The Ethics of Negative Option Marketing

C. W. Von BergenDepartment of Management and Marketing,

John Massey School of BusinessSoutheastern Oklahoma State University

Durant, Oklahoma 74701580.745.2430

FAX 580.755.7485cvonbergen@sosu.edu

The Ethics of Negative Option Marketing

ABSTRACT

Negative option marketing (NOM), where customers are required to expressly reject unsolicited offerings to avoid being charged for a product or service, is becoming a common marketing strategy

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The Ethics of Negative Option Marketing

VOICE ON THE PHONE: C. J. Nickle Company would like to thank you for yourcatalog order today. As a token of our appreciation, we would like to send you, free of charge, Northern Living Magazine.

CONSUMER: Great! I really like Northern Living.VOICE ON THE PHONE: OK then. You will receive 3 months of Northern Living,

absolutely free. At the end of the 3 months, we will bill the C. J. Nickle Company credit card you used today for your year’s subscription. Or, after 3 months you can call 1-800-xxx-xxxx and cancel your subscription to Northern Living and keep the 3 months of issues absolutely free.

For centuries, commerce was simple and straightforward. A merchant would offer a good or service for sale and a consumer would decide whether or not to buy. Today, with negative option marketing (NOM), commerce can be anything but simple, and consumers can end up being charged for products or services they never intended to purchase. Simply put, the NOM technique—also known by such terms as advance-consent marketing, continuous-service agreements, inertia selling, or opt-out options—turns the sales transaction around and requires that the customers act to prevent a sale from taking place. In the past, silence meant no sale, however, under NOM, silence means sale and consumers must act to prevent the sale from taking place (Lamont 1995). Thus, instead of the merchant having to “sell” an individual a product or service, it starts with the assumption that the person already bought it—and it is up to the consumer to contact the merchant and cancel the order if they do not want to complete the transaction. It is no longer a world of consumer consent, but consumer rejection. In effect, the NOM practice is based on presumption—the individual is presumed to agree to a proposition unless he or she takes the initiative to refuse it.

Companies are using perfectly legal marketing strategies of "negative options" to sell magazines, natural gas, cellular phone service, health club memberships, lawn care contracts and other goods and services (. According to Jean Ann Fox, director of consumer protection for the Consumer Federation of America, as quoted in the Post article, "It's no longer a world of consumer consent, but consumer rejection," which puts more pressure on customers. The Post article goes about detailing various pros and cons of the practice, for both the customers and the marketing companies. Mail-order music and book clubs have been using it for a long time. They send you the goods, and if you do not act to return the items, your account is charged for the goods. Other companies use it to extend the subscription period by sending a letter saying that unless you act, we will extend your subscription and charge your account. There are many other ways that the negative options are being used or could be used.

considers opt-out to be a weak form of consent - one that unfairly puts the onus of initiative on the wrong party and reflects at best a mere token observance of what is perhaps the most fundamental principle of the Act. We would prefer that organizations adopt an exclusively "positive" or "opt-in" approach - a much more respectful approach whereby individuals would be deemed to have consented only if they have expressed a definite "yes" to a proposition.

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The reason for this increased usage of negative options marketing is quite obvious. A lot of consumers do not notice the negative option, which is usually in small print, in their communications. Other times exercising the "opt-out" requires effort and time from the customer that he or she may not be willing to spend. Thus, by default, the customer stays with the company and many times purchases something. The proponents of the strategy say that it results in increased retention rate, convenience to customers and lower costs. On the other hand, the detractors of the practice say that it creates customer confusion, is inconvenient, and is unfair.

Huffman, Mark (2005, November). Negative Option: When No Means Yes. RetrievedMay 18, 2006, from

http://www.consumeraffairs.com/news04/2005/negative_option.html

The Columbia Record Club and various “book-of-the-month” clubs were early pioneers of negative option marketing. The hook was an offer of five or ten books or records for free or at a heavily discounted price.

By accepting the offer, the consumer agreed to “join” the club and receive regular shipments of other books or records at the full price, unless the consumer took the “negative option,” telling the company it did not want to receive that month’s offering.As you might expect, negative option has been abused as its use has become more prevalent. The widespread use of credit cards and the growth of the Internet have fueled that abuse, to the point that federal and state consumer authorities have taken action.In 2001, the Federal Trade Commission cracked down on negative option abuses, suing nine companies for charging customers’ credit cards for products or services without gaining their express approval. The FTC found the companies, as part of a transaction with consumers, offered “free offers” or “trial offers” of other products and services, without disclosing that consumers would be billed for additional products or services unless they exercised the negative option.

“Negative option marketing is particularly troubling when marketers already have consumers’ credit card or billing account information and can easily charge consumers’ accounts without their permission or when marketers fail to disclose that consumers’ credit card numbers will be transferred to another company and charged unless consumers call to cancel,” the FTC’s Elaine Kolish told Congress in November, 2001.But Congress took no action, and in the last four years, negative option marketing has increased, and so has its abuse.

According to the FTC, companies selling magazine subscriptions through the negative option are among the worst offenders. In 2001 the FTC logged 204,000 complaints about deceptive magazine sales. Two years later, the number of complaints had more than doubled, to well over 500,000.

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Magazine publishers are a bit defensive about that. In fact, the Magazine Publishers of America, an industry trade association, says it prefers to call negative option marketing “advance consent marketing.” The group defends the practice, saying continuous service and automatic renewals also benefit consumers.

“The FTC has expressed concern about the disclosures associated with such marketing techniques and ensuring that consumers understand the terms and conditions of the marketing offers. A number of industry groups have established guidelines for advance consent marketing. MPA has created an educational document around one such set of guidelines,” the group said in a statement on its Website.

The lengthy MPA document, written in 1998, is a set of “voluntary” guidelines for the independent contractors hired by publishers to sell magazine subscriptions. Judging from the growing number of complaints received at the FTC about magazine sales, a reader might conclude these guidelines are not always followed.

Banned in Motown

Michigan Attorney General Mike Cox warns consumers in his state to be wary of negative option traps. He says businesses employ them for one simple reason – they work.

“Studies show that if a company asks a customer to sign up for a new service or product, less than 15 percent of consumers receiving the solicitation will sign up,” Cox said. “On the other hand, if the service or product is supplied without the consent of the consumer, up to 80 percent of the consumers will be ‘recruited’ into the new service plan.”In Michigan, negative option marketing is illegal, based on the state’s interpretation of the law.

“Basic contract law requires an agreement, not a unilateral tender of goods by a shady merchant,” said Allison Pierce, Communications Director for the Michigan Attorney General’s Office.“Thus, a pure negative option arrangement is no good under contract law, and a bill for the goods involved is deceptive and violates various laws, including the Michigan Consumer Protection Act and state and federal unsolicited merchandise laws.”Even though negative option marketing is considered illegal in Michigan, consumers in that state still fall victim to the system’s abusive practices. Clarence, of Pleasant Lake, Michigan complained to ConsumerAffairs.com about an unauthorized charge of $149 on his credit card from Triligiant’s Health Saver Plan.

“I called the phone number for their health saver plan to find out how and why I was charged for a membership on my credit card,” Clarence told us.“For starters, the individual I spoke to was very rude. When I asked him how and why my credit card was charged he said I cashed a $2.50 check that authorized them to set up and charge me for a membership. In the first place, I don't remember any check for $2.50. Secondly, I purposely don't cash these checks when they come in the mail for this

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specific reason. When I gave him the opportunity to take this charge off from my credit card he proceeded to tell me the benefits of their plan. I told him I had insurance and wasn't interested in their plan but, instead of listening to me, he continued to try to push their plan.”

State and federal governments all have rules in place that are designed to protect consumers from inadvertently committing to purchases through a negative option pitch. Still, angry consumers complain they are being victimized. How can this be?

Defending The Status Quo

Very simply, some companies follow the rules while some don’t. Any attempt to toughen these rules – even outlawing negative option marketing, for example – would be met with stiff opposition from magazine publishers, specific marketing companies, and the marketing industry as a whole.

The Electronic Retailing Association, which represents radio, TV and Internet marketers, has noted with alarm, on its Web site, that “state and federal regulatory activity threaten the effectiveness and viability of these types of promotions potentially resulting in a loss of convenience for consumers as well as unnecessarily burden industry with increased costs associated with compliance.”

The association said it believes that current law provides an adequate infrastructure to protect consumers from “rogue” companies abusing "advance consent marketing (negative option) practices."

Staying Out Of The Negative Option Trap

The law does, in fact, provide many consumer-friendly remedies. The problem is, they aren’t all that well publicized and therefore rarely enforced. The problem is compounded by the fact that most consumers who fall victim to negative option marketing are completely blindsided by it.

The law requires that consumers give an informed consent before a negative option purchase can be considered legitimate. Yet the overwhelming majority of complaints received at ConsumerAffairs.com are from consumers who have no idea why they are being charged for a particular service. Under the law, the burden of proof is on the marketer, not the consumer.

"Telemarketers need to be sure that consumers agree to be charged, and what account will be charged -- even if they have an account number from another transaction," said Howard Beales, Director of the FTC's Bureau of Consumer Protection."If you charge consumers without their permission, we'll charge you with committing a fraud."

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When an unauthorized charge appears on their credit card statement, many consumers make the mistake of calling the toll-free customer service number of the company placing that charge, which appears on the same line of the statement. That rarely leads to satisfaction.

A more successful and less frustrating action is to call your credit card issuer’s customer service number and report the charge as unauthorized. The credit card company, which controls the flow of money, will be a much more effective advocate.

In addition to taking action to remove the charge, consumers should always file complaints with ConsumerAffairs.com and appropriate government agencies.Finally, consumers should be aware of the pitfalls that lurk behind many ordinary purchases. Anytime a consumer is offered a “free gift” or “trial offer,” more than likely there is a longer-term, more expensive negative option transaction taking place. The best policy is to just say no. Otherwise, read the fine print very carefully.

Organizations can legally make a consumer’s failure to act an acceptance of the

product (Sovern 1999). Whereas previously a person had to affirmatively indicate that

they wanted the product or service (positive/affirmative option), today many

organizations are using NOM to sell magazines, natural gas, cellular phone service,

health club memberships, lawn care contracts, and other goods and services (Sharma

2001). Proponents of the strategy say that it results in increased retention rate,

convenience to customers, and lower costs. On the other hand, detractors of the practice

say that it creates customer confusion, is inconvenient, and is unfair (Sharma, 2001).

Indeed, one consumer attorney indicated that “As a result of such negative-option

offerings, many families have acquired an abundance of unwanted items because they

failed to return a card within a stated time period” (Cox 1992, B1).

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Though there is little publicly-available empirical evidence on what impact

negative options have on consumer choice what is available shows clearly that it makes a

significant difference. For example, the Federal Communications Commission (FCC)

studied how consumers responded to offers to “unbundled” services by telephone

companies. The FCC found that consumers who had to indicate affirmatively that they

wished to purchase the optional maintenance plan subscribed about 44% of the time.

Consumers who could subscribe by doing nothing—that is, through a negative option—

subscribed 80.5% of the time—a difference of about 36% of the consumers (Phillips

1993).

Similar results have shown up in the cable television industry. In Canada, cable

television companies found that when new channels were offered in normal ways, only

25% of customers subscribed, but when made available through negative options, 60 to

70% of the subscribers did not reject the offer (Austen 1995; Walker 1995). In other

words, for many cable customers, the key factor in the purchasing decision was not the

cost or content of the programming, but rather whether they have to act.

Recently, organizations have also been using the negative option or opt-out model

for building lists for email marketing. Here is how it works: A marketer has a list of email

addresses but does not have permission to send third-party promotions. To obtain

permission, the marketer sends an email stating its intention to send future third-party

emails. If the recipient does not respond (negative option), the marketer assumes the

recipient has granted permission. It then begins sending to the list—and renting the

names to others (Jennings, 2001). Proponents of this approach tell you that as long as the

email address is publicly available (on a business card or in an industry directory) and all

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future emails include an option to unsubscribe, this approach to gathering permission is

acceptable. Some say that a pre-existing relationship (visit to a trade show booth, receipt

of a company publication) automatically bestows third-party permission. Sending that

initial email is only a courtesy.

Proponents present low "remove me from your list" response rates from these

campaigns as proof that people are OK with the negative option. A marketer I spoke with

uses select quotes from Seth Godin's "Permission Marketing" to validate this model and

describes the resulting lists as permission-based or "permission-cleansed." Marketers

make $3 to $5 per name annually when they put these lists on the market.

Those opposed see things differently. For them, the most controversial part of the

model is the assumption that a recipient's silence equals permission. They point out that

many people don't open every piece of email they receive, so they may not see the

negative option message. The low response rate is cited as evidence. When presented

with an opt-out that can't be missed (such as on a registration page), the response rate is

usually around 15 percent. Comparing this to a low single-digit rate when an opt-out is

offered via a negative option suggests that some recipients miss the opt-out email.

Opponents take issue with the assumptions made about public email addresses,

unsubscribe links, and pre-existing relationships, believing that in these cases an explicit

opt-in is required. Although negative option is legal in the United States, it is not in some

European countries.

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Merchandisers have acknowledged that consumers buy more readily when items

are sold through negative options. For instance, when one cable television provider

switched its offering of a new channel from a negative option to a positive option, the

company reduced its estimate of the number of expected subscribers to the new channel

from 80 percent to 50 percent (Clayton 1991). Similarly, when the FTC took testimony

on negative option selling, it noted that several industry sellers acknowledged that fewer

subscribers would purchase the goods offered if buying them required affirmative action

(38 CFR 1973).

Furthermore, one observer has noted that consumers are more likely to make a

purchase through a negative-option plan if they do not notice that they are making the

purchase (Craig 1994). In particular, inexpensive items and services are more likely to be

overlooked: “even if the consumer happens to notice the charge, he or she might not

devote much attention to it because of the time and effort to determine the cause of the

charge and to have it removed from the bill. Moreover, those in vulnerable positions,

such as the elderly or foreign born persons, might feel intimidated or deterred from

objecting to the charge” (Craig 1994, 8).

Another study demonstrating the power of opt-out systems inherent in NOM

approaches was demonstrated by a comparison of the vast number of individuals who

want to protect their privacy with the small number of individuals who actually opt out.

For example, Bank of America’s response rate for its opt-out notice to individuals not

wishing to have their financial information shared with other institutions was 0.2%, even

though most public opinion polls suggest that upwards of 60-80% of individuals do not

want their financial information disclosed (Rehm 2000).

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In general terms, then, NOM reverses the traditional buyer/seller relationship

because it requires consumers to reject expressly unsolicited offerings to avoid being

charged for a product or service (Spriggs and Nevin 1996). Negative option plans

describe an arrangement in which the consumer receives goods and services on a regular

basis until he/she cancels—and failure to reply constitutes acceptance. As suggested in

the opening example, NOM involves transactions between the seller and the consumer in

which there exists a previous/current business relationship: providing a magazine

subscription to a current credit card holder.

NOM has also been referred to as advance consent marketing, automatic

renewals, continuous-service agreements, unsolicited marketing, inertia selling, “free

trial” offers, or “book-of-the-month” type plans.

“Broadly speaking, a ‘negative option’ is any type of sales term orcondition that imposes on consumers the obligation of rejectinggoods or services that sellers offer for sale. A negative option allowsa seller to interpret the failure of a consumer to reject goods orservices as the acceptance of a sales offer, when, under traditionalcontract law, an affirmative response accepting the offer would benecessary” (U. S. Federal Trade Commission [FTC], 1998, 44556).

In the past, the term opt-out marketing has also been used as a synonym for NOM. But

recently, the term “opt-out” has been associated mainly with privacy issues, such as

consumers allowing (via acquiescence) their personal and/or financial information to be

shared between firms (Hatch 2001; Sovern 1999).

The current research does not focus on consumer privacy or its loss, rather the

loss of consumer choice or control, hence the topic is confined to NOM. A review of the

current research on the topic of NOM suggests that there is very little information

available, yet many firms appear to be utilizing this strategy. Why? Does the consumer

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have a positive or negative attitude toward these offers? Does the consumer’s satisfaction

with the offer influence the attitude toward the organization making the offer?

In the following pages we will review the limited literature on NOM. We then

apply some theoretical constructs to the process to gain an understanding of the

consumer’s perspective on NOM. The research uses an experimental survey design in

which customers of a bank were exposed to one of four treatments–three negative option

treatments and one positive option treatment. The consumers’ attitudes toward the offer

and the firm making the offer are explored. We conclude the paper with a discussion of

the implications for managers regarding the use of negative option strategies and by

addressing privacy, technology, and legal issues pertaining to this marketing procedure.

To our knowledge, this is the first research to examine possible theoretical underpinnings

of NOM option marketing.

BACKGROUND

Negative Option Marketing

NOM has existed for a long time. The famous potter, Wedgewood, used this

strategy in the 18th century to gain a foothold in the pottery market of Europe. He sent

samples of his work, unsolicited, to his customers who were some of Germany’s leading

aristocracy. Wedgewood’s rationale was that his clientele were too lazy to send the

pottery back and would, instead, pay for it (Wasserman 2001).

The next notable use of the strategy was in 1926, when the Book-of-the-Month

Club was formed in the U.S. by marketers Maxwell Sackheim and Harry Scherman. The

Book-of-the-Month Club developers sent new books to members with the agreement that

the Club would pay for return postage if the book was not wanted (Major 2005). This

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policy proved costly and an adjustment was made. Members were pre-notified of the

book to be sent with the option to decline the book. If a card declining the offer by the

purchaser was not returned in a timely fashion, the book was sent and billed (negative

option) (Bowal 1999).

There appear to be five major variations on the negative option strategy currently

in use.

1. Something is regularly shipped or service provided, once a contract is in place;

2. The consumer has a limited time free trial membership prior to being charged, with the free trial beginning with the initiation of a contract;

3. The consumer and firm have a primary transaction relationship, the negative option is offered through a secondary transaction relationship that is billed automatically;

4. The consumer and firm have a primary transaction relationship with the marketer adding goods or services to the consumer’s bill at the marketer’s discretion; and

5. The contract continues after the end date unless the consumer explicitly cancels the contract—usually within a certain time before the end of the contract (Bowal 1999).

The one consistent pattern throughout all five forms is the basis of some sort of business

relationship between the consumer and the firm. Using the relationship as an entree,

negative option strategies are applied.

RESEARCH OVERVIEW

One service provider that has the ability to use negative option strategies that

operate from an existing contractual agreement is a bank. Once a customer agrees to the

stipulations of a demand deposit account (checking), banks can make a number of

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negative option offers. Because of this circumstance, we chose to research NOM in a

banking environment.

In researching NOM, we investigated four basic research questions, one practical

question, and one ethical question.

1. What are some consumer perceptions that might impact the consumer’s satisfaction with the negative option offer?

2. Does the consumer’s satisfaction with the negative option offer impact his/her satisfaction with the bank making the offer?

3. Does the consumer’s satisfaction with the negative option offer impact consumer behaviors such as intentions to purchase?

4. Is the impact of satisfaction with the negative option offer mediated by the consumer’s desirability to control the purchase situation, and the natural agreeableness of the consumer?

From a practical point of view:

5. What is the financial impact of a negative option offer?

And from an ethical point of view:

6. Has the consumer correctly comprehended the offer?

Model Development

Figure 1 indicates a model for analyzing a negative option service offer from a

bank to customers. The dependent variable of interest in the model is satisfaction with the

negative option offer (Satisfactionoffer). Although there are many constructs that might

impact the consumer’s perceived satisfaction with the offer, the authors narrowed the

field to three consumer perceptions that might impact the consumer’s perceived

satisfaction with the offer. These perceptions were selected based on exit interviews

conducted with bank customers (these bank customers were not part of the survey

sample) and include:

Positive influences

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o The perceived value of the offer

o The perceived procedural justice/fairness inherent in the offer, and

Negative influences

o The perception of opportunistic behavior on the part of the bank

making the offer.

The authors also examined positive and negative individual difference variables that

might mediate the consumer’s satisfaction with the offer. These variables comprise:

Positive mediating influence

o Agreeableness

Negative mediating influence

o Desirability of control

A review of relevant literature on the concepts of the model follows.

[Insert Figure 1 about here]

Influences on Satisfaction with the Offer

Positive - Perceived value of the offer

Perceived value is a key concept in the model illustrated in Figure 1. Woodruff,

Schumann, and Gardial (1993) indicated that perceived value is closely related to

satisfaction. Although a key concept, perceived value is complex (being difficult for both

marketer and consumers to grasp) and difficult to measure. Semon (2001) discussed how

arbitrary most measures of value appear and how often marketers and consumers are not

in agreement in their perceptions of value. Semon (2001) additionally noted that

marketers deal only abstractly with money in terms of value, defining value as price, or

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sacrifice, while in contrast, consumers find money is the main term used when defining

value.

The complexity of the concept is illustrated in explanations offered in three

investigations. Woodruff et al. (1993), when examining perceived value from the

consumer’s perspective, considered it a basic attribute-to-benefit ratio. Saliba and Fisher

(2000) reviewed the ratio analysis literature and offered a model based on a ratio of

perceived benefits received to perceived sacrifices made to purchase and use the

product/service. Zeithaml (1988) developed a conceptual model that included value.

From her consumer interviews she was able to categorize perceived value from the

consumer’s perspective into four definitions:

Value is low price. Value is whatever I want in a product. Value is the quality I get for the price I pay. Value is what I get for what I give (pg. 13).

The underlying commonality of these perspectives is that the consumer’s perception of

value is based on a ratio analysis. Negative option offers would appear to contain a

perceived value component since the offer clearly states the price (sacrifice), the offers

and benefits, and sometimes even a “free-ride” period. We therefore define the concept of

perceived value of the offer in our model as “What I get for what I give” (Zeithaml 1988,

p. 13).

Positive - Perceived equity of the offer

The concept of equity involves a comparison of fairness, rightness, or

deservingness relative to others. Homan’s (1961) “rule of justice” is a seminal

examination of equity. Essential to Homan’s (1961) equity approach was process,

proportionality, and comparison (Oliver and Swan 1989). The process includes an

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exchange encounter with another entity. Proportionality referred to Homan’s equation

where rewards and inputs to rewards should be proportional. The third component and

final determinate of equity involves comparison to a person, group, or entity. Oliver

(1997) noted that equity judgments are bipolar-like disconfirmation judgments.

Equity has a direct role in satisfaction as well, with both person-to-person

comparisons and merchant-to-person comparisons (Oliver 1997). Regarding merchant-to-

person comparisons, the person is comparing two things. First is the comparison of the

merchant’s selection and service compared to the consumer’s efforts and price paid for

the selection and service. This is an individual type of comparison where the consumer is

only interested in getting what he/she paid for. The second type of comparison is

merchant oriented—what did the merchant receive (profit) for the price the consumer

paid. The importance of these comparisons is that such judgments of equity directly

influence satisfaction (Oliver 1997).

The equity comparisons noted thus far address distributive justice, or outcomes of

an exchange. Goodwin and Ross (1992) expanded the equity concept from a single

dimension of distributive justice, to include procedural justice and interactive justice.

Procedural justice refers to perceptions of the outcome process. Interactive justice refers

to perceptions that the consumer was treated with respect, politeness, and dignity during

the transaction. Goodwin and Ross (1992) found that the inclusion of procedural and

interactive justice significantly increased the explanation of satisfaction variance, with

distributive justice influencing satisfaction the most and interactive justice influencing

satisfaction the least. Thus, the inclusion of equity in the model is warranted.

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NOM has suffered from the perception of being unfair (e.g., Hatch 2001; Sovern

1999) and much discussion of its legality and ethicality has surfaced in the US and

Canada. After all, the consumer is not given his/her opportunity to opt into an exchange

relationship, rather, the relationship is foisted on the consumer until the consumer

indicates “Enough.” We therefore included perceived equity in our model.

Negative - Opportunistic Behavior

Williamson (1983) first defined opportunistic behavior as “self-interest seeking

with guile” (p. 6). The behavior most often takes the form of manipulating information by

withholding it or distorting it. The end result is that promises or obligations are not

fulfilled. John (1984) noted that the key to such behavior is the inherent deceit as opposed

to ignorance or apathy. In other words, the self-interest seeking behavior is conscious and

goal directed behavior.

John (1984) further noted that in some disciplines where opportunistic behavior

has been studied (such as transaction cost analysis), it is assumed that humans naturally

behave opportunistically. This is particularly so if humans can get away with such

behaviors and such behaviors are profitable. Williamson (1983) noted that humans will

get away with (word choice: display or present?) as many opportunistic behaviors as they

can. The transaction cost analyses processes do not bother to explain the behavior, rather

just attempt to explain the transaction costs of such behaviors. John (1984) indicated that

the potential for opportunistic behaviors is most prevalent in long term relationships, such

as those found between consumers and financial institutions, personal service providers,

and other product-service entities that consumers have come to rely upon.

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When the opening scenario of this article was read to bank customers during an

exit interview, most indicated that this sounded like opportunistic behavior.

Consequently, this concept was included in the model as having an impact on satisfaction

with a negative option offer.

Satisfaction with the Offer

We found that two rather broad theories were relevant to our concept of

satisfaction with the offer: Expectancy-disconfirmation Theory (Oliver 1980) and

Comparison Level Theory (Thibaut and Kelley 1959).

Expectancy-disconfirmation Theory

Oliver (1980) explained the expectancy-disconfirmation paradigm as a process

whereby satisfaction judgments arise from comparisons of expectations held previously

and current product/service performance. If current performance exceeds previous

expectations the results are positive disconfirmation resulting in increased satisfaction. If

on the other hand, current performance is exceeded by previous expectations the result is

negative disconfirmation and a concomitant increase in dissatisfaction.

Oliver (1997) expanded the information on expectancy-disconfirmation by stating

that assimilation and contrast effects may underlie the expectancy-disconfirmation

process. When consumers assimilate expectations, they are very confident of their

expectations—so much so that they may not compare performance to expectations in case

their expectations are not accurate. They therefore gravitate toward their initial feeling. In

this case, expectations will always equal performance, much like a self-fulfilling

prophecy (Eden 1990; Jones 1977). Contrast effects tend to lead to exaggerations of the

discrepancies or gaps between expectations and performance. For example, contrast

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effects exaggerate satisfaction (where the discrepancy is due to performance exceeding

expectations) to being very satisfied. Oliver (1997, 91) called this “magnifying ratings in

the direction of the performance discrepancy”.

Comparison-level Theory

Comparison-level Theory is an approach used to explain satisfaction which is

comprised of two standards (Thibaut and Kelley 1959). The first standard is the level of

comparison. The second standard is the comparison level for alternatives. For example, if

an individual lives in a rural community with few health care professionals in a 50 mile

radius (few alternatives for health care), his/her level for comparisons might be low. The

outcome is that individuals might be satisfied with less in the rural environment than if

they were in a metro area with a number of major medical centers (alternatives).

The current study involved a banking context and thus it seemed that

Comparison-level Theory was relevant based on the number of banks found in even the

smallest of communities (not to mention Internet banks).

Individual Differences Variables? Mediating Influences on Satisfaction

Desirability of Control

The Desirability of Control is essentially the desire to “control the events in one’s

environment” (Burger and Cooper, 1979, 382). Some people are high in their Desire for

Control (DC), exhibiting assertive and decisive characteristics, and generally try to

influence others if it is to their advantage. In an attempt to avoid events that are

unpleasant or result in failure, a person high in DC will try to exercise control over or

manipulate events. In contrast, individuals who possess a low DC are generally more

nonassertive, passive, and indecisive. These people will probably not try to influence

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others and may even prefer that others make daily decisions for them (Burger and Cooper

1979).

The process of NOM takes a certain amount of control of free choice away from

the consumer. Indeed, since the transaction is initiated by the marketer, unless halted by

the consumer, the consumer has lost the ability to affirmatively complete the transaction,

thus losing control over the situation. While some consumers may not be troubled by

losing control, others are often incensed by its loss. It therefore seems plausible that the

individual variable of Desirability of Control may mediate the level of satisfaction with a

negative option offer.

Agreeableness

Personality traits are enduring ways of thinking, feeling, and acting (McCrae and

Costa 1997) and, as such, might mediate the overall feeling of satisfaction with a negative

option offer. A review of the personality literature revealed that the Five Factor Model

(Goldberg 1990; McCrae and John 1992) was most prevalent approach and might provide

additional insights with respect to our model. When placed into a hierarchical structure of

personality the five factors reside at the most elemental, abstract level—“defined as the

basic underlying predispositions that arise from genetics and a person’s early learning

history” (Licata, Mowen, Harris, and Brown 2003, 258).

The five factors are comprised of:

Conscientiousness (or will to achieve), Agreeableness (opposite of antagonism), Extraversion or surgency, Openness to experience, intellect or culture (creativity), and Neuroticism or emotional instability (McCrae and John 1992).

21

It would seem likely that the level of agreeableness of the consumer might mediate

satisfaction with the negative option offer. If the consumer was very agreeable, he/she

might not take offense at the negative option process. On the other hand, if the consumer

was more antagonistic, he/she might not feel positively about the process which might

mediate satisfaction with the offer.

METHOD

Operationalizing the Model Concepts

Existing scales that had acceptable reliabilities were used to operationalize the

model concepts. All scale items were measured on a 5-point Likert scale. Perceived

value, perceived equity, opportunistic behavior, satisfaction with the offer, and

satisfaction with the bank making the offer, were posed as attitudinal statements with a

1=strongly disagree to 5=strongly agree format. The agreeableness scale was introduced

as “How often do you feel/act:” and followed by 4 adverbs measured by 1=never to

5=always. Desirability of Control was introduced by asking “How often does the

statement apply to you?” and followed by 1=does not apply to me at all to 5=the

statement always applies to me.

The value scale was comprised of seven items borrowed from two satisfaction-

with-the-offer scales developed by Burton and Lichtenstein (1988) and Petroshius and

Monroe (1987). The seven items had a Cronbach alpha of .924. Equity was comprised of

two borrowed items (Maxham 1999) having an alpha of .816. Opportunistic behavior

used two borrowed items (McKee, Rodrigue, and Licata, forthcoming) that posted a .723

alpha. Satisfaction with the offer and satisfaction with bank had three and four items,

respectively, borrowed and modified for the research (Mittal and Lasser 1996; Oliver and

22

Swan 1989). Exploratory factor analysis found all items loading on their appropriate

model variable with acceptable statistics, as noted by Hair, Anderson, Tatham, and Black

(2002, 385). Satisfaction with the offer had an alpha of .804 and satisfaction with the

bank had an alpha of .901. The Burger and Cooper Desirability of Control scale (Burger

and Cooper 1979) originally had 20 items. We chose four items that specifically

measured attitudes regarding being told what to do. The four items had a calculated alpha

of .797. Finally, agreeableness had four items borrowed from Licata et al. (2003) with an

alpha of .817. (Note: all items can be found in the Appendix.)

Data Collection and Sample Characteristics

NOM has the potential to be an important marketing tool in the financial services

sector. The industry is seeking new sources of revenue, offering new services and

changing old ones. Technology makes it easier and less expensive than in the past for the

industry to effect these changes. From a negative perspective, the new technologies could

allow industry to profit by surreptitiously billing unsuspecting customers for unwanted

products and services. However, the use of NOM by responsible service providers

operating in competitive markets can enable financial institutions to offer better service

more easily and with greater efficiency.

Consequently, the sample identified was non-interest bearing DDA (checking

account) customers of a community bank in the southwestern US. These customers have

a contractual, primary transaction relationship with bank. Banks often offer additional

services that can be billed directly to the customer’s DDA. We gained access to a 1000-

customer mailing list with all names having a retail DDA relationship with the bank. The

survey was blind, coming from professors of a nearby university. No pre-announcement

23

or follow-up mailing was used. The survey contained a scenario where the respondent’s

primary bank was offering AD and D (accidental death and dismemberment insurance of

up to $100,000 to customers for $3.50 per month). There were four versions of this offer:

1) the customer can positively complete the transaction by sending the bank an acceptance card (included in the monthly statement),

2) the insurance will start today and the customer’s DDA will be debited $3.50, beginning this month, until the customer opts out of the coverage (by calling the bank),

3) the insurance begins today and the customer’s DDA will be debited $3.50 beginning next month (giving one month free) unless the customer opts out of the coverage (by calling the bank within the next month),

4) the insurance begins today and the customer’s DDA will be debited $3.50 three months from now (giving three months free) unless the customer opts out of the coverage (by calling the bank within the next three months).

The mailing list had 848 valid addresses with 194 usable returned surveys. The

sample was comprised of an almost even split by gender (female 45.9%, male 53.1%),

with 34.6 percent holding a college degree or advanced degree, average age of 36.6 years.

The majority of the respondents (52.6%) were currently married and had an average

household of 2.9 persons.

RESULTS

Mean index scores were computed for all model variables. Table 1 illustrates the

means of the variables and the correlation coefficients. Using a one-sample t-test, all

means were found to be significantly different from middle scale value of 2.50, thus

indicating respondents were not neutral regarding attitudes toward any of the variables.

The lowest mean score was satisfaction with the offer (mean=2.89), while the second

highest score was for satisfaction with the bank (mean=3.73).

24

[Insert Table 1 about here]

A series of hierarchical regressions were used to test the model. Table 2 illustrates

the results of four hierarchical regressions:

Model 1 – Satisoffer= a + x1(perceived value) + x2(perceived equity) + x3(perceived opportunistic

behavior) + e

Model 2 - Satisoffer= a + x1(perceived value) + x2(perceived equity) + x3(perceived opportunistic

behavior) + x4(desirability of control) + e

Model 3 - Satisoffer= a + x1(perceived value) + x2(perceived equity) + x3(perceived opportunistic

behavior) + x5(agreeableness) + e

Model 4 - Satisoffer= a + x1(perceived value) + x2(perceived equity) + x3(perceived opportunistic

behavior) + x4(desirability of control) + x5(agreeableness) + e

[Insert Table 2 about here]

The adjusted R2 for each model indicated that the basic model has good

explanatory power. When the mediators were added (Models 2-4) the R2 does not appear

to improve significantly. An examination of the standardized beta coefficients illustrates

that DC has a little or no mediating affect on satisfaction with the offer. The results of

adding Agreeableness to the regression indicates no change in beta coefficients. Indeed,

the betas for Agreeableness are not statistically significant. There is also no multiplicative

affect when both DC and Agreeableness are added to the regression, yielding little

change in the betas. It would therefore appear that the individual difference variables of

Desirability of Control and Agreeableness do not mediate the influence of Perceived

Value, Perceived Equity, and Perceived Opportunistic Behavior on Satisfaction with the

negative option offer.

25

There are a number of issues tangential to testing the model. First, does the

satisfaction with the offer affect the customer’s satisfaction toward the bank making the

offer? Recall from Table 1 that the lowest mean score was Satisfactionoffer, (2.89 on a 5-

point scale, significantly different from a neutral score of 2.50). Interestingly, one of the

highest means was satisfaction with the bank making the offer (Satisfactionbank – mean

3.73). A one-way ANOVA with Satisfactionbank as the dependent variable indicated that

Satisfactionoffer posted a significant F statistic (3.94, p<.001). The adjusted R2 for the

model, .177, may explain why the mean for the Satisfactionoffer was so low and

Satisfactionbank so high—satisfaction with the offer provides very little in explanatory

power for Satisfactionbank.

A second issue concerns the impact of Satisfactionoffer on the customer’s intent to

purchase the service. A univariate regression, with intent to purchase as the dependent

variable and Satisfactionoffer as the independent variable was significant (F=2.79, p<.01,

R2=.212. Therefore, it appears that even though the level of satisfaction with the negative

option offer was relatively low, it positively influenced the intent to purchase the service.

The third issue concerns comprehension. Did the respondents clearly understand

the offer? We included a manipulation check in the questionnaire. It appears that 29

respondents (15%) were unable to correctly state the offer they were made. A study

conducted by Jacoby and Hoyer (1989) using 1347 respondents found that 21.4 percent

of respondents did not understand the meaning of printed communications offered in

advertisements, editorials and magazines. In comparison, we cannot say that our negative

option offer fostered more than “normal” levels of misunderstanding.

26

A fourth issue is the economic impact of the offer for the bank making the offer.

Respondents were given four choices: 1) very interesting in buying the service, 2)

somewhat interested in buying the service, 3) not interested at all in buying the service,

and 4) don’t know if interested or not in buying the service. The scenario involving one

month free service followed by debiting the customer’s DDA had the largest positive

response (very interested in buying the service—48.7 %). We can extrapolate from this

information and get a sense of the economic value of the negative option strategy. The

bank has approximately 10,000 non-interest bearing DDAs. Given these survey results,

4870 DDAs would be very interested in purchasing the insurance. The cost to the

customer would be $3.50 per month or $42 per year. The cost to the bank is $2.49 per

DDA account or $29.88 per year. The negative option offer with one month free would

bring the bank an additional $204,540. revenue per year with a net revenue of

$145,515.60.

DISCUSSION

The current research examines NOM where a purchase is imposed on the

consumer unless he/she acts in a timely fashion to prevent the sale. This seems to be a

very popular strategy in the US and Canada. Despite the frequency of this marketing

strategy there has been no research to gain insights into the strategy. The current

investigation is the first to examine the effectiveness of the strategy and attempt to apply

consumer behavior theory to the strategy.

At the beginning of the article, we posed four basic research questions. RQ1

asked what consumer perceptions might impact the consumer’s satisfaction with a

negative option offer. The data indicated that 74.9 percent of the variance explained in

27

satisfaction with a negative option offer was attributed to consumer perceptions of value,

equity, and opportunistic behaviors. RQ2 and RQ3 asked if the consumer’s satisfaction

with the negative option impacts satisfaction with the organization making the offer and

intentions to purchase. The research indicated that satisfaction with the negative option

offer significantly impacted both satisfaction with the organization making the negative

option offer and intentions to purchase (although satisfaction with the offer explains little

variance with satisfaction with the bank making the offer). RQ4 addresses the mediating

effect of two individual difference variables, Desirability of Control and Agreeableness,

on satisfaction with the negative option offer. The research indicates that these two

particular variables had no significant mediating influence on satisfaction with the

negative option offer.

The results indicate the answer to Q5 (regarding the financial impact of the offer

to the bank) could be quite positive. In spite of a low satisfaction rating with the offer,

enough customers were very interested in the offer to potentially provide the community

bank with an impressive increase in revenue. The results also indicate that, ethically,

NOM does not promote miscomprehension of the offer. Indeed, it appears that more

customers comprehend the negative option offer than suggested by prior advertising

research.

Limitations

The research had certain limitations. First, the research utilized only one context

and one contractual situation. Would the findings hold for another contractual situation,

say a health club or lawn service? Because of this limitation, findings cannot be

generalized—rather findings might be used as exploratory for further research utilizing

28

other contractual situations. The second limitation involves the variables of the model.

Although the independent variables of perceived value, equity and opportunistic behavior

posted a quite acceptable R2, the lack of impact of mediating variables was disappointing.

Future research might focus on choosing mediating variables that might be shown to have

a more demonstrable impact on satisfaction with a negative option offer.

Managerial Implications

Although it might not be appropriate to generalize from the research, based on the

limitations just noted, there may be some managerial implications present.

Marketing effectiveness

First, it appears the reason why this marketing strategy is so popular is because it

is effective. NOM has worked long and well for book, record, and video clubs. In these

competitive markets a relationship is voluntarily established by the customer. A key

feature of these programs (and required by FTC regulations) is that they require that all

terms and conditions of the buyer/seller relationship be explicitly laid out and

acknowledged up front. NOM can be advantageous to both parties when transparency

and tangible benefit to the consumer are evident, (e.g. convenience and better value for

money), and when the respective administrative burdens or costs to both parties are

reduced.

Another potential positive use of NOM involves automatic contract renewal

clauses. Under existing contracts, automatic price rise clauses (negative option price

clauses) can eliminate costly renegotiation of contracts whenever there is a price increase.

Moreover, in a negotiated contract when there is more or less equal bargaining power,

one can assume that there will be benefits to both parties.

29

An extrapolation of the results from this study noted an impressive increase in

revenues (both gross and net) from the strategy with a minimum of “free-ride” time (one

month). For this particular offer, the consumer did not seem to feel particularly positive,

or negative, thus avoiding negative outcomes. The offer, although receiving a low

satisfaction rating, had a positive impact on satisfaction with the bank. Perhaps the offer

represented another “touch” situation, and as long as the offer was not viewed as highly

negative, it positively affected satisfaction with the bank. Additionally, it appears that

managers do not have to worry about the ethical considerations of negative option offers.

Consumers seem to understand these offers better than most advertising and written

offers. In sum, it appears that negative option offers might be an effective new tool for

marketing managers whose service has a contractual relationship foundation.

Privacy concerns and new technologies

Under an opt-out system inherent in NOM strategies information can be shared

and made public unless a person instructs an organization to keep it confidential. An opt-

out system allows unlimited sharing of private information unless and until a consumer

says “stop” (Sovern 1999, 1075). Former Attorney General for Minnesota, Mike Hatch

(2001), indicated that there are three fundamental problems with an opt-out system that

undermine its ability to adequately protect an individual’s privacy interests concerning

the treatment of sensitive personal information. First, a successful opt-out system is

conditioned upon individuals being able to understand how organizations are using their

personal information. Second, a successful opt-out system is conditioned upon consumers

getting meaningful notice that they have a right to opt-out of this information sharing.

Third, a successful opt-out system is predicated upon consumers being able to effectuate

30

their preference without undue convenience. In contemplating using NOM strategies it

would behoove organizations to address these privacy concerns.

This is particularly important in the financial services sector because of the ease

of access to a consumer’s personal financial information (Hatch 2001; Sovern 1999). The

issue of how to manage NOM, including privacy implications, in this and other sectors,

needs to be addressed initially we believe through voluntary codes, and, if necessary,

through other means such as regulatory activity.

Additionally, the potential impact of new technologies on the use and abuse of

NOM is a major issue, (e.g., the case of a bank using credit rating information for

marketing purposes). The interconnection of networks will increase the amount of

information—such as electronic transactions, credit ratings, financial accounts,

educational, medical and driving records—that can be assembled and collated into

comprehensive profiles of individuals or companies. Elaine Kolish, Associate Director of

the FTC’s Bureau of Consumer Protection’s Division of Enforcement, indicated that

“Negative option marketing is particularly troubling when marketers …already have

consumers’ credit card or billing account information and can easily charge consumers’

accounts without their permission or when marketers fail to disclose that consumers’

credit card numbers will be transferred to another company and charged unless

consumers call to cancel” (Federal Trade Commission 2001, 1). These records can be

sold across borders, resold or reused, or integrated with other databases without consent

or remuneration, for purposes unrelated to those for which the data were originally

collected. This makes NOM a very appealing marketing tool. The implications for

guarding and managing personal information on the information highway as it relates to

31

NOM should be reviewed by organizations and governments in response to electronic

privacy issues.

Legal considerations

In the United States, several cases have been brought before the courts involving

cable companies (Time Warner, Comcast, TCI/Encore) that either unbundled channel

packages or introduced new channels using NOM. Most were prosecuted using a

provision of the federal Cable Television Consumer Protection Act of 1992, amended in

1994, to ban the practice of charging a subscriber for any service that the consumer has

not affirmatively asked for by name. In another case, FTC v. Ira Smolev (2001), the FTC

announced that the defendant violated the Telemarketing Sales Rule (16 C.F.R. 2003) by

not disclosing material terms and conditions of the offers up front. As a result, Ira

Smolev, paid more than $9 million to settle charges brought by the FTC and 40 State

Attorneys General, that the defendants misled consumers into accepting trial buying club

memberships and obtained consumers’ credit card account numbers without the

consumers’ knowledge or authorization from telemarketers selling the buying clubs.

Consumers then were enrolled in the clubs and charged up to $96 in yearly membership

fees.

In the final analysis information emerges as one of the key issues in matters of

NOM. Clear, accurate, comprehensible information, presented in plain language, is

required for consumers to make informed decisions and choices and to understand the

terms and conditions of contracts. Organizations considering adoption of NOM plans

would do well to review Federal Trade Commission information with regards to book

clubs, record clubs, and video clubs as a source of guidance in implementing a NOM,

32

regardless of industry. Specifically, under the FTC Trade Regulation Rule Regarding Use

of Negative Option Plans by Sellers in Commerce (16 CFR § 425 1998) sellers must

clearly and conspicuously provide certain information about their plans in any

promotional materials.

The FTC is concerned about this particular marketing approach and has

developed numerous consumer education publications to help consumers protect

themselves. Organizations considering NOM should carefully scrutinize these regulatory

publications before implementing such a practice.

The development and implementation of industry led voluntary codes, standards,

and best practices may be a viable alternative in addition to traditional government

action.

33

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37

APPENDIX

Scale Items

Perceived Value: Source – Petroshuis and Monroe, 1987; Burton and Lichtenstein, 1988. α=.924

1. I consider the offer a good buy.2. The cost of the offer is very acceptable.3. Compared to other offers, this one looks like it provides good service.4. I think the offer has value.5. The service offered would appear to be a bargain.6. I find the offer a good value for the money.7. I find the cost of the offer very economical.

Perceived Equity: Source – Maxham, 1999. α=.8161. The bank’s offer would result in a positive outcome for me. 2. What I receive in benefits from accepting the offer seems fair to me.

Perceived Opportunistic Behavior: Source – McKee, Rodrigue and Licata, Forthcoming. α=.723

1. The offer seems to take advantage of the customer2. The offer does not seem to have my best interests at heart.

Satisfaction with the Offer: Source – Mittal and Lasser, 1996; Oliver and Swan, 1989. α=.804

1. Compared to other offers this one looks like it provides good service.2. The service offered seems to meet or exceed my expectations.3. Overall, I am satisfied with the offer made by ABC Bank.

Desirability of Control: Source – Burger and Cooper 1979. α=.7971. I try to avoid situations where someone else tells me what to do.2. When it comes to orders, I would rather give them than receive them.3. I prefer to avoid situations where someone else has to tell me what it is I should

be doing.4. I’d rather run my own business and make my own mistakes than listen to

someone else’s orders.Agreeableness: Source – Licata, Mowen, Harris and Brown, 2003. α=.817

1. Tender hearted with others2. Sympathetic3. Kind to others4. Softhearted

Satisfaction with the Bank Making the Offer: Source – Mittal and Lasser, 1996; Oliver and Swan, 1989. α=.901

1. I would recommend ABC Bank to my friends.2. Overall, I am satisfied with the service provided by ABC Bank.3. The service I receive from ABC Bank meets or exceeds my expectations.4. Compared to other banks, ABC Bank provides good service.

38

TABLE I

Means and Correlation Coefficients for Model Variables

Variable 1 2 3 4 5 6 71.Value 3.232.Equity . 828+ 2.953.Opportunistic Behavior

-.584+ -.551+ 3.23

4.Satisfaction – Offer

.831+ .813+ -.587+ 2.89

5.Desirability of Control

-.047 -.005 .097 .062 3.57

6.Agreeability .106 .088 -.082 .067 .078 3.917.Satisfaction-Bank

.372+ .368+ -.381+ .350+ -.059 .194+ 3.73

+ p<.01Means are in bold, on the diagonal

39

TABLE 2

Beta Coefficients for Hierarchical Regression Analysis (N=194)

Dependent Variable: Satisfaction with the Offer

Model1

Model2

Model3

Model4

Perceived Value .835* .832* .834* .832*Perceived Equity .390* .310* .390* .381*Perceived Opportunistic Behavior -.129* -.124* -.129* -.124*Desirability of Control — .098* — .098*Agreeableness — — -.024 -.016

Adjusted R2 .749 .752 .749 .751

NOTE: Standardized beta is reported.*p <.01; **p<.05; ***p<.10

40

The Ethics of Negative Option Marketing

C. W. Von Bergen

Southeastern Oklahoma State University

John K. S. Chong

University

41

The Ethics of Negative Option Marketing

Abstract

Negative option marketing, , has a history of several hundred years yet no

systematic ethical review of this increasingly popular marketing strategy has been

undertaken.

42

The Ethics of Negative Option Marketing

Velasquez, Andre, Shanks, and Meyer (1996) and White and Taft (2004) provide similar ethical frameworks for evaluating problematic ethical issues. What is Ethics?

Simply stated, ethics refers to standards of behavior that tell us how human beings ought to act in the many situations in which they find themselves-as friends, parents, children, citizens, teachers, professionals, and particularly so for our purposes, businesspeople (Markkula Center for Applied Ethics, n.d.).

At a minimum, and is the one we will use in our discussion of negative option

marketing. Each addresses essentially five

Many philosophers and ethicists have helped us answer this critical question. They have suggested at least five different sources of ethical standards we should use.

Five Sources of Ethical Standards

The Utilitarian ApproachSome ethicists emphasize that the ethical action is the one that provides the most good or does the least harm, or, to put it another way, produces the greatest balance of good over harm. The ethical corporate action, then, is the one that produces the greatest good and does the least harm for all who are affected-customers, employees, shareholders, the community, and the environment. Ethical warfare balances the good achieved in ending terrorism with the harm done to all parties through death, injuries, and destruction. The utilitarian approach deals with consequences; it tries both to increase the good done and to reduce the harm done.

The Rights ApproachOther philosophers and ethicists suggest that the ethical action is the one that best protects and respects the moral rights of those affected. This approach starts from the belief that humans have a dignity based on their human nature per se or on their ability to choose freely what they do with their lives. On the basis of such dignity, they have a right to be treated as ends and not merely as means to other ends. The list of moral rights -including the rights to make one's own choices about what kind of life to lead, to be told the truth, not to be injured, to a degree of privacy, and so on-is widely debated; some now argue that non-humans have rights, too. Also, it is often said that rights imply duties-in particular, the duty to respect others' rights.

The Fairness or Justice ApproachAristotle and other Greek philosophers have contributed the idea that all equals should be treated equally. Today we use this idea to say that ethical actions treat all human beings equally-or if unequally, then fairly based on some standard that is defensible. We pay people more based on their harder work or the greater amount that they contribute to an organization, and say that is fair. But there is a debate over CEO salaries that are hundreds of times larger than the pay of others; many ask

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whether the huge disparity is based on a defensible standard or whether it is the result of an imbalance of power and hence is unfair.

The Common Good ApproachThe Greek philosophers have also contributed the notion that life in community is a good in itself and our actions should contribute to that life. This approach suggests that the interlocking relationships of society are the basis of ethical reasoning and that respect and compassion for all others-especially the vulnerable-are requirements of such reasoning. This approach also calls attention to the common conditions that are important to the welfare of everyone. This may be a system of laws, effective police and fire departments, health care, a public educational system, or even public recreational areas.

The Virtue ApproachA very ancient approach to ethics is that ethical actions ought to be consistent with certain ideal virtues that provide for the full development of our humanity. These virtues are dispositions and habits that enable us to act according to the highest potential of our character and on behalf of values like truth and beauty. Honesty, courage, compassion, generosity, tolerance, love, fidelity, integrity, fairness, self-control, and prudence are all examples of virtues. Virtue ethics asks of any action, "What kind of person will I become if I do this?" or "Is this action consistent with my acting at my best?"

Putting the Approaches Together

Each of the approaches helps us determine what standards of behavior can be considered ethical. There are still problems to be solved, however.

The first problem is that we may not agree on the content of some of these specific approaches. We may not all agree to the same set of human and civil rights.

We may not agree on what constitutes the common good. We may not even agree on what is a good and what is a harm.

The second problem is that the different approaches may not all answer the question "What is ethical?" in the same way. Nonetheless, each approach gives us important information with which to determine what is ethical in a particular circumstance. And much more often than not, the different approaches do lead to similar answers.

A Framework for Ethical Decision MakingRecognize an Ethical Issue

1. Is there something wrong personally, interpersonally, or socially? Could the conflict, the situation, or the decision be damaging to people or to the community?

2. Does the issue go beyond legal or institutional concerns? What does it do to people, who have dignity, rights, and hopes for a better life together?

Get the Facts

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3. What are the relevant facts of the case? What facts are unknown?

4. What individuals and groups have an important stake in the outcome? Do some have a greater stake because they have a special need or because we have special obligations to them?

5. What are the options for acting? Have all the relevant persons and groups been consulted? If you showed your list of options to someone you respect, what would that person say?

Evaluate Alternative Actions From Various Ethical Perspectives

6. Which option will produce the most good and do the least harm?

Utilitarian Approach: The ethical action is the one that will produce the greatest balance of benefits over harms.

7. Even if not everyone gets all they want, will everyone's rights and dignity still be respected?

Rights Approach: The ethical action is the one that most dutifully respects the rights of all affected.

8. Which option is fair to all stakeholders?

Fairness or Justice Approach: The ethical action is the one that treats people equally, or if unequally, that treats people proportionately and fairly.

9. Which option would help all participate more fully in the life we share as a family, community, society?

Common Good Approach: The ethical action is the one that contributes most to the achievement of a quality common life together.

10. Would you want to become the sort of person who acts this way (e.g., a person of courage or compassion)?

Virtue Approach: The ethical action is the one that embodies the habits and values of humans at their best.

The first step suggested by Velasques et al. (1996) in analyzing moral issues is

obvious but not always easy: Get the facts.

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The first step in analyzing moral issues is obvious but not always easy: Get the

facts. Some moral issues create controversies simply because we do not bother to check

the facts. This first step, although obvious, is also among the most important and the most

frequently overlooked.

But having the facts is not enough. Facts by themselves only tell us what is; they

do not tell us what ought to be. In addition to getting the facts, resolving an ethical issue

also requires an appeal to values. Philosophers have developed five different approaches

to values to deal with moral issues.

The Utilitarian Approach

Utilitarianism was conceived in the 19th century by Jeremy Bentham and John

Stuart Mill to help legislators determine which laws were morally best. Both Bentham

and Mill suggested that ethical actions are those that provide the greatest balance of good

over evil.

To analyze an issue using the utilitarian approach, we first identify the various

courses of action available to us. Second, we ask who will be affected by each action and

what benefits or harms will be derived from each. And third, we choose the action that

will produce the greatest benefits and the least harm. The ethical action is the one that

provides the greatest good for the greatest number.

Utilitarianism is based on the 18th-century ideas of Jeremy Bentham’s belief in

empiricism and the work of John Stuart Mill (Rosenstad, 1997; Velasquez, 1998), and is

founded on the importance of basing knowledge on objective, physical evidence.

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Utilitarianism, as a teleological approach, takes a societal perspective on costs and

benefits of ethical choice, suggesting that

an action should be evaluated according to how much good or harm it causes and should

consider

the effects on all parties. Utilitarianism is meant to promote the welfare of all persons by

minimizing harm and maximizing benefits, that is, using the criterion of achieving the

greatest good for the greatest number, thus taking precedence over concerns of duties,

rights, or justice. An example of a utilitarian-driven public policy decision would be to

change U.S. health care policy from a system that provides services primarily to insured

individuals, leaving more than 43 million people without basic care, to a system that

provides fundamental health and illness services to everyone.

The Rights Approach

The second important approach to ethics has its roots in the philosophy of the

18th-century thinker Immanuel Kant and others like him, who focused on the individual's

right to choose for herself or himself. According to these philosophers, what makes

human beings different from mere things is that people have dignity based on their ability

to choose freely what they will do with their lives, and they have a fundamental moral

right to have these choices respected. People are not objects to be manipulated; it is a

violation of human dignity to use people in ways they do not freely choose.

Of course, many different, but related, rights exist besides this basic one. These

other rights (an incomplete list below) can be thought of as different aspects of the basic

right to be treated as we choose.

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• The right to the truth: We have a right to be told the truth and to be informed

about matters that significantly affect our choices.

• The right of privacy: We have the right to do, believe, and say whatever we

choose in our personal lives so long as we do not violate the rights of others.

• The right not to be injured: We have the right not to be harmed or injured

unless we freely and knowingly do something to deserve punishment or we

freely and knowingly choose to risk such injuries.

• The right to what is agreed: We have a right to what has been promised by

those with whom we have freely entered into a contract or agreement.

In deciding whether an action is moral or immoral using this second approach,

then, we must ask, Does the action respect the moral rights of everyone? Actions are

wrong to the extent that they violate the rights of individuals; the more serious the

violation, the more wrongful the action.

The rights perspective, associated with the ideas of Locke, Kant,

Mill, and Rawls, is founded on a movement throughout history to

overcome basic social injustice and/or constraints on personal

freedom. Human rights, also referred to as natural rights, include those

rights contained in the Bill of Rights of the U.S. Constitution (1791) or

the Universal Declaration of Human Rights of the United Nations (1948;

see Appendix), delineating fundamental

and unconditional rights to be respected because they are based on

universal tenets in nature. Human rights are universal rights that

individuals are born with, regardless of status, intelligence, or

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nationality. For example, the Universal Declaration of Human Rights of

the United Nations states that everyone has the right to life, liberty,

and security of person; no one shall be held in slavery or servitude;

and no one shall be subjected to torture or to cruel, inhuman, or

degrading treatment or punishment. Basic rights of one kind can

override rights of another kind; for example, employees’ right to a safe

work environment overrides employers’ right to cut costs and ignore

safety in theworkplace. Human rights may be based on moral

principles and/or a legal system of rights, and whereas we may judge

certain acts as immoral, the laws may permit such acts (Smith, Forbes,

& Extejt, 1988). Here are two examples: (a) in the United States during

the period from the 16th to the 19th centuries, Whites had the legal

right to own slaves; (2) in the United States until 1920, women were

prohibited by law from voting. Rights are aligned with justice and often

asserted to overcome or correct some fundamental injustice. The U.S.

legal system demonstrates that rights serve justice, and justice takes

rights into account.

The Fairness or Justice Approach

The fairness or justice approach to ethics has its roots in the teachings of the

ancient Greek philosopher Aristotle, who said that “equals should be treated equally and

unequals unequally.” The basic moral question in this approach is: How fair is an action?

Does it treat everyone in the same way, or does it show favoritism and discrimination?

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Favoritism gives benefits to some people without a justifiable reason for singling

them out; discrimination imposes burdens on people who are no different from those on

whom burdens are not imposed. Both favoritism and discrimination are unjust and wrong.

A justice approach to ethics uses universal principles such as

reciprocity and equality of human rights and respect for the dignity of

all human beings as individual persons. Persons, situations, and

dilemmas are to be judged in a fair, objective, equitable, and impartial

manner, not, contrary to an ethic of care, swayed by circumstances. In

a system of justice, individuals have moral autonomy within the

context of a social contract and are expected to use reason to discern

which principles should be followed. Society provides a hierarchy of

rules, rights, and obligations that protect the infringement of individual

rights. Systems of justice in society, and the grievance process in

organizations, aim to incorporate these ideals. There are three types of

justice principles: Distributive justice is a way to distribute benefits and

burdens so that equals will be treated equally and nonequals will be

treated unequally. The allocation of benefits and burdens may include

equal shares to each person based on need, effort, merit, or social

contribution (Fritzsche, 1997). An example is equal pay for equal work,

including compensating women and men equally when performing the

same job.

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Retributive justice is for the punishment of wrongdoing, proven

through due process. The severity of the punishment is to be in

proportion to the magnitude of the wrongdoing. A conviction of

corporate executives for knowingly leaking toxic chemicals into ground

water would lead to some form of retributive justice.

Compensatory justice is concerned with compensating the injured

party equal to the loss thatwas suffered. When compensation cannot

be adequately provided, for example, in the case of lost life, property,

or proprietary information, then compensation is for a fair estimate of

damage. An example is the multibillion dollar settlement paid by

tobacco companies to states and individuals

for the loss of life and damage to health caused from cigarettes.

The Common-Good Approach

This approach to ethics presents a vision of society as a community whose

members are joined in the shared pursuit of values and goals they hold in common. This

community comprises individuals whose own good is inextricably bound to the good of

the whole.

The common good is a notion that originated more than 2,000 years ago in the

writings of Plato, Aristotle, and Cicero. More recently, contemporary ethicist John Rawls

defined the common good as “certain general conditions that are... equally to everyone’s

advantage.”

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In this approach, we focus on ensuring that the social policies, social systems,

institutions, and environments on which we depend are beneficial to all. Examples of

goods common to all include affordable health care, effective public safety, peace among

nations, a just legal system, and an unpolluted environment.

Appeals to the common good urge us to view ourselves as members of the same

community, reflecting on broad questions concerning the kind of society we want to

become and how we are to achieve that society. While respecting and valuing the

freedom of individuals to pursue their own goals, the common-good approach challenges

us also to recognize and further those goals we share in common.

The Virtue Approach

The virtue approach to ethics assumes that there are certain ideals toward which

we should strive, which provide for the full development of our humanity. These ideals

are discovered through thoughtful reflection on what kind of people we have the potential

to become.

Virtues are attitudes or character traits that enable us to be and to act in ways that

develop our highest potential. They enable us to pursue the ideals we have adopted.

Honesty, courage, compassion, generosity, fidelity, integrity, fairness,

self-control, and prudence are all examples of virtues.

Virtues are like habits; that is, once acquired, they become characteristic of a

person. Moreover, a person who has developed virtues will be naturally disposed to act

in ways consistent with moral principles. The virtuous person is the ethical person.

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In dealing with an ethical problem using the virtue approach, we might ask, What

kind of person should I be? What will promote the development of character within

myself and my community?

Virtue ethics, grounded in the Western philosophy of Aristotle (384-322

BCE) and the Eastern philosophies of the Buddha (ca 500 BCE) and

Confucius (ca 551-479 BCE), prescribes living one’s life and behaving

according to recognized virtues. Virtue, among other things, includes

living in moderation, according to the “Golden Mean,” or in Buddhism,

the “MiddleWay.” It does not depend on rules or principles but rather

motives and actions of people who are intent on doing the right thing

at all times. Acting with virtue ethics depends on qualities, traits, or

dispositions internal to an individual, or those qualities, traits, or

dispositions that a person strives to have or be.Virtue ethics is based

on being, emotion, and reason where one’s actions are an expression

of one’s virtues. How to be virtuous is primarily prescribed or

proscribed by one’s culture, religion, and life circumstances.

Philosophers and spiritual leaders have preached their preferred

virtues. Aristotle claimed that moral virtue involved both emotion and

reason, including charity, courage, truthfulness, friendliness, modesty,

and righteous indignation—or having a sense of justice (Rosenstad,

1997). St. Thomas Aquinas believed in both the intellectual virtues of

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wisdom, justice, temperance, and

fortitude, and the religious virtues of faith, hope, and charity, claiming

that virtue is learned, not innate. Confucianism teaches that one

should cultivate the virtues of patience, sincerity, obedience, and

knowledge. Buddhism teaches that the right path to a moral life

involves practicing compassion, forgiveness, nonharming of others,

honesty, generosity, and equanimity, along with other practices. In all

traditions, virtue focuses on moral character, asking

questions such as, “What kind of person should I be?” “What kind of

character should I have?” The aim of moral life is to develop moral

virtues or general dispositions. The virtues provide criteria for

evaluating individual actions, social institutions, and practices

(Velasquez, 1998).With an internal locus of control, an individual facing

a moral or ethical dilemma exercises

personal judgment rather than applying universal rules.

Ethical Problem Solving

These five approaches suggest that once we have ascertained the facts, we should

ask ourselves five questions when trying to resolve a moral issue:

• What benefits and what harms will each course of action produce, and which

alternative will lead to the best overall consequences?

• What moral rights do the affected parties have, and which course of action

best respects those rights?

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• Which course of action treats everyone the same, except where there is a

morally justifiable reason not to, and does not show favoritism or

discrimination?

• Which course of action advances the common good?

• Which course of action develops moral virtues?

This method, of course, does not provide an automatic solution to moral

problems. It is not meant to. The method is merely meant to help identify most of the

important ethical considerations. In the end, we must deliberate on moral issues for

ourselves, keeping a careful eye on both the facts and on the ethical considerations

involved.

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References

Fritzsche, D. J. (1997). Business ethics: A global and managerial perspective. San

Francisco: McGraw-Hill.

Markkula Center for Applied Ethics. A Framework for Thinking Ethically. Retrieved

May 18, 2006 from http://www.scu.edu/ethics/practicing/decision/framework.html

Rosenstad, N. (1997). The moral of the story: An introduction to ethics (2nd ed.).

Mountain View, CA: Mayfield.

Smith, J. E., Forbes, J. B., & Extejt, M. M. (1988). Ethics in the

organizational behavior course. The Organizational Behavior Teaching Review,

13, 85-95.

United Nations. (1948). Universal declaration of human rights. Retrieved

January 4, 2004, from http://www.un.org/Overview/rights.html

Velasquez, M. (1998). Business ethics, concepts and cases (4th ed.). Upper

Saddle River, NJ: Prentice Hall.

Velasquez, M., Andre, C., Shanks, T., S.J., & Meyer, M. J. (1996, Winter). A framework

for moral decision making. Ethics, 2-5.

Judith White, J., & Taft, S. (2004). Frameworks for teaching and

learning business ethics within the global context: Backgroujnd of

ethical theories. Journal of Management Education, 28, 463-477.

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The following is from Big Brother: Hatch, Mike. "The Privatization of Big Brother: Protecting Sensitive Personal Information From Commercial Interests in the 21st Century." William Mitchell Law Review, 27, No. 3, 2001, p. 1457-1502.

A. Defining An Opt-In and Opt-Out System.“Opt-in” and “opt-out” are terms that create presumptions. Under an opt-in system,information will remain private unless a person consents to its disclosure. “Opt-in” provides an opportunity for consumers to weigh in--to say “yes”--before their information is shared.225 By contrast, under an opt-out system, information may be shared and made public unless a person instructs the entity to keep it confidential. An opt-out system allows unlimited sharing of private information unless and until a consumer says “stop.”226 Conservative commentator WilliamSafire describes the difference between opt-in and opt-out as “the difference between a doorlocked with a bolt and a door left ajar.”227

35B. The Inherent Problems With An Opt-Out System.There are three fundamental problems with an opt-out system that undermine its ability toadequately protect an individual’s privacy interests concerning the treatment of sensitivepersonal information. First, a successful opt-out system is conditioned upon individuals beingable to understand how companies are using their personal information. Second, a successfulopt-out system is conditioned upon individuals getting meaningful notice that they have a right toopt-out of this information sharing. Third, a successful opt-out system is conditioned uponconsumers being able to effectuate their preference without undue convenience. An opt-outsystem cannot operate effectively because there is no true individual control over the exchangeof personal information.1. Consumers do not understand how personal information is beingdisclosed.The secrecy surrounding how personal consumer information is used by commercialentities limits the potential for consumers to act.228 Companies routinely fail to disclose themanner in which they use sensitive information. Unless an individual notices an unauthorizedcharge or some other irregularity, the information sharing will continue indefinitely regardless ofthe individual’s desire to keep that information private. Even companies that provide somenotice of their information-sharing practices typically fail to disclose who will receive the

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information, how it will be used, whether the information will be merged with another databasedor networked information, and the manner a company may use to solicit a consumer whoseinformation has been shared.In addition, the opt-out notice is usually surrounded by confusing and misleadinginformation that prevents individuals from understanding how their personal information may be36disclosed. For example, in the spring of 2000, The New Yorker, a national magazine, sent alengthy, 44-question survey to “loyal” or “preferred subscribers.” The questionnaire soughtinformation about everything from subscribers’ shopping habits to their medical ailments, ongrounds that the magazine wanted “to maintain an open dialogue with our subscribers.” Amongother things, the magazine publisher asked subscribers if they were clinically depressed,menopausal, overweight, used birth control, had menstrual pain, gastritis or nail fungus. In thecover letter asking subscribers to return the survey, The New Yorker stated that this personalinformation would be shared with “select advertisers,” but failed to identify those “selectadvertisers,” what criteria is used to select the advertisers, or the scope of its so-called “PreferredSubscriber Network.” Faced with a company’s incomplete, inadequate or deceptive descriptionsof its information-sharing practices, consumers are left with little opportunity to exercisemeaningful, informed consent to opt out of such collection or sharing.2. Consumers are not given meaningful notice that they have the right toopt out.Many Americans are unaware that they have a right to opt out, and companies make aweak effort to give notice of that right.229 The failure of an opt-out system is demonstrated by acomparison of the vast number of individuals who want to protect their privacy with the smallnumber of individuals who actually opt out. For example, Bank of America’s response rate to itsopt-out notice is 0.2%, even though most public opinion polls suggest that upwards of 60-80% ofindividuals do not want their financial information disclosed.230 Of the 195 million Americanssolicited by Acxiom Corporation, fewer than 300 people had opted-out by the end of 1997.231

Although banks, telemarketers, and internet companies claim that these opt-out notices provide

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37consumers with a “choice,” such opt-out systems are plainly ineffective and far from actual“consent.” 232

An opt-out system encourages businesses to use misleading or vague privacy policieshidden in the fine print of a policy agreement or contract:At present, businesses have little incentive to disclose to consumers how theirpersonal information is used or that they can opt-out of its use. As a result, thecurrent system produces inefficient results. A change in the default rule [to an optin]gives businesses an incentive to make disclosures and increases the likelihoodthat an efficient market will result.233

A typical opt-out notice has been described as something that you need “the eyes of an eagle”and “a law degree” to find and understand.234 Typically, the opt-out is placed in the “fine printwith other boilerplate terms.”235 Consumers do not take advantage of opt-out opportunitiesbecause they often do not know they can opt out, even if they are generally aware of theinformation sharing practices of the company.3. Opt-out systems currently utilized impose cumbersome proceduresupon the consumer.The amount of time, inconvenience, and cost of exercising an opt-out right issubstantial.236 For example, the Federal Communications Commission (FCC) has found thatsubscription rates for different telephone maintenance plans are highly correlated to whether ornot the seller used an opt-out system. When telephone companies obtained affirmative consentfor optional maintenance telephone plans, about 45% of consumers selected the product, butwhen the telephone company used an opt-out the number of consumers who “selected” theproduct nearly doubled. Cable companies in the United States and Canada have also had similarexperiences with the opt-out system when selling premium cable channels, with the number ofpeople being billed for additional services 30% higher than if the company was required toobtain affirmative consent.237

38In short, “[p]eople are too pressed in their daily routines to initiate, lead, or otherwisecontrol most consumer contracting.”238 An opt-out system places a cumbersome burden onconsumers to inform a company that they do not want personal information shared, which theyreasonably expect should remain confidential, when the burden should rest with the

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company toobtain consumers’ consent before disclosing highly personal information.C. An Opt-In System Follows a Basic Premise of Contract Law Concerning“Acceptance” of an “Offer.”The right to privacy has alternatively been described as the “right to be let alone,” “theright to individual autonomy,” and “the right to a private life.”239 Underlying each of thesedefinitions is the desire of the consumer to control access to and use of personal information.240

The most effective method of protecting an individual’s right to privacy is a system thatrecognizes an individual’s ability to contract with companies as to how sensitive personalinformation, such as financial records, telephone records, and the like, will be maintained.An opt-out system is a negative-option approach to contract law which undermines afundamental concept of contract formation under the common law--that silence does not equalconsent.241 A contract requires both an offer and acceptance.242 Assuming that consumersconsent by their silence violates the consumer’s autonomy and freedom to contract.243 An optoutsystem transforms silence into acceptance of a company’s information sharing practices,contrary to the accepted norms of contract law.244

1. An opt-in system offers the consumer a meaningful opportunity of“selection.”An opt-in system offers consumers the legitimate opportunity to affirmative consent.245

It requires that the company give meaningful notice, and perhaps even pay consideration, for theuse of the customer’s name and data. By “opting in,” the consumer has meaningfully contracted39with the company concerning the private data. With affirmative consent, individuals areafforded a procedural safeguard which gives the consumer control over their data.246

2. An opt-in system is consistent with consumers’ reasonableexpectations of privacy.The surveys cited earlier make it clear that consumers do not reasonably expect that theinformation they provide to facilitate a loan or credit card transaction will be collected and latershared with other commercial entities. This is a secondary use of information beyond thereasonable expectations of consumers who provide the information for a different primarypurpose. An opt-in system is consistent with these expectations, as it requires commercialentities to obtain consent before information is shared for secondary uses.A banking opt-in law does not interfere with transactions initiated by the customer, suchas writing a check, applying for a loan, or using money from an ATM machine.247 Indeed,depository and ATM account agreements already require the customer to “opt in” because thecustomer agrees that such information may be shared.248 However, if a company wants to

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useinformation, beyond servicing a customer’s request, for whatever reason, then it should explainsuch information-sharing practices in the depository account agreement. If businesses haveworthwhile reasons for disclosing a customer’s personal records for secondary uses, then consentshould not be difficult to obtain.249 Indeed, there is nothing to prevent a bank from refusing toservice the customer if he does not agree to opt in to the arrangement. An opt-in provision givesnotice to the customer that information collected about them for one use will be disclosed for adifferent, secondary use.403. An opt-in system better balances bargaining power betweenbusinesses and consumers.Information sharing is often justified as necessary to provide an individual with valuableinformation about quality products and services. Yet, under an opt-out system, individualconsumers are not allowed to determine for themselves whether the information is actuallyvaluable or whether the products and services are of high quality. An opt-in system gives theindividual power to control distribution of their personal information, which in turn increases theindividual’s bargaining power by allowing him or her to effectively set the market price forpersonal financial or credit information. In order for the consumer to provide consent, thepotential products and services must be of sufficient value to offset the corresponding invasion ofthe consumer’s privacy. Opt-in empowers the consumer to decide whether waiver of privacyrights is justified by corresponding benefits of information flow.4. An opt-in allows businesses to find consumers favorably disposed tomarketing.Information allows businesses to focus their resources to avoid wasteful marketing ofproducts and services to uninterested consumers. An opt-in system identifies a pool ofconsumers favorably disposed to such marketing, because individuals demonstrate their desire toreceive marketing materials about specific products by exercising their right to opt in. An opt-insystem thus improves the quality of information that does exist,250 making marketing of productsultimately more efficient.Although an opt-out system may increase the quantity of information in the short-term,over time both the quantity and quality of the information may diminish.251 Individuals

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will notmake a purchase or apply for a job, credit, or insurance because they do not want their privacy41invaded.252 Individuals may also provide false information requested on such applications inorder to protect their privacy.253

For example, e-mail marketers used to send unsolicited marketing material, dubbed“Spam,” to internet users without their consent.254 That method of marketing has resulted in abacklash from consumers, and possible litigation.255 Internet companies have now concludedthat the best way to market their materials is through an opt-in system.256 An industry leader inon-line marketing, NetCreations, Inc., discovered that “empowering” consumers with an opt-in,and then giving them an opportunity to opt-out every time they are sent a marketing message, isthe best method to maintain customer goodwill and sell products on behalf of companies likeDell Computer, Compaq, and J. Crew. 257258 The opt-in system is considered by some internetmarketers to be the “best business practice.” 259

1 Gregory Shaffer, Globalization and Social Protection: The Impact of EU and International Rules in the RatchetingUp of U.S. Privacy Standards, 25 YALE J. INT’L L. 1, 2 (2000).2 See Hippocratic Oath, Fifth Century B.C.3 Samuel D. Warren & Louis D. Brandeis, The Right to Privacy, 4 HARV. L. REV. 193 (1890).4 Id. at 193-95.5 See Carey v. Population Servs. Int’l, 431 U.S. 678, 684 (1977) (noting that one aspect of liberty is a right ofpersonal privacy, holding that this right includes “making certain kinds of important decisions”).6 Loving v. Virginia, 388 U.S. 1 (1967).7 Skinner v. Oklahoma, 316 U.S. 535 (1942).8 Eisenstadt v. Baird, 405 U.S. 438 (1972).9 Prince v. Massachusetts, 321 U.S. 158 (1944).10 Pierce v. Society of Sisters, 268 U.S. 510 (1925).11 Griswold v. Connecticut, 381 U.S. 479, 485 (1965) (holding Connecticut’s law that places restrictions onproviding information about contraception unconstitutional as it intrudes upon the right to marital privacy). See alsoEisenstadt, 405 U.S. at 453 (evaluating the constitutionality of a law restricting the distribution of contraceptives tounmarried persons; broadening the Griswold privacy definition so that it includes single individuals as well asmarried couples).12 Roe v. Wade, 410 U.S. 113 (1973).13 See Planned Parenthood v. Casey, 505 U.S. 833, 887 (1992).14 Id. at 851.15 Board of Directors of Rotary Int’l v. Rotary Club of Duarte, 481 U.S. 537, 545 (1987).16 Frisby v. Schulz, 487 U.S. 474, 484 (1988) (citing Carey v. Brown, 447 U.S. 455, 471 (1980)).

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17 U.S. CONSTIT. amend. IV. See also Katz v. United States, 389 U.S. 347, 353 (1967) (noting that the FourthAmendment protects not only areas against unreasonable searches and seizures, but also people).18 Miranda v. Arizona, 384 U.S. 436, 459 (1966) (citations omitted).19 See RESTATEMENT (SECOND) OF TORTS §§ 652A-652E (1977). William L. Prosser gave the right to privacydefinition by separating the various court rulings that supported Warren and Brandeis’s theories into four distinctcauses of action. W. PAGE KEETON ET AL., PROSSER AND KEETON ON THE LAW OF TORTS, §117, at 850-51 (5th ed.1984).20 See RESTATEMENT (SECOND) OF TORTS §§ 652A-652E (1977) (adopting Prosser’s privacy tort theory).4321 Id. § 652B.22 Id. § 652C.23 Id. § 652D.24 Id. § 652E.25 Pavesich v. New England Life Ins. Co., 50 S.E. 68, 71 (Ga. 1905).26 See, e.g., Truxes v. Kenco Enters., Inc., 119 N.W.2d 914 (S.D. 1963); McCormack v. Oklahoma Publ’g Co., 613P.2d 737 (Okla. 1980); Hinish v. Meier & Frank Co., 113 P.2d 438 (Or. 1941). Other states, finding noconstitutional or common law basis for the invasion of privacy tort, have enacted rights to privacy by statute. See,e.g., MASS. GEN. LAWS ANN. ch. 214, § 1B (West 1989); NEB. REV. STAT. ANN. § 20-201 (West 1995); N.Y. CIV.RIGHTS LAW § 50 (1992).27 Lake v. Wal-Mart Stores, Inc., 582 N.W.2d 231 (Minn. 1998).28 Id. at 233.29 Id. at 235. The Minnesota Supreme Court recognized the torts of intrusion upon seclusion, public disclosure ofprivate facts and appropriation of one’s likeness. Id. at 236.30 Id. at 235. For an extended discussion of Lake v. Wal-Mart Stores, Inc., see Jane E. Prine, No Longer Living in aGlass House: Every Minnesotan Is Entitled to a Right to Privacy, 25 WM. MITCHELL L. REV. 999 (1999).31 MINN. STAT. § 144.69 (1998).32 MINN. STAT. § 144.768 (1998).33 MINN. STAT. § 290.611 (1998).34 MINN. STAT. § 254A.09 (1998).35 MINN. STAT. § 13.46 (1998).36 MINN. STAT. § 13.32 (1998).37 MINN. STAT. § 13.40 (1998).38 MINN. STAT. § 13.44 (1998).39 MINN. STAT. § 13.56 (1998).40 MINN. STAT. § 13.531 (1998).41 MINN. STAT. § 144.335, subd. 3a (1998). See also MINN. STAT. § 144.651, subd. 16 (1998) (“Patients andresidents shall be assured confidential treatment of their personal and medical records, and may approve or refusetheir release to any individual outside the facility.”)42 MINN. STAT. §§ 151.213; 151.23 (1998).43 MINN. STAT. § 72A.502, subd. 1 (1998).44 Video Privacy Protection Act, 18 U.S.C. § 2710 (1999).45 Cable Television Record Privacy Act, 47 U.S.C. § 551 (1999).46 Driver’s Privacy Protection Act, 18 U.S.C. § 2721, amended by Shelby Amendment, Pub. L. No. 106-96 (2000).See also MINN. STAT. §§ 168.346; 171.12 (1998).

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47 MINN. R. PROF. CONDUCT 1.6.48 MINN. R. PUB. ACCESS TO RECORDS OF JUDICIAL BRANCH 4, subd. 1(a); MINN. R. JUV. PROC. 30.02, subd. 3.49 MINN. R. JUV. PROC. 2.01.50 MINN. R. CIV. PROC. 26.03.51 MINN. STAT. § 595.02, subd. 1 (a) (1998). See also Lundman v. McKown, 530 N.W.2d 807, 829 (Minn. Ct. App.1995) (acknowledging that a spouse may assert the marital privilege to bar a witness spouse from testifying).52 MINN. STAT. § 595.02, subd. 1 (c) (1998). See also State v. Orfi, 511 N.W.2d 464, 469 (Minn. Ct. App. 1994)(finding that portions of the defendant’s communication with ministers subject to clergy privilege).53 MINN. STAT. § 595.02, subds. 1 (g); 1 (i) (1998).54 Richfield Bank & Trust Co. v. Sjogren, 244 N.W.2d 648, 651 (1976) (finding that a bank is generally under a dutynot to disclose the financial condition of its depositors). See also Cunningham v. Merchants’ Nat’l Bank, 4 F.2d 25(1st Cir. 1925), cert. denied 268 U.S. 691 (1925); Milohnich v. First Nat’l Bank, 224 So.2d 759 (Fla. Ct. App.1969); Peterson v. Idaho First Nat’l Bank, 367 P.2d 284 (Idaho 1961).55 MINN. STAT. §§ 325C.01-03 (1998).56 See, e.g., Tenant Co. v. Advance Mach. Co., Inc., 355 N.W.2d 720, 726 (Minn. Ct. App. 1984); CreativeCommunication Consultants, Inc. v. Gaylord, 403 N.W.2d 654, 657 (Minn. Ct. App. 1987).57 See, e.g., Burlington N. R.R. Co. v. Omaha Pub. Power Dist., 888 F.2d 1228 (8th Cir. 1989); Minnesota Mining& Manuf. Co. v. Kirkevold, 648 F. Supp. 661 (D. Minn. 1980).4458 MINN. STAT. § 325C.05 (1998).59 42 U.S.C.A. § 405 (1999) (“Social security account numbers and related records that are obtained or maintainedby authorized persons pursuant to any provision of law… shall be confidential, and no authorized person shalldisclose any such social account number or related record.”)60 Fair Credit Reporting Act, 15 U.S.C. 1681 (1999).61 Privacy Act, 5 U.S.C. § 552a (1999).62 Bank Secrecy Act, 12 U.S.C. §§ 1951-1959 (1999).63 Access to Telephone Records Act, 18 U.S.C. § 2709 (1999).64 Taxpayer Browsing Protection Act, 26 U.S.C. § 7213(a) (1999).65 Universal Declaration of Human Rights, art. 12, 1948.66 Convention for the Protection of Human Rights and Fundamental Freedoms, art. 8, 1950.67 S. AFR. CONSTIT., §14, 1996.68 ARG. CONSTIT., arts. 18, 19.69 Parliament and Council Directive 95/46/EC on the Protection of Individuals with Regard to the Processing ofPersonal Data, 1995 O.J. (L281) 1.70 Ordinance No. 81 of 1995 (H. K.).71 Privacy Act of 1993 (N. Z.).72 Law of the Russian Federation on Information, Informatisation and Information Protection, January 25, 1995.73 Data Protection Act of 1973 (Sweden).74 Protection of Computer Processed Personal Data Held by Administrative Organs Act of 1988 (Japan).75 See id.76 The Act on the Protection of Personal Information Managed by Public Agencies of 1994 (S. Korea).77 GEORGE ORWELL, NINETEEN EIGHTY-FOUR 4 (1949).78 See id.

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79 CHARLES SYKES, THE END OF PRIVACY 4 (St. Martin’s Press 1999). See also John Caher, PrivacyInitiative Aims for Consumer Protection, N.Y. L.J., Jan. 24, 2000, at 1 (“It is not big brother that we now have to beafraid of, but big browser.”) (quoting New York Attorney General Eliot Spitzer).80 Jane Bryant Quinn, The Spies in Your Pocket, NEWSWEEK, Aug. 16, 1999, at 43.81 Robert O’Harrow, Jr., Data Firms Getting Too Personal?, WASH. POST, Mar. 8, 1998, at AO1.82 William J. Fenrich, Common Law Protection of Individuals’ Rights in Personal Information, 65 FORDHAM L.REV. 951, 952 (1996).83 Id.84 Acxiom Corp., Marketing Materials, in JOEL R. REIDENBERG, NAT’L ASS’N ATT’YS GEN., EXAMPLESOF THE SALE OF PERSONAL INFORMATION (Privacy Working Group, Sept. 23-24, 1999) [hereinafterEXAMPLES].85 Id.86 Medical Marketing Service, Inc., Marketing Materials, in EXAMPLES, supra note 84. See also MedicalMarketing Service, Inc. (visited July 6, 2000) <http://www.mmslists.com/>.87 Medical Marketing Service, Inc., Marketing Materials, in EXAMPLES, supra note 84.88 Id.89 Id. Other examples of the misuse of medical information include the partnership between CVS pharmacy andpharmaceutical companies, and the partnership between a law firm and a hospital.In 1998, pharmaceutical companies solicited customers of CVS Pharmacies who were identified by the pharmacyas suffering from specific medical conditions. Weld v. CVS Pharmacy, Inc., No. CIV. A. 98-0897F, 1999 WL494114, at *1-2 (Mass. Super. Ct. June 29, 1999). On behalf of several pharmaceutical companies, CVS allegedlysearched their customer database to find customers who suffered from high blood pressure or diabetes. Id. Then,CVS allegedly downloaded names and addresses of those customers onto a separate diskette, and gave the disk to adirect marketing firm. Id. On behalf of various pharmaceutical companies, those individuals were mailedadvertisements about particular drugs and were encouraged to speak with their physician. Id. Litigation againstCVS Pharmacies is currently pending. Id.In 1993, Warren General Hospital in Ohio entered into a partnership with a local law firm to electronically searchits medical records for patients who might be eligible for Supplemental Security Income reimbursement of medicalexpenses. Biddle v. Warren Gen. Hosp., No. 96-T-5582, 1998 WL 156997, at *1-2 (Ohio Ct. App. Mar. 27, 1998).45The hospital’s database included the patient’s address, birth date, employment information and their admittingdiagnosis. Id. The law firm would contact patients about having their medical treatment paid for by the SocialSecurity Administration. Id. The law firm would then receive a percentage of whatever money they generated forthe hospital. Id.90 Student Marketing Group, Inc., Marketing Materials, in EXAMPLES, supra note 84. See also Student MarketingGroup, Inc. (visited July 6, 2000) <http://www.studentmarketing.net>. Student Marketing Group also sells the

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names and addresses of preschool children ages 2-5. Id.91 Venture Direct, Marketing Materials, in EXAMPLES, supra note 84. See also Venture Direct (visited July 6,2000) <http://www.venturedirect.com>.92 Adam L. Penenberg, The End of Privacy, FORBES MAG., Nov. 29, 1999, at 183.93 Id.94 Id.95 See Steven Vonder Haar, Data Chase, BRANDWEEK, Sept. 6, 1999, at IQ17 (“Call it the Golden Age of OnlineData. More than ever before publishers, marketers and advertising service companies all are racing to compilemounds of information… ”)96 Wayne W. Eckerson & Lynne Harvey, Customer Intelligence Drives Next-Generation Web Personalization (Feb.25, 2000) <http://www.customers.com>; Kayte VanScoy, Get Inside Your Customers’ Heads (and Their WalletsToo), SMART BUS. FROM ZDWIRE, June 1, 2000, available in 2000 WL 2000378 (describing data mining andrules for customer interaction).97 Nina Bernstein, Lives on File: Personal Files via Computer Offer Money and Pose Threat, N.Y. TIMES, June 12,1997, at A1.98 Id.99 Id.100 Eckerson & Harvey, supra note 96, at 2-3.101 Mark Allan Baginskis, Telemarketing Fraud upon the Elderly Shows No Signs of Slowing, 11 LOY.CONSUMER L. REP. 4 (1999); Patrick E. Michela, “You May Have Already Won…”: Telemarketing Fraud andthe Need for a Federal Legislative Solution, 21 PEPP. L. REV. 553, 574 (1994).102 Privacy first emerged as an issue of public policy and concern with the publication of Warren and Brandeis’article, The Right to Privacy, written over one-hundred years ago. 4 Harv. L. Rev. 193 (1890). The authorsadvocated for the creation of a new tort that protected the private lives of ordinary people from intrusion orappropriation. Id. at 195. The computer has made their words even more applicable and insightful today.The majority of states have now adopted the common-law right to privacy, but the law does not adequately protectindividuals in the information age. Lake v. Wal-Mart Stores, Inc., 582 N.W.2d 231, 235 (Minn. 1998) (becomingone of the last states to adopt the common-law right to privacy).103 Robert O’Harrow, Jr., A Postscript on Privacy, WASH. POST, Nov. 5, 1999, at EO1.104 Senator Richard Shelby, Coalition for Financial Privacy (Oct. 13, 1999) <http://www.senate.gov/shelby/press/prsrs307.htm>.105 Id.106 Clyde Mitchell, Privacy and Gramm-Leach-Bliley’s Financial Services Modernization, N.Y. L.J., Apr. 19, 2000,at 3 (outlining current disputes as a result of Gramm-Leach-Bliley and formation of Congressional Privacy Caucus).107 Senator Richard Shelby, Congressional Privacy Caucus (Feb. 10, 2000) <http://www.senate.gov/shelby/press/prsrs315.htm>.108 Comments from the National Association of Attorneys General on Gramm-Leach-Bliley Act (Mar. 31, 2000).Comments were signed by Attorney General Bruce M. Botelho (Alaska), Janet Napolitano (Arizona), Bill Lockyer(California), Kan Salazar (Colorado), Richard Blumenthal (Connecticut), Robert A. Butterworth (Florida),

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StephenH. Levins (Hawaii Office of Consumer Protection), Alan G. Lance (Idaho), Jim Ryan (Illinois), Tom Miller (Iowa),Carla J. Stovall (Kansas), Andrew Ketterer (Maine), J. Joseph Curran, Jr. (Maryland), Tom Reilly (Massachusetts),Jennifer Granholm (Michigan), Mike Hatch (Minnesota), Mike Moore (Mississippi), Jeremiah W. Nixon (Missouri),Joseph P. Mazurek (Montana), Frankie Sue Del Papa (Nevada), John J. Farmer (New Jersey), Patricia Madrid (NewMexico), Eliot Spitzer (New York), Heidi Heitkamp (North Dakota), W.A. Drew Edmondson (Oklahoma), D.Michael Fisher (Pennsylvania), Sheldon Whitehouse (Rhode Island), Paul Summers (Tennessee), Jan Graham(Utah), William H. Sorrell (Vermont), Iver A. Stridiron (Virgin Islands), Christine O. Gregoire (Washington),Darrell V. McGraw Jr. (West Virginia).46109 Jeff Sovern, Opting In, Opting Out, or No Options at All: The Fight for Control of Personal Information, 74WASH. L. REV. 1033, 1057 (1999) (citing 1996 survey commissioned by Equifax).110 Julie Tripp, Information-Selling Crushes Depositors’ Faith, PORTLAND OREGONIAN, June 20, 1999, at B05(“‘Appalling’ and ‘horrifying’ were some of the other adjectives that got a workout last week when readers learnedthe details of what the Minnesota attorney general alleges U.S. Bancorp has been doing with their account, creditcard, and Social Security numbers.”)111 Wal-Mart, 582 N.W.2d at 235 (“The right to privacy is an integral part of our humanity: one has a publicpersona, exposed and active, and a private persona, guarded and preserved. The heart of our liberty is choosingwhich parts of our lives shall become public and which parts we shall hold close.”) See also Griswold v.Connecticut, 381 U.S. 479 (1965) (recognizing the right to privacy as a fundamental right).112 Sovern, supra note 109, at 1057.113 Jedediah Purdy, An Intimate Invasion, USA WEEKEND, June 30-July 2, 2000, at 7 (stating that 62% of therespondents believed that too many people have access to their driving record, and 61% say that too many peoplehave access to their medical records).114 Id. (noting that 65% of respondents believed that internet companies who track computer use and transactionshave invaded their privacy, and 60% of respondents consider junk mail an invasion of their privacy).115 Id.116 N.Y. SENATE, THE SENATE MAJORITY TASK FORCE ON THE INVASION OF PRIVACY 12 (2000)[hereinafter SENATE]. See also Albert R. Hunt, Bright Past Kindles America’s Hope, WALL ST. J., Sept. 16,1999, at A9 (describing poll results).117 SENATE, supra note 116.118 Id.119 Id. (citing Grant Lukenbill, Consumers Most Worried About Privacy, DM NEWS, Dec. 29, 1999)120 Id.121 Id. (citing Mary Alice O’Brien, State Legislative Chair, American Association of Retired Persons, Testimonybefore the New York State Senate Majority Task Force on the Invasion of Privacy (Apr. 15, 1999)). See also AM.

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ASS’N RETIRED PERSONS, 39 DATA DIGEST, February 1999 (reporting December 1998 survey results with a+/- 4 % margin of error).122 Id.123 Id.124 Mark E. Budnitz, Privacy Protection for Consumer Transactions in Electronic Commerce: Why Self-RegulationIs Inadequate, 49 S.C. L. REV. 847, 849 (1998) (citing Dr. Alan F. Westin, Testimony before the FinancialInstitutions and Consumer Credit Subcommittee of the House Banking and Financial Services Committee,Electronic Payment Systems, Electronic Commerce, and Consumer Privacy, FED. NEWS SERVICE, Sept. 18,1997).125 Id.126 Id.127 Carol Krol, Consumers Reach the Point over Privacy Issues: A Hot Marketing Concept is Running Smack intoBig Concerns About the Extent of Company Usage of Personal Information, ADVERTISING AGE, March 1999.128 Id.129 Id. at 850 (citing Drew Clark, Worries About Privacy Rain on Net Commerce Parade, AMER. BANKER, July 3,1997, at 14). A 1999 AT&T study that found that Internet users are more likely to provide information when theyare not identified. Melinda Reid Hatton & Mark Paulding, Online Privacy - Some Milestones for the Millennium,587 PLI/PAT 823, 825-26 (2000). The AT&T study also found that 79% felt that it was important to their decisionto use the internet if the company shares information with other companies or organizations.130 Id.131 SENATE, supra note 116, at 12.132 Id.133 Id.134 Id.135 Sovern, supra note 109, at 1062.136 Id.137 Id.47138 Conrad deFiebre, Minnesotans Make Public Their Desire for More Privacy Proposals to Restrict Telemarketers,Others Find Broad Support, STAR TRIB., Apr. 6, 2000, at B1. See also Jim Ramstad’s 2000 QuestionnaireResults, RAMSTAD REP., Summer 2000, at 3 (finding that 84% of Congressional District 3 respondents favored“new regulations to prevent businesses from sharing your personal information with other businesses”).139 See deFiebre, supra note 138, at B1.140 Budnitz, supra note 124, at 849.141 Id.142 Id.143 Joshua D. Blackman, A Proposal for Federal Legislation Protecting Informational Privacy Across the PrivateSector, 9 SANTA CLARA COMPUTER & HIGH TECH. L.J. 431, 447 (1993).144 Id.145 Id.146 Id.147 Hatton & Paulding, supra note 129, at 840.

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148 Id.149 Privacy Din Sparks DoubleClick Deal, ADVERTISING AGE, March 6, 2000.150 Id.151 Id.152 Id.153 Id.154 CHARLES SYKES, THE END OF PRIVACY 4 (St. Martin’s Press 1999).155 Id.156 Id.157 Rachel Zimmerman & Glenn R. Simpson, Lobbyists Swarm to Stop Tough Privacy Bills in States, WALL ST. J.,Apr. 21, 2000, at A16.158 Id.159 Id. (quoting Washington Attorney General Christine Gregoire).160 Id.161 Id.162 Id.; Conrad deFiebre, House Commerce Panel Puts Telemarketing Measure on Hold, STAR TRIB., Apr. 19,2000, at B5.163 Zimmerman & Simpson, supra note 157, at A16 (quoting Washington Attorney General Christine Gregoire).164 Glenn R. Simpson, Financial-Privacy Legislation Expected Today, WALL ST. J., May 4, 2000, at A2 (outliningPresident Clinton’s proposal to label financial-privacy violations as unfair trade practices).165 Id.166 William Safire, Stop Cookie-Pushers, N.Y. TIMES, June 15, 2000.167 Michael Schroeder, Groups Seek to Pre-Empt Wave of Rules to Protect Consumer-Finance Data, WALL ST. J.,Feb. 10, 2000, at A2.168 Id.169 Id.170 See JOHN DUGAN, FIN. SERVS. COORDINATING COUNCIL, THE NEW FEDERAL FINANCIALPRIVACY LAW: A COMPREHENSIVE APROACH THAT SHOULD BE GIVEN TIME TO WORK (2000)(listing member organizations “representing America’s Diversified Financial Services Community” on bookletheader).171 Gregoire Waters Down Her Consumer Privacy Proposal, SEATTLE POST-INTELLIGENCER, Mar. 2, 2000.172 Id. Opponents of privacy legislation have advanced three principal arguments against the various privacyproposals. First, industry representatives argue that most people are not concerned about privacy; it is just a politicalor media created issue. This argument is made despite contrary public opinion polls and bi-partisan support ofenhanced privacy protection.Second, opponents argue that the various privacy proposals will chill the economy. Yet, at a hearing on afinancial privacy bill in Minnesota (S.F. 3000), legislators pressed lobbyists to provide a specific example of howthe privacy proposal would interfere with conducting business, but no person in the room could provide a specific48example. See Testimony of Subcommittee on Data Privacy of Minnesota Senate Judiciary Committee (Feb. 24,2000).Third, lobbyists claim that privacy is complex and thus deserves to be studied before any action is taken.

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To thatend, Rep. Asa Hutchinson (R-Ark) recently proposed a $2.5 million dollar commission to study privacy. However,a study is unnecessary because it represents yet another excuse to delay substantive enforcement and legislativeaction and it duplicates what everyone knows--that companies collect a lot of information and disclose it without theconsumer’s knowledge or meaningful consent, and that people want real privacy protections now. See MinnesotaAttorney General Mike Hatch, Testimony submitted to the U.S. House Subcommittee on Government Management,Information and Technology (May 15, 2000) [hereinafter Hatch].173 Zimmerman & Simpson, supra note 157, at A16.174 While critics of privacy legislation often point to the “democratization of credit” as a benefit to low-income andmiddle-income consumers, the availability of credit has also come at a cost. See FRED H. CATE, FIN. SERVS.COORDINATING COUNCIL, PERSONAL INFORMATION IN FINANCIAL SERVICES: THE VALUE OF ABALANCED FLOW 17 (2000) (writing in opposition to California privacy initiatives). The wide dissemination ofconsumer information touches upon the increasing prevalence of predatory lending practices. The subprimemortgage market has grown from $10 billion in 1993 to over $150 billion in 1998. Michael Schroeder, SummersCalls for Legislation to Curb Predatory Lending in Mortgage Markets, WALL ST. J., Apr. 13, 2000, at A2.Consumer organizations and HUD Secretary Andrew Cuomo are concerned that the growth in the subprime marketis partially due to financial institutions pushing minorities into subprime loans when they actually qualify for thelower interest rates and fees typical of a prime loan. Id. Subprime loans accounted for the majority of home-loanrefinancings in predominantly African-American neighborhoods in 1998, but only 9% in white neighborhoods. Id.African-Americans in high-income neighborhoods are also twice as likely to receive a subprime loan than familiesin low-income white neighborhoods. Id. See also Dee DePass, Feds Likely to Target Wells Fargo’s Web Site, STARTRIB., June 24, 2000 (alleging that bank uses information about customers’ existing ZIP codes to direct them tocertain other ZIP codes based on their current neighborhood’s racial profile).175 U.S. GEN. ACCOUNTING OFFICE, IDENTITY FRAUD: INFORMATION ON PREVALENCE, COST,AND INTERNET IMPACT IS LIMITED 4 (May 1998) [hereinafter IDENTITY FRAUD]. The actual estimate ofthe costs of identity fraud is difficult to determine. Id. The IRS recently detected $137 million in fraudulent refundschemes. Id. The Secret Service estimates that actual losses to victimized individuals and institutions are $745million. Id. Officials at VISA U.S.A., Inc. and MasterCard International estimate that it cost its member banks’$407 million in 1997. Id. The American Bankers Association reported that large banks had dollar losses averagingabout $20 million per bank in 1996. Id.176 FED. TRADE COMM’N, IDENTITY THEFT: WHEN BAD THINGS HAPPEN TO YOUR GOOD NAME 2(February 2000).

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177 Id.178 Id.179 Margaret Mannix, Getting Serious About Identity Theft, U.S. NEWS & WORLD REP., Nov. 8, 1999; MichelleSingletary, Laws Are Failing to Keep Pace with Rate of Identity Theft, SUN-SENTINEL, May 15, 2000, at 19.(citing California Public Interest Research Group (CALPIRG) and Privacy Rights Clearinghouse study regarding thevictims of identity theft).180 Singletary, supra note 179, at 19.181 IDENTITY FRAUD, supra note 175, at 3-4.182 Id.183 Id. at 55.184 William Safire, ‘Identity Theft’ Demands Legislation, HOUSTON CHRON., May 12, 2000, at A42.185 Id.; Singletary, supra note 179, at 19.186 IDENTITY FRAUD, supra note 175, at 5 (quoting representative from the Associated Credit Bureaus regardingrevenue generated from sale of information).187 Michela, supra note 101, at 573-74.188 The AARP, Council of Better Business Bureaus’ Foundation, Department of Justice, Federal Bureau ofInvestigation, Federal Trade Commission, National Association of Attorneys General, Security and ExchangeCommission, and the U.S. Postal Inspection Service began a joint effort called the “kNOw Fraud” program.KNOW FRAUD, TELEMARKTING FRAUD: WHAT YOU NEED TO KNOW (1999) (pamphlet providing tips49consumer information). The kNOw Fraud program is designed to educate consumers about telemarketing andmarketing fraud through videos and brochures. Id.189 Telemarketers may also purchase the ability to debit an individual’s checking account or credit card account.Although the telemarketing firms may theoretically not possess the account numbers, in reality they have completecontrol over a consumer’s account.190 The reading of a credit card number or providing written authorization symbolizes the “meeting of the minds”required by contract law. In the past, consumers would know that they are actually purchasing a product and will bebilled for that product if they provide affirmative authorization. Pre-acquired account telemarketing eliminates thatsafeguard, and creates an environment where the consumer is at the mercy of the telemarketer.191 FTC ADVISORY COMM. ON ONLINE ACCESS AND SECURITY, FINAL REPORT 17 (May 15, 2000)(describing authentication of credit card purchases). The advisory committee notes that merely using an individual’smaiden name, birth date, and Social Security number is a risky form of verification because they are so widelyavailable. Id.192 Hatch, supra note 172.193 Id.194 See Hatch v. MemberWorks, Inc., Civ. Action No. MC99-010056 (D. Minn. Apr. 18, 2000).195 Id.196 Id.197 Id.198 Id.

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199 Federal Deposit Insurance Corporation, Symbol of Confidence (last modified July 27, 1999)<http://www.fdic.gov/about/learn/symbol/index.html>.200 Id.201 Id.202 Ed Mierzwinski, New Bank Laws May Increase Threats to Consumers’ Privacy, U.S. PIRG, Fall 1999, at 4(“Earlier this year, Congress had a golden opportunity to address the financial side of this [privacy] problem, as itenacted a sweeping rewrite of financial law that will allow banks, insurance companies and stock brokerages tomerge with each other. Yet the law passed by Congress not only failed to better protect consumer privacy, it mayhave made things worse.”)203 In the Matter of NationsSecurities and NationsBank, Admin. Proc. File No. 3-9596, Securities Act Release No.7532, Exchange Act Release No. 39947, 67 S.E.C. Docket 143 (May 4, 1998).204 Id.205 See Mierzwinski, supra note 202, at 4. After the U.S. Securities and Exchange Commission (SEC) was alerted tothe practice, it brought a claim against NationsBank. The SEC and NationsBank settled in 1998 for $7 million,because of a violation of investment laws. Id. The private class action lawsuit eventually settled for $40 million.See Leslie Wayne, Privacy Matters: When Bigger Banks Aren’t Better, N.Y. TIMES, Oct. 11, 1998 (describingNationsBank case and settlement).206 Paul Beckett, Comptroller Warns Banks on Practice of Giving Telemarketers Customer Data, WALL ST. J.,June 8, 1999, at A4.207 Id.208 Henry Gilgoff, Private Matters: More Banks Now Selling Personal Consumer Data, NEWSDAY, July 25, 1999(“[T]he deals are widespread among the country’s biggest banks, Hawke said in a recent interview.”) A statementby a USBancorp spokesman said that the cooperative marketing programs are “common practices.” Id.209 Hatch, supra note 172.210 See Hatch v. US Bank Nat’l Ass’n, Civ. Action No. 99-872 (D. Minn. June 9, 1999).211 See Hatch v. US Bank Nat’l Ass’n, Civ. Action No. 99-872 (D. Minn. Jan. 25, 2000). See also Dee DePass, USBank Kills Marketing Deals: But Still Plans to Fight State Lawsuit, STAR TRIB., June 11, 1999, at D1.212 Marcy Gordon, Chase Privacy Pact May Prompt Trend, WASH. POST, Jan. 28, 2000 (stating that as many as 22million consumers nationwide have been affected by Chase Manhattan’s decision to disclose personal customerinformation).213 DePass, supra note 211, at D1, D4 (“Now Wells Fargo, which for three days after Hatch’s suit didn’t revealdetails of its telemarketing relationships, said it is [suspending its relationship with telemarketers].”).50214 Gilgoff, supra note 208, at F07 (describing Citibank’s decision to implement a moratorium on informationexchanges with telemarketers).215 Gordon, supra note 212.216 See Tania Padgett, Report Says Good Merger Targets in Short Supply, AMER. BANKER, June 1, 2000 (“On

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average, the five largest players hold 73.2% market share in the 40 attractive growth markets. In 13 of the areas,deposit market share held by the top five is 80% or more.”)217 Gilgoff, supra note 208, at F07 (quoting Comptroller Hawke, “Although financial conglomerates may profit fromthe cross-marketing opportunities and consumers may benefit from the availability of a broader array of customtailoredproducts and services… there is a serious risk that these developments may come at a price to individualprivacy.”)218 Beckett, supra note 206, at A4. In 1997, the OCC logged 16,000 consumer complaints. Id. In 1998, the numberof complaints rose to more than 68,000 and in 1999 it reached over 100,000. Id.219 Jeff Leeds, Bank Sold Credit Card Data to Felon, L.A. TIMES, Sept. 11, 1999.220 Id.221 Id.222 Id.223 Id.224 In articles and testimony in front of legislators, opponents have claimed that privacy legislation will raise theprice of financial services, reduce the availability of credit, and interfere with a person’s ability to make purchaseswith a check. See CATE, supra note 174, at 17 (claiming severe economic hardship). They fail to mention that theState of South Dakota has had an “opt in” law for banks for over 15 years and has experienced no difficulty with thesystem.225 Hatch, supra note 172.226 Id.227 William Safire, America Hasn’t Gone Far Enough to Protect Privacy Rights, STAR TRIB., Sept. 26, 1999.228 William J. Fenrich, Common Law Protection of Individuals’ Rights in Personal Information, 65 FORDHAM L.REV. 951, 963 (1996) (“[S]ecrecy surrounding how personal consumer information is used limits the potential forconsumer action… ”)229 Id.230 Barbara A. Rehm, B of A Chief: Privacy Shields Harm Customers, AMER. BANKER, May 3, 2000. See alsoRichard A. Barton, Testimony at the Financial Privacy Hearings before the Subcommittee on Financial Institutionsand Consumer Credit of the Committee on Banking and Financial Services, 106th Cong., 1st Sess. (July 21, 1999)(stating that less than three percent of the U.S. population utilizes the Direct Marketing Association’s opt-outsystem).231 Robert O’Harrow, Jr., Data Firms Getting Too Personal?, WASH. POST, Mar. 8, 1998, at AO1.232 William Safire, Stop Cookie-Pushers, N.Y. TIMES, June 15, 2000 (“The word choice is used by banks, hospitals,and Internet companies to conceal their intrusions into the personal lives of their consumers.”)233 Sovern, supra note 109, at 1104-05.234 Robert K. Heady, Don’t Let Anyone Sell Your Privacy, PIONEER PRESS, Oct. 3, 1999.235 David J. Klein, Keeping Business Out of the Bedroom: Protecting Personal Privacy Interests from the RetailWorld, 15 MARSHALL J. COMPUTER & INFO. L. 391, 398 (1997).236 Sovern, supra note 109, at 1075.237 Peter Bowal, Reluctance to Regulate: The Case of Negative Option Marketing, 36 AM. BUS. L. J. 377,

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384(1999); Dennis D. Lamont, Negative Option Offers and Consumer Service Contracts: A Principled Reconciliationof Commerce and Consumer Protection, 42 UCLA L. REV. 1315, 1330 (1995).238 Bowal, supra note 237, at 378.239 FRED H. CATE, PRIVACY IN THE INFORMATION AGE 21 (1997).240 SENATE, supra note 116, at 12.241 Bowal, supra note 237, at 389.242 Lamont, supra note 237, at 1350.243 Id.244 Id. at 1351.245 Safire, supra note 232.51246 An opt-in system does not mean that information may never be shared, it only means that there should beconsent. Once there is consent, then a commercial interest can share information pursuant to that consent. An optinalso has the beneficial effect of providing a business with a list of individuals who are actually interested in whatis being sold.247 Deron H. Brown, Book Note, Privacy in the Information Age by Fred H. Cate, 22 Thomas Jefferson L. Rev. 251,254 (2000).248 Id.249 Cost is always an issue that is raised with an opt-in system, but these concerns are unwarranted. The picturedrawn by most industry representatives is a mailbox filled with hundreds of notices asking an individual to consentto the sharing of their information. This picture is incorrect for two reasons. First, a well-crafted opt-in will notrequire consent for every transaction. Individuals will be asked once, and if they grant permission then the consentwill last for a specific period of time. Second, an opt-in will only apply if the commercial entity wants to go beyondthe scope of a consumer’s reasonable expectations. If a bank or retailer does not share information with non-relatedaffiliates or third parties, then no consent is required.250 Richard S. Murphy, Property Rights in Personal Information: An Economic Defense of Privacy, 84 GEO. L.J.2381, 2406-08 (1996).251 Id.252 Id.253 Id.254 Carol Patton, Weaving your E-mail Marketing Web: Mass Mailing Done Right Can Be Golden, but Done Wrong,It’s Just Spam, CRAIN’S DETROIT BUS., June 12, 2000, at E1.255 Id.256 Id.257 Internet Marketers Vote In Favor of Opt-In Email: NetCreations Inc. Sponsors Key Internet Marketing Surveys,BUS. WIRE, Mar. 9, 2000.258 Id.259 Id. (“The second poll, an informal survey of attendees taken at the Direct Marketing Association’s (DMA)Internet marketing show in Seattle last week, also found that marketers overwhelmingly favored opt-in

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emailmarketing services as the right means to reach consumers.”) At the same marketing show, the DMA’s ownAssociation for Interactive Media publicly stated its preference for “opt out” as the industry’s best practices foremail marketing despite the opinions of its members and evidence to the contrary. Id.

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Prohibited in other countries:

Negative option marketing is not allowed in all countries. For example, Finland (Consumer Ombudsman, Consumer Complaint Board in Finland, 2005)

Consumer Ombudsman, Consumer Complaint Board in Finland. (2005, January). NewLegislation Does Not Allow Negative Option Marketing. Retrieved May 18, 2006, from http://www.kuluttajavirasto.fi/user/loadFile.asp?id=5790

Three Canadian provinces have banned negative option marketing: British Columbia, Quebec, and Nova Scotia http://www.legassembly.sk.ca/Hansard/23L1S/96-03-27.pdf

Prohibited in South AfricaCokayne, Roy (2004, September 7). Government set to declare inertia marketing illegal. Retrieved May 18, 2006, from http://www.busrep.co.za/index.php?fSectionId=561&fArticleId=2214842

However, the consumer affairs committee concluded in its report that inertia selling was an unfair business practice and "an unacceptable marketing method which cannot be justified in the public interest".

It said inertia selling was unfair because some customers might not receive, read or understand the marketing material, notification, brochure or letter and might acquire a product or service without even being aware of this.

In addition, inertia selling imposed a positive obligation on consumers who, should they fail to take positive steps, would be charged. "It is unfair to expect a consumer who does not wish to enter into a transaction to take active steps to prevent the transaction from going through," it said.

The committee added that inertia selling forced some particular products on consumers, discouraged comparative shopping and produced sales of unwanted goods.

This article presents some ethical frameworks:

Toward an ethical framework for political marketingNicholas O'Shaughnessy. Psychology & Marketing . Hoboken: Dec 2002.Vol.19, Iss. 12;  pg. 1079

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Subjects: Ethics,  Marketing,  Politics,  Theory

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Classification Codes 1210   Politics & political behavior ,  9190   United States,  7000   Marketing ,  9130   Experimental/theoretical ,  2410   Social responsibility

Locations: United States,  USAuthor(s): Nicholas O'ShaughnessyDocument types: General InformationPublication title: Psychology & Marketing . Hoboken: Dec 2002. Vol. 19, Iss. 12;  pg. 1079Source type: PeriodicalISSN: 07426046ProQuest document ID: 252991151Text Word Count 6751Document URL: http://proquest.umi.com/pqdweb?did=252991151&sid=1&Fmt=3&clientId=52326&RQT=309&VName=PQD

Abstract (Document Summary)

This article seeks to focus and organize the public and academic debate on the ethics of political marketing by soliciting answers in the application of ethical theory. Principal ethical theories of interest to marketing and the particular illumination they lend to political marketing are discussed. Often the answer they yield is ambivalent (not least because ethical propositions can only be argued, never resolved). It is concluded that, although utilitarians and others tip the balance in favor of political marketing practice, the strength of the contractarian critique means there is no closure in this debate.

Full Text (6751   words)

Copyright Wiley Periodicals Inc. Dec 2002 [Headnote]ABSTRACTThis article seeks to focus and organize the public and academic debate on the ethics of political marketing by soliciting answers in the application of ethical theory. Principal ethical theories of interest to marketing and the particular illumination they lend to political marketing are discussed. Often the answer they yield is ambivalent (not least because ethical propositions can only be argued, never resolved). It is concluded that, although utilitarians and others tip the balance in favor of political marketing practice, the strength of the contractarian critique means there is no closure in this debate. (c) 2002 John Wiley & Sons, Inc.

Everyone has an opinion on the ethics of political marketing, and often it is an unflattering one: from jeremiads on the "shallow science of imagistics" (Philo, 1993) to meditations on the chicaneries of "spin" (Jones, 1995), political marketing and its ready public associations with the idea of manipulation has become one of those things it is fashionable to worry about, the political face of a cultural "dumbing down." Numerous ad watchers in the American press testify that this is a matter of public concern. One area of anxiety, for example, is the idea that opinion is being "bought" by the richest rather than the best, and this offends democratic notions.

That there are thus ethical problems associated with political marketing is thus not in doubt. But what problems-and whose ethics? Are they worthy of serious attention, and even legislation? If the wrong problems are defined, the wrong solutions are embraced, yet the real dangers of political marketing may be the more hidden and less publicly discussed ones, forexample, the extensive focus on negativity may blind us to other things such as the short-term decision making it may engender. Such debates also have political consequences if sufficiently arousing. Public policy may enact, for example, controls of electoral expenditure or espouse the public funding of political parties.

Ethical theory will not answer these questions, but it might clarify them, illuminating those areas

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where there should be real worry and offering reassurance when anxieties have been unnecessary, replacing a vague moral superstition about the entire area of political marketing with more focused concerns organized within a coherent structure.

In this article, therefore, the aim is to review some of the principal contemporary and classical ethical theories of interest to marketing, as summarized by O'Shaughnessy (1995): that is, Kantian, utilitarian, contractarian, communitarian, objective, and cultural relativist. Can they discriminate usefully among the mass of criticisms of political marketing, and offer enlightenment as to where the common interests are really being served and where anxieties should truly lie? The deontological approach is addressed first.

THE DEONTOLOGICAL APPROACH

Although Greek did not actually have a direct a word for duty perse, they possessed a term that referred to the imperative-the thing one must do; but in English the word means connected with duty. Immanuel Kant (1724-1804) argued that action should flow from elemental principles that are both the moral basis for the action and the universal principles upon which all should act. This is actually an argument for moral absolutism, for the basing of all actions on rules to which all reasonable people should seek to conform: It is a nonnegotiable morality formulated as an antidote to the potential dominance of all our lives by pleasure-seeking behavior. How society actually arrives at these rules is left rather vague by Kant, and he appears to believe that they can be formulated by a process of reasoning alone.

The problem with the Kantian approach is that it is insensitive to context, defining the limits of what is permissible with no regard to circumstance; but in questions of political ethics-in ethics generallycontext is all important. Even duplicity can on occasion be justified, and the Kantian imperative is therefore of limited value in formulating an ethical basis forthe conduct of political marketing. For example, if one were seeking to formulate such rules, the layperson might immediately suggest an agreement to eschew negative advertising. As will be seen, even negativity has its articulate defenders on the grounds that characteris a legitimate issue.

Yet the criticism of political marketing sometimes seems rather Kantian, grounded as it sometimes is in normative models or ideals of democratic behavior (Franklin, 1994; Jamieson, 1992). An example of this would be the normative model of voting decision making based on objective information and full deliberation. For the convinced Kantian, any deviation from this would be unacceptable once it had been endorsed as universal law. Yet voters are not in the end particularly rational decision makers, but respond to gut feel and emotion. They cannot follow this model because of the intrinsic complexity of the decisionmaking task; therefore they use the cognitive shortcuts and cues provided by political advertising, journalism, etc., in order to facilitate a decision (Newman & Sheth 1987; Reid, 1988; Popkin, 1994; Sniderman, Body, & Tetlock, 1993).

THE CONSEQUENTIALIST TRADITION

This tradition emphasizes results of action as the criteria for evaluating their ethical base-in the political context, is the result good government (but what is good government-responsiveness to public opinion? In that case there might be some vindication of the marketing conceptualization of politics). Utilitarianism is one form of this tradition, with its claim that the truth of ethics can be objectively established via rational means, and Benthamite-derived utilitarianism was popularly expressed by J. S. Mill (1806-1873) as that which conduces to the greatest good for the greatest number. There are different forms of utilitarianism: For example, Act Utilitarianism claims that actions are justified by their contribution to the increase in welfare, whereas Rule Utilitarianism would seek out the corpus of rules that would lead to the maximizing of welfare. Other forms of utilitarianism include motive utilitarianism, where the worth of motives is the issue, though this may be ascribed to a different system of ethics called teleological ethics, which incorporate the virtue of the motive, the argument being that there is a critical distinction between intentional and unintentional

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consequences. There is, however, a vagueness about how to operationalize these precepts: How is the worth of these motives evaluated, and what is "welfare"? It raises as many questions as it solves.

Both utilitarianism and the deontological approach can be reconciled by an argument that says the moral base on which one take a particular action should be universal, and yet at the same time one must be guided by the consequences of that action for others (Hare, 1981).

Yet utilitarian perspectives are possibly the richest field of ethical critique of political marketing. In particular:

1. Bogus issues may be incentivized. A commercial organization, the political consulting firm, perceives a political issue as a marketable commodity, and there is therefore an incentive for it to create and merchandise issues selected on the irrelevant criteria of their dramatic appeal: Important but perhaps less value-symbolic issues may as a result be bypassed.

2. Such issue entrepreneurship may in fact be divisive, with deliberately polarizing issues selected as the best strategy. As Ansolabhere and Iyengar (1995) suggest in the case of negative advertising, an optimizing strategy may be to deliberately seek to freeze out the political center from any political participation. Motive utilitarians would certainly condemn this.

3. Decisions may be made with no reference to the long term, because a business-derived conceptualization of politics may lead to the thrust to maximize market share (measured by votes) without considering other consequences. Issues that cannot be publicly dramatized get neglected until it is too late (the savings and loan imbroglio?). Although it may be assumed that the mass electorate could reasonably be said to know where its own interest lies, on issues that have an inevitable though distant future impact, such as energy consumption and the environment, the electorate may be irresponsible.

4. Political marketing methodologies also tempt people to use communication to fill the space vacated by ideas and ideology (Sherman, 1987): Communications substitute foraction, creating a world of professional campaigners and amateur statesmen.

5. A ".x-it" mentality is created, with pressure for instant, mediafriendly solutions to elaborate problems.

These are utilitarian-derived criticisms, because the claim is that they lead to worse government and therefore a failure to achieve the greatest good for the greatest number. Another criticism would be that the costs of political marketing create the need for a wealthy paymaster, normally a string of political action committees, because 70% of campaign costs in the United States now go on advertising. The favor is returned by benevolent legislation, and this can be seen as undermining the efficiency of government in terms of its ability to deliver the best for the most. Vested interests, whose concerns are seldom identical with those of the majority, can frustrate the service to that majority of its elected representatives. The NRA and the tobacco industry are cases in point, where the political struggle against them has had to be carried out in the courts, since legislators seem either bribed or intimidated.

Yet it would be dishonest to pretend that the phenomenon of marketed politics had nothing useful to deliver. It is ironic that the phenomenon can nevertheless be defended in utilitarian terms as a contribution to public information. Ansolabhere and Iyengar (1995) review the evidence that political advertising increases public knowledge of salient issues by increasing the amount of information in circulation. Banker (1992) argues that "they can be viewed as supplying voters with alternative perspectives for understanding political reality," they enable us to "reframe political facts, to allow the public to see it from a different perspective." Second, and in reply to the earlier criticism about issue entrepreneurship, their locus in opinion research can introduce legitimate public concerns into the election that might otherwise have been missed, because no issue can be successfully manufactured

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and sold without meeting an underlying resonance in public opinion. To argue otherwise is perhaps to entertain the notion of a naive, jejeune electorate and a crude stimulus response or hypodermic model of political communication (Kraus & Davis, 1976). Banker discusses a case in point, where polling revealed that an incumbent candidate (Senator Denton) was perceived as rich and aloof: Projective polling suggested his rival focus on Denton's use of official monies to pay country club membership and on his anti-social security vote. In this context, the negative advertising can be justified as a legitimate awareness exercise that led to a more informed, if more, embittered contest.

Flanagan (1996) makes several significant criticisms of the above philosophical approaches. Both Kantianism and utilitarianism are vague; Kantian and utilitarian arguments occur, for example, on both sides of the abortion controversy, and the key problem is therefore that abstraction needs embodying in coherent, workable precepts to guide actions. The respective theoretical variables of duty and happiness need grounding in more precise values to give direction. Utilitarians are constantly debating the meaning of what the goods are and how they are ordered to maximize the greatest good overall, whereas what Kantians have trouble doing is articulating the categorical obligations in a detailed way.

THE CONTRACT VIEW OF ETHICS

Utilitarianism has had many critics from its very beginnings as a coherent philosophy (as Cardinal Newman wrote in the nineteenth century, "The philosophy of Utility, you may say, Gentlemen, has at least done its work; and I grant it,-it aimed low, but it has ful.lled its aim"). For example, Rawls (1972) points out how the mantra of the greatest good for the greatest number could lead to the sacrifice of individual liberty: indeed, communism itself could be seen as constructed on such an argument, for the "dictatorship of the proletariat" represents precisely that. Thus an important source of criticism has been human rights perspectives, because the pressures of crude majoritarianism can sometimes be seen as overriding the liberty of the individual. Theories of rights were thus developed to protect the autonomy of the individual; Rawls regards the right to equal liberty as being the basis of all other freedoms and rights. But ethics involve both rights and duties-as if in fact there were a societal contract in operation between individuals, institutions, and society. These contractarian perspectives posit a bargain struck with each otherforthe benefit of all, an exchange that includes the acceptance of some restrictions on individual liberty.

There are of course important limitations to this perspective-what, forexample, happens when rights conflict? But if one can imagine such an invisible contract, then clearly some of the things political marketers do would be illegitimate in the sense that they would violate exchanges based on rights and duties. One area where this clearly emerges would be that of fraud and fakery-the extent of manipulated imagery in political marketing that could easily be called deception, such as the controversial George W. Bush subliminal television advertisement that flashed "DemocRATS" at the boundary of perception. Thus a University of Oklahoma study of over 2000 political advertisements from the 1950s onward found that more than 15% were manipulated in some way (USA Today, May 23, 1996). And a study of the 1996 presidential campaign found that 28% of 188 advertisements analyzed revealed questionable use of technology: "news conferences that were never held, debates that never took place, use of audio or video tricks to stereotype or ridicule opponents" (Johnson, 1997). The numberof ads using altered images, according to the National Science Foundation, rose from 13% of those made 1950-1962 to 70% post 1980 (USA Today, May 23, 1996). Such manipulation has become customary-the lowering of George Bush's voice in a 1988 advertisement would seem to be rather typical. In anothercase a Senatorwas actually dying but sufficient shots of his reelection announcement were pasted together to hide the fact (O'Shaughnessy, 1990). Image manipulation can of course be quite open. The appeal in this case is not to reason; rather the target is being invited to share in a mutual fantasy of vilification as co-partners in the production of hyperbolic meaning. These techniques include "morphing," such as in a 1996 California ad that merged the face of child murderer Richard Allen Davies with that of incumbent Vic Fazio; another ad ran Davies with Democrat Walter Capps as a kind of double ticket (Johnson, 1997).

These are clear instances of obvious manipulation, but, more generally, political marketing may

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appear to give permission to be rather more generally evasive. If, for example, the entire area of spin control is admitted into the domain of political marketing-and there is certainly an argument for saying that this belongs to a separate conceptual realm-then its ethical critics must be heeded. Thus in the London Times (July 4, 2000) Michael Gove criticized what he called the manipulation of public spending announcements by the government: "the practice of double-counting, or triple-announcing, by which rises in ex penditure are trumpeted, re-trumpeted and then orchestrated again for brass band and pulled strings, has created a deep rooted cynicism towards all government initiatives. . . . When Alan Milburn announced . . . that ward sisters would be given L5000 to improve their patients' environment it was welcomed . . . butsixweeks laterthe Department of Health informed hospital trusts that the policy was to be funded by a cut in theircapital allocation." Another example was the introduction of "nurse consultancies"-forwhich howeverno new money was forthcoming. This critique is typical of many that have appeared in the British press with increasing regularity-and all relaying similar examples. Another of numerous instances is when the British government chose to include the compulsory tuition fees levied on the parents of students (an amount that within the next three years will reach L1.2 billion) as part of public investment in higher education (Times Higher Education Supplement, November24, 2000).The functionaries of the British state have jettisoned their old bureaucratic language for the new hyperbole, but reading it-as in this example-leaves one perhaps no wiser than before: "Mr. Milburn will be creating a top-level NHS modernisation board to drive through the changes in the NHS. In a move designed to overturn traditional Whitehall bureaucracy and hierarchy, board membership will include the brightest and best modernisers in the health service. The changes signal a vote of con.dence in frontline clinicians and managers who are consistently trailblazing new ideas. These are the people at the rockface with the experience and enthusiasm to drive home the modernisation programme" (Times, February 23, 2001).

No contractarian perspective on political ethics could accept this kind of institutionalized evasiveness, where governments repeatedly violate theirside of the bargain that is assumed to be implicit between citizen and state. Problems, insofar as they are solved, are solved rhetorically. Perhaps politicians actually come to believe their own verbalizing and confuse communication with action. Political efficacy comes to reside exclusively in communication skill, arguing away real-world problems as they multiply.

Another potential problem from the contractarian perspective is the criticism that politicians are ceasing to try to enlist the direct physical participation of citizens in politics: There is no real incentive for them to do so now that marketing can perform the persuasion task. The argument is that marketing makes redundant the kind of proselytizing organization that Ellul (1973) reckons to be central to the learned commitment to a cause. People internalize adherence by participating, therefore engaging in self-persuasion and retrospectively justifying actions, and the lack of active participation in politics today (Richardson, 1995) makes for a superficiality of support, quickly lost, and no direct link between governors and governed. An extreme case of this was Forza Italia: "Slickly presented, adopting American political techniques in a context devoid of American restraints, Berlusconi used television with a skill that made the enigmatic arts of the Christian Democrat Giulio Andreotti as redundant a political weapon as the letters of Cicero . . . Veneziani explains that Berlusconi built his instant movement, Forza Italia, on a base which was both apolitical and non-ideological. Its structure is not that of a political party but of a network of football supporters' clubs"(Times Literary Supplement, January 6, 1995). People are less likely to be involved in politics at a personal level: Britain's Labour Party found it could create a substantial "credit card" membership through advertising, but it was also later to discover the fickleness of its new membership base.

Another area of potential interest to contractarians, which flows out of this, is the changing nature of the individual's relationship with the state. Perhaps there is a loss of dignity if governments come to be seen as just big service organizations, and an erosion of loyalties and ties is a consequence of being taught at the aggregate level to be consumers in everything we do. Political marketing may be viewed as involving this learning, at a higher level of abstraction, in which we are teaching people to think of themselves as political consumers, and perhaps, merely as political consumers.

It would perhaps seem natural to discuss negative advertising also here, and present it too as a form

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of contractual violation. In fact, the ethical argument over negative advertising is a complex one and does not admit any easy resolution. As Banker argues, argument and argument form need to be distinguished from one another: "an individual 'negative' political ad is an argument, at least implicitly. As an argument it may be reasonable or unreasonable. That does not mean that all 'negative' ads, the argument form, should be discouraged." What though is clear, as discussed earlier, is that the effect of negative advertising is to reinforce partisanship and remove the political center: That may be the effect, and it is presumably sometimes the intent as well. It is this aspect contractarians might object to on the ground that the tactic may represent a deliberate seeking of the self-disenfranchisement of large numbers of people, thus undermining the ethos of democracy.

COMMUNITARIANISM AND VIRTUE ETHICS

Communitarianism locates virtue within the context of some parochial social setting. Virtues are traits and they are formed by a long process, underpinned by emotionally driven conviction (MacIntyre, 1981). Ethical traditions and sensitivities are seen as arising out of community. Aristotle argued that virtue was not a rule book, but a skill whose art lay in negotiating circumstance (Soloman, 1993). Yet these propositions are rather vague as a source of potential ethical guidance. Certainly it is true that some of the practices of political marketing are more acceptable to some cultures rather than others. If virtue is what the community teaches, it is apparent that different communities teach different things, as will be clear from the very mixed reception given to the export of American political marketing techniques in different countries, with notable rejection in for example Greece and Scandinavia, although Johnson (1997) makes clear this is more a rejection of the idea of American-influenced elections than of the ethos of political marketing per se. Tradition legitimates, and the American tradition is to place an almost nonnegotiable value on freedom of speech: It is this value that has stood in the way of legislative attempts to (forexample) control expenditure on campaign advertising. It may be argued that other countries value freedom of expression less, and social integration more: There is a trade-off. The origins of political marketing and some of its associated practices, such as negative advertising, do in fact go back a long way in America, because they arise out of the particular value that culture has traditionally placed on the idea of liberty: The first negative campaign using modern media appeared fully formed in the California gubernatorial campaign of 1936 (Mitchell, 1992) in which Upton Sinclair was the unfortunate victim, while the first advertising agencies were enlisted in 1916 (O'Shaughnessy, 1990). A second, related, tradition is the value Americans place on market freedoms: The state should not tell people how to spend theirmoney, and this includes more generous freedom than elsewhere to spend it on political involvement-as is the case, forexample, with political action committees. Cultures with greater traditional intolerance of market freedoms have also tended to restrict the access of finance to politics more (in the U.K., for example, expenditure per parliamentary seat is limited to around L5000).

Community tradition is one locus for virtue ethics, but it is not the only one, because some philosophers have criticized community both for conservatism and excessive belief in the merit and possibility of communal consensus. Organizations are also viewed as relevant communities, with role relationships generating obligations. These philosophers reject notions of hard and fast rules: The key thing is to sponsor a cultural climate supportive of ethical behavior: "if the cultural climate is not openly supportive of ethical behavior, the motivational climate for ethical conduct will be missing" (O'Shaughnessy, 1995). More rules are not seen as particularly illuminating, and value is placed on developing skills to weigh up conflicting interests.

These contemporary moral theories-utilitarian, contractarian, virtuetheoretical (communitarianism) have focused attention on significant aspects of moral life, but they have perhaps obscured some of the salient features of morality and the problem of finding, at the real level, a particular solution to a particular moral dilemma. There is an obscurantism: there is still a need to know what are the key moral issues today and what magnitude of importance is attached to them: "I do not believe that morality has a nature that can be revealed by moral philosophy-betterto talk of actual and possible worlds and visions of human flourishing therein" (O'Shaughnessy, 1995).

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MOTIVATION TO COMPLY

ForBenedict Spinoza any system of ethics must be internalized and not just verbally endorsed. The key is motivation. Under the deontological position and utilitarianism, motivation arises from the appeal of reason and from a wish to behave in an ethically sound way. Contractarians perceive it as elevated self-interest, virtue theorists as the emotions arising out of community-based custom, value, and tradition.

But David Hume (1711-1776) spoke of the necessity of having an emotional base to ethical conduct. Others, such as the economist Frank (1988), endorsed essentially the same view, that ethics cannot be apprehended at the level of reason alone, but needed emotional commitment, because emotions engender, energize and direct response: Otherwise expedient "short-termism" will rule. He claims that, in the long run, ethical conduct, by building up trust, is linked to success. In fact it is a fallacy to divorce emotion from reason as completely as is so often done, because, forexample, it is only through emotion that we can convert decision into action or choose among the competing claims presented by reason. Indoctrination and social conditioning are more relevant here than abstract knowledge: As Aristotle said, you get a virtuous adult by training a child do the right thing.

For those who would seek a way forward on the ethics of political marketing, the question is whether to anchor those ethics in reason, for example, enlightened self interest, or find some way of getting politicians to internalize this emotional adherence to ethical values. It is not, however, easy to think of a way of achieving this, because unethical behavior has sometimes been rewarded-in 1988 for example, Banker argues "Dukakis was skilfully portrayed as a weak, liberal, do-gooder lacking in common sense. The man who demonstrated moral restraint paid for that restraint by losing the election" (the name "Willie Horton" is evidence enough here).

Self-interest is probably a much stronger argument, however-arguably any tendency to moral drift in American politics is held in check by the fact that negative ordishonest political advertisements can backfire. First, they can incite a counterattack from opponents, who now have access to instant rebuttal facilities via the Internet. Second, all political marketing may be subject to arbitration by an independent source they cannot control, the free media, with its ad-watches, etc. Media can fix a maligned interpretation on a text that is quite different from that which the party or candidate intended-for example, when the Canadian press accused the Tory Party of attacking a facial defor mity of the Liberal leaderJean Chretien. Whetherornot this was intentional on the part of the Tories, for most voters their only exposure to the advertisements was through the interpretative framework attached by television, and it suddenly became "politically incorrect to be a Tory" (Whyte, 1994). In fact the Tories, previously the largest party in Canada, were left with just two seats.

To undertake political marketing is to undertake a journey but not to control its destiny. The system may perhaps be seen as possessing an in-built self-corrective mechanism in which extremes of unethical behavior, or even as in the Chretien case the mere suspicion of them, will be punished. For a political marketing text stands in its own right as an autonomous political event with independent political consequences; it is not merely a paid messenger or conduit of persuasive information from encoder to decoder. The fact that harshly negative advertising is such a volatile weapon thus brings its own restraints. For example, a 1996 candidate for Alabama Supreme Court, Harold See, was subject to one of the most vicious negative campaigns of recent years (Johnson, 1997). Commercials featured a skunk morphing into Harold See's face, and claims (strongly disputed) that he had abandoned his wife and children years before, etc. But See still won: A negative ad is as much as statement about the values of the attackeras the defender, and extremes have a tendency to alienate. Yet, as Johnson remarks, "when othercapable and civic-minded citizens contemplate the ridicule and vilification endured by See and his family, many will conclude that running for office today is not worth the price."

OBJECTIVE RELATIVISM

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Objective relativists (Putnam, 1981) claim that the right ethical decision is relative to circumstance. This is a position that might provide some justification for the ethos, and many of the practices, of political marketing, because there is a credible argument that it has been propelled forward by circumstance; for in common with all voluntary civic activities, the willingness of people to be actively involved as citizen activists has been in sharp decline in America and Europe (Richardson, 1995), and this coerced privatization of hitherto public activity serves to create a need for persuasion to be electronic, and purchased. Put simply, it is difficult to persuade people to become volunteers. Moreover, with voting behavior no longer driven by inherited class loyalties to the extent that it once was (a phenomenon of dissolving class barriers), the task of persuasion is greater, because partisanship is less. In addition, there has been a significant decline in the willingness of U.S. media to coverpolitics as competition for ratings becomes more intense and entertainment values become ever more dominant on television. According to some authorities, television news has reduced its purely political coverage by as much as 60% since 1995. Consequently, it is suggested that circumstance actively compels resort to marketing methods where the media abrogates its traditional responsibilities.

Banker (1992) has argued: "when considering whether a particular communication act was ethical the situation must be considered. Political campaigns are a competitive situation; there is just one winner. It is ridiculous to expect the same standards to apply to such a situation as apply to polite social discourse." Context prescribes ritual and rhetoric, and a political context is ultimately about the leadership and future direction of the nation, and therefore may merit higher levels of rhetorical aggression than are legitimated by other communications situations, including commercial ones. Banker would include in this the ad hominem attacks that make the critics of political marketing so indignant: "an election campaign is not just about what issues candidates favor and oppose, it is also, by its very nature, concerned with who we elect-the motives and characterof the man orwoman who will lead us." Perceived character is an integral part of the political product that is exchanged for votes: It is important because any publicly visible persona is probably perceived as symbolic of values of one kind or another, and in practice it is less easy therefore to create some neat dichotomy between character and issue and declare the one off-limits to public curiosity.

These points are a valuable corrective to the tendency in much of the literature to dismiss negative advertising as an unqualified loss for American public culture, but they are not an entirely satisfactory answer to the critics of political negativity: by the early 1990s 50 states with 62% of the voting age population suffered full negative campaigns (Ansolabhere & Iyengar, 1995), and negativity on that scale probably needs a stronger defense than this.

CULTURAL RELATIVISM

Cultural relativism resolves ethical conflicts between one culture and another by accepting that ethical standards are relative to culture (O'Shaughnessy, 1991). But, while accepting that legitimate intellectual and moral differences and traditions exist, not least in regard to the differing values placed on the needs of individualism versus the demands of community, cultural relativism becomes more difficult to accept once one gets down to the level of individual practices (e.g., institutionalized bribery and "kleptocracy"). At its worst, cultural relativism is simply an excuse to suspend the operation of judgement. As O'Shaughnessy (1995) argues: "There is evidence from both anthropology and history demonstrating the essential ethical similarities among different cultures. In accepting ethical relativism, we put up a rival standard, namely, universal ethical tolerance as the absolute virtue. To make ethical tolerance the absolute virtue means treating public wellbeing, honesty and justice as of secondary concern. This cannot be acceptable." In a sense, to tolerate all is in fact to believe in nothing.

But for the extreme cultural relativist, American political marketing might indeed present no problems at all-for surely that's America, part of its gaudy, vigorous way of being: Though the relativists might balk at its export to countries with no such tradition, on the grounds that it represents an alien cultural graft. But, there may indeed though be some merit in permitting elements of cultural relativist critique to creep into the ethical analysis of political marketing. The different political traditions of different

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countries must be seen as embodying value systems that differ but contain an internal coherence, so that to change one variable in an integrated system is to change the interrelationships of all its components. Thus elements that might be objectionable on an individual basis, like the role of money in American politics, may be justified as a structured part of some overall workable pattern. Political marketing is pre-eminently American, in invention and operation, conceived and energized by American culture, values, and tradition. First, although speech in America has never been absolute-witness the current laws on hate speech or earlier generations' prohibition on pornography, the bias toward this as a desirable social end has been strong, with some support in the constitution, even to the extent of the American Civil Liberties Union defending the rights of Nazis to demonstrate. This might be contrasted with its U.K. counterpart Liberty (formerly NCCL), which has neverdefended this orany otherfr eedom of the far orindeed near right.

The use of money to purchase political persuasion is part of this tolerance, with money seen as a legitimate expression of power, although it is often difficult for even the richest in the land to merely buy political office: Michael Huffington lost $20 million in his bid to become a senator for California (Daily Telegraph, June 7, 2000), and as for another multimillionaire "the more he spent, the more obscure he got" (Daily Telegraph, June 9, 2000). Another American tradition is to recognize that power in a democracy is not only a function of the numbers of those who feel, but of those who feel most intensely: 80% of Americans have consistently favored more gun control, but the 20% who oppose this are vehemently opposed, and so farthey have usually gotten their way (O'Shaughnessy, 1990). In a sense this represents elements of a stakeholder approach to social ownership of American politics, an approach that is manifest also in the powerof political action committees in the American polity: In the last U.S. presidential election, 150,000 prochoice women were contacted by the pro-choice movement in Pennsylvania alone (Independent, October27, 2000).

Moreover another historic feature has been the acceptance of a relatively free market in most things, including religion, as Moore (1994) outlines in his book, and this is combined with the nearuniver salization of the business ethos; as Moore argues, churches from the early days in America learned to sell themselves. The transfer of a marketplace ethos, that is, conceptualization and techniques, applies to many areas of American life, where in other countries commercialization might be perceived as some kind of devaluation. John Corzine, who paid $140 per voter to win the 2000 Democratic Senate primary in New Jersey (Daily Telegraph, June 9, 2000) used similar marketing techniques to those other wealthy candidates Forbes and Perot before him, "bombarding voters with television and billboard advertisements and showering down contributions on every level of his state's Democratic Party machine . . . " Toward the end of the presidential election itself Republicans had made 62 million phone calls, issued 110 million pieces of direct mail, and spent $40 million on getting supporters to the polls (Daily Telegraph, October 31, 2000).

Yet it is possible that a cultural relativist with an educated knowledge of American history would claim to see a coherence here with other aspects of American life and tradition: The amounts are exceptional, but the practice is not. Another ideological trajectory for the cultural relativist to follow would be that of postmodernism, claiming that political marketing was just another category of postmodernist culture, reflecting and reinforcing its core themes. Such a critic would be troubled less by the notion that political marketing has tended to lead the political agenda into a focus on symbolic goals and the serial creation of meaning. Thus Axford and Huggins (2002) see political marketing as part of a broad postmodernist culture of signs and symbols, a phenomenon of dissolving class barriers where people are bereft of traditional anchors. They take the example of Forza Italia as an extreme case of this, a media-created party that seemed to answer a huge appetite for change, a party people were comfortable with. They see political marketing as simply part of a world of serial symbolism and media saturated imagery, whose self-referentiality is captured in a scene from Murphy Brown, where she watches Dan Quayle criticizing her giving birth outside wedlock.

CONCLUSIONS

The application of ethical frameworks does not generate any final answers, as no ethical debate is ever final. Ethical questions can only ever be taken further, not answered: What the process does

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seek to achieve is further clarification of the nature of the moral issues associated with political marketing, and some sort of ordering among them as a magnitude of priorities.

But the overall direction of the ethical critique is clear-that it is an error to proclaim a general anathema against political marketing and the key generic practices such as negative advertising most commonly associated with it. What is morally questionable is not so much the genre and its derivatives, but particularized individual cases of application, the specific instance that embodies the idea of excess; toxic individual negative campaigns, legislative seats merely purchased, allegation and video image merely fabricated. But utilitarians, objective relativists, cultural relativists, and communitarians would place the balance in favor of political marketing as it sharpens debate (utilitarian), arises out of cultural-political tradition (cultural relativist), is legitimated by competitive context (objective relativist), and the nature of the postmodern condition enforces it (cultural relativist), as it is a response to and not a cause of the social and economic phenomena of these times. And freedom of speech, including economic speech, would be an argument of particular interest to communitarians.

But against these there are certain strong contractualist arguments: where the generation of imagery can be a substitute for political action and for the direct civic participation of citizens, the contract-violation criticisms cannot be dismissed as merely trivial. There is no final resting place forthe ethical debates on political marketing.

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Sherman, Sir A. (1987). The ad man cometh. Guardian (London).Sniderman, P. M., Body, R. A., & Tetlock, P. E. (1993). Reasoning and choice, explorations in political psychology Cambridge: Cambridge University Press.Soloman, R. C. (1993). Corporate roles, personal virtues: An Aristotelian approach to business ethics. In E. R. Winkler & J. R. Coombs, Applied ethics: A reader. Oxford UK: Basil Blackwell.Whyte, K. (1994). The face that sank a thousand Tories. Saturday Night, Canada, p. 14.Times (London) (February 23, 2001). Report.Times (London) (July 4, 2000).Times HigherEducation Supplement (November24, 2000). Report.Times Literary Supplement (January 6, 1995).USA Today (May 23, 1996). Report.

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