the plaintiff asserts
that when McDonalds advertises to children that Happy Meals include toys, McDonalds
“has helped create, and continues to exacerbate, a super-sized health crisis... [causing]
children to make poor nutritional choices, develop unhealthy eating habits that will
follow them into adulthood, and becoming obese”…which “in turn contributes to the
rising cost of health care in this country”; and 2. Has placed a strain on parent-child
interaction”.3717 CSPI has stated: “In an ideal world, perhaps parents would ignore all of
children’s requests for lavish toys and unhealthy snack foods, but, in fact, research is
clear that parents have a high rate of yielding to children’s purchase-influence
requests.”3818Finally, there is concern that the default side and beverage selection for the
happy meal is french fries and a soda.3919
Assumptions
1. Parents and CSPI believe that children are primarily drawn to McDonalds for the toy
2. Parents and CSPI believe that the situation will not change without government
intervention
3. They understand that their actions will have an impact on McDonalds
4. They believe that most parents don’t understand the dangers of french fries and sodas
as evidenced by the outrage in the default selection
5. They have not evaluated other potential reasons for a child being overweight/obese
6. They aren’t fully informed of the various methods of advertising that may be reaching
their children
Consequences if Succeed
1. Children will no longer be taken advantage of, used to get into parents wallets
2. Children will have better odds of not developing all of the aforementioned health
1636 Leslie Patton, "Ronald McDonald Sidelined as Chain Touts Lattes," Bloomberg Businessweek 02 March 2011. Superior Court of the State of California, San Francisco, No. CGC-10-506178, San Francisco, 112011 Jan 2011.1737 Superior Court of the State of California, San Francisco, No. CGC-10-506178, San Francisco, 112011 Jan 2011.1838 Ibid.1939 Ibid.
14
issues
3. McDonalds will stay in business as long as it pulls its unlawful marketing campaigns
4. McDonalds will lose sales as children are drawn to healthier alternatives that can be
advertised with a toy
5. The child-parent relationship will be restored
6. Healthcare costs will not increase as drastically as they would without intervention
Discussion
Based on the above assumptions and expected consequences it could be argued that the
ethical outcome in this situation would be for the judge to side with the plaintiff. This is
because the primary consequence of this ruling is that children will be less at risk for
health related problems and able to live better, more productive lives. Taken one step
further, it could be argued that CSPI should work to ensure that all restaurants or food
retailers in California are prohibited from marketing any unhealthy food to children.
Additionally, the parents should examine other factors that lead to children being
overweight and obese and try to work with CSPI and the government to conquer them.
For example, one possibility is to work with CSPI to encourage the government to
mandate exercise for children. The government could authorize parents up to one hour
three times a week in which parents can leave early to go home and exercise with their
children (both private and public sectors). Another possibility would be to extend the
school day by two hours for exercise related activities (cycling, weights, etc). All of the
actions discussed above are based on the fact that since they are for the children’s good,
they are ethical. It could even be argued that to not take such action would be unethical.
If parents truly believe that they need the government’s help in order to combat outside
influences on their child without causing friction in the relationship, drastic action such as
those just given should be considered.
McDonalds
We requested feedback from McDonalds concerning Parham vs. McDonalds. Below is an
15
excerpt from their response.40 20
“While we share in the desire to find a meaningful solution to the
growing problem of kids' health and nutrition, we believe taking away a
toy from a kids meal does absolutely nothing to improve children’s health,
nutrition or well-being. We are extremely proud of our Happy Meals,
which give our youngest guests wholesome food and toys of the highest
quality. Parents tell us they want to have the right and responsibility to
make their own decisions and decide what’s right for their children – not
lawmakers. Any fair and objective review of our menu and the actions
we’ve taken will demonstrate we’ve been responsible, we’re committed to
children’s well being, and we’ll continue to learn and take action for our
customers that is guided by science and facts. Banning a toy is not the
way to fight obesity or improve children’s well-being. Solutions will
come only from education and awareness based on science and fact.”
Assumptions
1. Children like McDonalds because of the food and because McDonalds is fun
2. Parents are responsible for deciding and enforcing what is right and wrong for their
child
3. Food isn’t a health concern if eaten in moderation
4. They understand that there are other potential reasons for a child being
overweight/obese
Consequences
1. Drop in sales - drop in profits and drop in donations for the RMCH
2. Increase cost to make commercials just for California
3. Potential for a few workers to be let go
4. McDonalds will be at an unfair disadvantage to their competitors who have not
been targeted
5. Creates extreme uncertainty – will other locations or marketing forms be targeted
2040 Danya Proud, Query re: Marketing of Happy Meal to Children, Chito Peppler (26 Feb 2011).
16
6. Children may or may not continue to frequent McDonalds, depending on parent
Discussion
Based on the above assumptions and expected consequences it could be argued that the
ethical outcome in this situation would be for the judge to side with McDonalds. This is
because the primary consequence of this ruling is that an individual company is unjustly
targeted which will result in a drop in sales which has the potential to negatively impact
the California employees and will disrupt the funding stream for the RMCH. RMCH
actually assists families who are in dire need and who can’t control their situation. This is
viewed as an ethical cause. Whereas causing sales to potentially drop by going after
McDonalds so that a parent won’t have to tell their child no, isn’t.
Conclusion
In our effort to determine whether or not it was ethical for McDonalds to market directly
to children by using a toy to advertise happy meals we discovered that the answer really
depends on the information an individual has and what that individual values. The parents
bringing the suit against McDonalds truly believe that the actions the company has been
partaking in are extremely unethical, whereas McDonalds disagrees.
Even we, the authors, disagree with each other on this issue. One of us values actions that
assist in the plight of lower income neighborhoods, which are more likely to not have
access to healthy food and to have more fast food restaurants in a given area. Using this
as the center for ethical decision-making, this individual sides with the plaintiff. Further
the individual believes that it would be ethical for the federal government to mandate that
fast food restaurants offer many more healthy options. Another one values freedom of
choice and personal accountability, therefore believing that there is nothing unethical in
the form of advertising being questioned but that the plaintiffs case is actually unethical.
17
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18
White House. Let's Move. 2011. <http://www.letsmove.gov/learnthefacts.php>.
Wikipedia. Wikipedia. <http://en.wikipedia.org/wiki/McDonalds>.
19