Shackled with Bombs: How Giant Corporations Besiege Consumer Rights

Jack Larson, "Cellphone Zombies" 2013

ordering isotretinoin online without a precription buy pfizer Lyrica online By terminating its sale, Samsung has ended the scandal of the exploding Note 7 smartphone. In predictable fashion for such a large corporation, Samsung may walk away unscathed; however, consumers will still have to bear the cost themselves, at least in the short term.

Samsung has shut down the sale and production of its Note 7 globally and permanently in the midst of an escalating scandal: it’s been reported that the company’s flagship phone caused numerous explosions and injured many of its users. Samsung’s failed attempt to recall and rectify the alleged faulty phone batteries led to this costly final decision. New reports of explosive Samsung top-loading washers do the tech giant no good at this sensitive moment.

Out of 96 complaints against smoldering and sparking phones, 13 cases inflicted physical harm to users, while another 47 cases did damage to consumers’ property. The numbers may seem negligible compared with the global sales number of 2.5 million sets. However, Samsung has betrayed not only the safety of those 96 users but also its responsibility to uphold basic consumer rights, including consumers’ claim to safety. The explosions indicate that 2.5 million consumers were jeopardised unknowingly by Samsung’s faulty products. This poses a serious challenge to consumer protection.

Pessimists forecasted that Samsung would face sliding stock prices and massive losses over the termination of the sale of the Note 7. But could these losses pose devastating harm to Samsung and, thus, mark the demise of Samsung’s status as a tech giant? Not so much.

On 12th September, Samsung’s stock price suffered the biggest slide in its 28 years of history as a public company, evaporating 7% overnight. However, it regained 16% overnight. On 7th October, it even hit a price higher than before the massive slide. The estimated 1 billion loss due to recall and termination of production may seem enormous, but actually only accounts for less than 5% of Samsung’s projected net income of 2016. The cost of the explosion scandal for Samsung stockholders is marginal at most. Furthermore, the temporary drop in stock price might even attract more investors who have faith in the company over the long term. Likewise, Samsung does not face tremendous pressure from the market. Note 7 was regarded as the “Phone of the Year” by T3, a well-established tech magazine, after the explosion reports in 2016.

Samsung is not the only giant company that could get away with lazy consumer protection measures without paying the price. The computer behemoth Lenovo was found in 2014 to have been pre-installing Superfish, a software that monitored users’ web traffic, without the knowledge of its users. Despite that, its PC business achieved a record high market share of 20.6% in 2015, dominating the global PC market for more than nine months.

Such staggeringly negligible aftermath of big companies’ irresponsible product design has unsettling implications on the global market. It depreciates consumers’ basic claims to safety and knowledge, which are recklessly trampled by giant corporations. How these companies weathered the scandals provides an insidious example for other companies. Their followers might prioritise adopting immature but eye-catching technologies (like quick charging in the Samsung case) to expand their market share, placing consumers’ safety and privacy at risk.

And consumers seem to turn a blind eye to giant companies’ misdeeds. The Wall Street Journal reported that 90% of Note 7 users chose to exchange for a Samsung S7, instead of accepting a refund offered by the company, showing unwavering confidence in Samsung (or, perhaps, a lack of good choices for consumers). The top 5 smartphone manufacturers, Samsung, Apple, Huawei, Oppo, and Xiaomi, account for more than half of the global market in the first quarter of 2016. Users have no choice but to select from among a few top brands. It’s even worse for more concentrated markets: in the American search engine market, the top four providers take up 98.5% of the market share. Even though search engine giants like Google are frequently reported to threaten users’ privacy, consumers could hardly substitute them with better alternatives and, thus, are at the mercy of giant corporations’ transgressions.

The situation is even starker in developing markets. Consumers from emerging markets, constrained by less purchasing power, have fewer choices than their counterparts from established markets. Their sensitivity towards price motivates giant companies to stretch the limit of low production cost to reduce the price of their products, neglecting their responsibility for protecting consumer rights. On the other hand, due to price-mindful buyers’ attraction to affordable products, giant corporations have less to lose. Toyota’s sale was stagnant and even declining in developed markets like Canada and Europe after its recalls of vehicles with sticking accelerator pedals from 2009 to 2011. By contrast, it saw unhampered growth in developing countries like India, where growth increased by four times from 2009 to 2012. Potential safety or privacy hazards are intangible and invisible to most consumers. The relatively smaller records of damage caused by products of giant corporations appear insignificant in the light of their massive production volumes. Consumers with less market power are thus enticed to take the chance and hope they are not the unfortunate ones.

Governments and supervising agencies can barely be relied on to tackle the threat to consumer rights posed by giant companies. These companies generously invest in lobbying the government to further their interests and perpetuate their dominant market power. For instance, Toyota increased expenditure on lobbying after its recalls in 2012 from 3.4 million to 4.6 million in 2013, an increase of  35%. That generosity was largely maintained from 2013 onwards. The considerable effort of giant corporations in preserving their interests raises serious questions about the willingness of authorities to open potential competitors’ access to industry and to conduct more stringent anti-trust investigations to limit giant corporations’ market power.

Even if the government wishes to punish giant corporations for failing their customers, the authorities’ hands are often tied. For example, Samsung might not even have worry about a fine from supervising boards like U.S. Consumer Product Safety Commission, as the sale of explosive products were not a fraud in nature and retroactive punishment lacks a legal basis.

In the long run, hopefully, governments will enhance access to industry and enact measures to limit giant corporations’ market power. Nevertheless, in the short term, consumers, especially those from emerging markets, have to bear the risk and have few choices in their purchases. Big corporations possess accumulated technological and human capital to continue churning out cutting-edge products with the newest designs and functions. They can coordinate design and production across the globe, resulting in a more cost-efficient production than most of their smaller competitors. In a crisis like the one Samsung is facing, it is hard to imagine a smaller company would have as strong a technical department to locate the fault in its product and as much capital to respond swiftly, by initiating recalls, exchange, and refund. For now, big names in consumer products might still be their best bet, if not the only choice.