STRICT PRODUCT LIABILITY AND MARKET GOVERNANCE: LEGAL, ECONOMIC, AND POLICY IMPLICATIONS FOR MANUFACTURER RESPONSIBILITY AND CONSUMER PROTECTION

Abstract

Market structures, consumer protection and corporate responsibility are all important aspects of present markets - and so is product liability. Particularly,  liability on manufacturers alters the law by holding manufacturers liable for defective products, without regard to fault or negligence. This article discusses the consequences of strict liability on manufacturers, from a legal, policy and operations perspective. It discusses the allocation of the risk from consumer to the manufacturer and the role of manufacturers to ensure safety, quality and risk reduction measures. The research also examines the economic and business implications for manufacturers, in terms of insurance premiums, legal and compliance costs. The paper addresses the consumer protection-business trade-off by analyzing the pros and cons of other legal options, and the advances in consumer protection law. Strict liability enhances market efficiency, and changes the law and the business model for manufacturers.