Global legal regime or international law to govern product liability Essay

There are fundamental values that international companies must uphold them”.

Thomas Donaldson

            “Corporations must learn to work with an even stronger sense of ethics and of responsibility of their own actions”.

Schoichiro Toyoda

Back ground and historical context

Today, environmental impact is considered in product development, manufacturing, packaging, and marketing all over many other industries. And due to international trade all industrial democracies have recognized regulatory regimes to control the testing, manufacture, and marketing of pharmaceutical, biological, and medical device products. The damaging side effects of products such as thalidomide demonstrated that consumers and health care professionals cannot completely evaluate the safety of products that they use on a daily basis, and that liability law can not always provide sufficient added incentives for manufacturers to test for and retain the highest standards of quality control (Christopher Curran, 1992). Government regulation attempts to fill up that gap for therapeutics by requiring extensive pre-market research and testing concerning the safety, quality, and effectiveness of new pharmaceutical and biological products, as well as controls on sanitary conditions and quality assurance throughout manufacture.

Due to International market, governments impose special regulations on the manufacture and authorization of biologics because, compared with pharmaceuticals, they are chemically less established, more heat- and shear-sensitive, difficult to assay, and more subject to contagion. Contaminated intravenous medicines can quickly spread disease and even cause death.

Between the end of the nineteenth century and the 1920s ‘a national culture of utilization emerged’ in the United States. This was obviously a prerequisite of any consumer movement. At the same time, there was the growth of the Progressive Movement ( Barbrook and Bolt 1980) which, although mainly concerned with corruption of government, raised the issue of the supremacy of producers. People like Upton Sinclair in the United States highlighted issues of defilement of food and this led to increased food regulation ( Forbes 1987: 4). Likewise, abuses of the monopoly place of the railways led to the development of the Interstate Commerce Commission as the first regulatory authority for protecting consumers ( Nadel 1971: 22). In Britain, similar questions were raised concerning food adulteration ( Burnett 1989) and the cooperative movement started in order to organize and reinforce the market position of consumers (Tivey 1974). However, at this time there were no consumer groups as such and any consumer regulation was to care for the consumer from direct physical or economic harm ( Nadel 1971: 7).

In Britain, it was not until 1957 that the Consumers’ Association (CA) became the first national product testing organization. The Consumers’ Association was recognized as a response to consumerism in the United States and the failure of the government to create a consumer advisory service ( The Times 5 October 1978). It also revealed the growing concern with consumer issues in Britain. The Consumers’ Association was instigated with a loan from the Consumers’ Union and with a few volunteers in the East End of London ( The Times 7 October 1978). By 1980 this had grown to 685,000 members and had ‘acquired ascendancy as a spokesman for the consumers’ ( Smith 1982: 284). However, regardless of the respect and importance of these organizations in both Britain and the US, they mainly failed to obtain a wider political role in the sense of providing a consumer input into wider political questions. Barbrook and Bolt ( 1980: 237) point out that: ‘for most of its subsistence Consumers’ Union has hardly been a pressure group in the severe sense of the term’, and it was only in 1969 that the Union established a Washington office ( Thorelli and Thorelli 1974: 437).

International the national legal environment

Product liability law provides a restriction, but so do other forces. The majority important such force is reputation. Firms invest large sums in setting up and protecting reputations, and numerous institutions in the marketplace police and provide information about reputations (Daniel B. Klein, 1997). There is a negative aspect to reputation as well: a firm which injures consumers suffers a large loss in the value of its reputation. When a firm’s product causes an injury or is judged unsafe, the company suffers considerable losses in stock value, indicating that the stock market expects that consumers will be unwilling to purchase the products of that firm. Firms are aware of these costs, and consequently have very strong incentives, autonomously of product liability law, to provide safe products.

An added source for safety in the contemporary U.S. economy is directive. Virtually all products that might be concerned in injuries are synchronized by the federal government, through such agencies as the FDA, the CPSC, NHTSA, and others. Moreover, while regulation errs, it is often on the side of extreme safety. If there were less regulation, then we would be expecting new institutions to develop to provide additional information concerning product safety to consumers. Indeed, a significant function of safety regulation can be the provision of information, as while the market reacts to a recall or other regulatory event representing insufficient attention to safety by a firm (Paul H. Rubin , R. Dennis Murphy, and Gregg Jarrell, 1988).

Lots of the major problems identified with the present legal system are due to the conservatory of strict liability to design defects. It is expected that a contractual solution would show the way to little or no liability for design defects, and thus fewer cases filed. Besides, the cases that would not be filed are the most costly and difficult, so there would be a great saving from eliminating them.

Another major class of contemporary liability cases involves a “failure to warn.” Originally it was thought that product warnings would protect manufacturers from liability. However, the opposite has occurred: manufacturers are often found legally responsible for failure to warn, at times in circumstances where consumers misused the product in dangerous and impulsive ways (James A. Henderson and Aaron D. Twerski, 1990). This expansion in liability for failure to advise is the second major cause of the growth in product liability in the modern legal system

Impact on international trade and international business and

As product liability laws, system, and court decisions favor the consumer, the scope of consumer responsibility is lessening and corporate liability is expanding. A poor economy and media hype concerning successful claims are contributing to a growing number of claims instigated by individuals against business. It can be easier and very lucrative to sue while an impersonal corporation or insurance company can be forced to pay. Many consumers are jumping on the bandwagon, driven by greed or a convincing need to place blame somewhere other than on fate or on themselves.

Costly and burdensome restrictions are promptly imposed by new laws after injuries or deaths, at times without due consideration of their rationality. In the wake of the 1982 case of cyanide laced Tylenol capsules, the industry and consumers are paying for new product packaging design. The new packaging thrives in keeping the elderly from its contents, but it still cannot avert consumer terrorism.

Hot areas of proceedings today are medical misconduct and product liability. Even pharmaceutical and aircraft manufacturers of federally approved products are targets. There are no clear standards for well-intentioned companies to follow and thus be certain they will not be sued–no matter how consummate their behavior. Though a company is in fulfillment with government standards, there is no assurance against punitive damages.

Future developments in international business and trade

The reality of the matter is that efficient regulation of corporate groups or their activities inexorably requires control of all the components contributing in the enterprise. Where multinational groups are concerned, this inexorably means extraterritoriality. It ever more appears to be a world phenomenon rather than something mainly associated with American controls over foreign subsidiaries of American multinationals. From the view of effective economic regulation, it is not merely suitable, it is essential that the legal structure match the economic configuration of the enterprise subject to the regulatory system. though, the extraterritorial assertion of national law intrinsic in the application of enterprise principles to components of multinational groups inexorably will engender international confrontation and disturb international trade and relations. This is the dilemma.

The challenge for the world order is the development over the years ahead of an international legal machinery to mediate, adjust, and lessen national conflicts and to emerge with a framework that will not only ease the nuisance of effective governmental controls over the activities of multinational groups, but will support the harmonious development of international economic relations.

In my opinion, in appraising product liability law, we should remember that it operates in concert with other forces to offer safety to international consumer. Economic analyses that the product liability law is the only factor leading to safety consequently overstates the significance of this system, and the conditions they obtain for efficient levels of safety are stronger than needed. Certainly, an alternative model to theirs would assume that consumers are completely informed about product safety, so that the law system would have no role in raising safety. The truth is somewhere in between.

In considering the expected outcome of a regime of free contract, it is significant to keep in mind the role of competition. For any product, there will be frequent sellers, and sellers will be capable to compete in offering diverse contractual terms. In analyzing contractual “failures,” opponents of free contract often appear to believe that there is simply one seller offering one contract, and that consumers are at a disadvantage as they cannot bargain with sellers over the forms of contracts, but are faced with a “take-it-or-leave-it” choice. But if they were permitted to, different sellers would proffer different contracts, and consumers would then have a choice. Just as sellers contend on price and other terms of sale, so they can be anticipated to compete in offering different contractual terms and warranties as well. Just as the seller who offers the blend of product quality and price that the consumer the majority values will succeed, so the seller who offers the most valuable contractual terms will also succeed. The “power” of consumers comes not from face-to-face bargaining but from competition in the market. Since lawyers are professionally caught up in the former but not the latter, they tend to undervalue its strength. As this competition is lacking while courts write identical contracts for everyone.

With these issues in mind, it will be practical to speculate concerning the efficient form of law. It is obliging to separate the standard of liability from the level of damages.


Barbrook A. and Bolt C. ( 1980) Power and Protest in American Life, Oxford: Martin Robertson.

Burnett J. ( 1989) Plenty and Want, London: Routledge.

Christopher Curran, “The Spread of Comparative Negligence in the United States,” 12 Int. Rev. L. &Econ.317 ( 1992).

Daniel B. Klein, ed., Reputation: Studies in the Voluntary Elicitation of Good Conduct ( 1997)

Forbes J. D. ( 1987) The Consumer Interest, London: Croom Helm.

James A. Henderson and Aaron D. Twerski, “Doctrinal Collapse in Products Liability: The Empty Shell of Failure to Warn,” 65 N. Y Univ. L. Rev.265 ( 1990).

Nadel M. V. ( 1971) The Politics of Consumer Protection, New York: Bobbs Merrill.

Paul H. Rubin , R. Dennis Murphy, and Gregg Jarrell, “Risky Products, Risky Stocks,” 1 Regulation35 ( 1988)

Smith G. ( 1982) The Consumer Interest, London: John Martin Publishing.

The Times 5 October 1978

The Times 7 October 1978

Thorelli H. B. and Thorelli S. V. ( 1974) Consumer Information Handbook: Europe and North America, New York: Praeger Publishers.

Tivey L. ( 1974) “‘The Politics of the Consumer'” in Kimber R. and Richardson J. J. (eds) Pressure Groups in Britain, London: Dent.