Product Liability

Our analyses show that the issue is more complex than indicated by the policy debate about whether there is either "too much" or "too little" product liability.

In the early 1990s, the ICJ's study of the economic effects of product liability in the pharmaceutical and medical devices industries described how product liability could have detrimental effects such as discouraging innovation and compromising safety. It also suggested reforms that could limit such effects without endangering consumer safety. This work helped focus the national debate about product liability on systematic evidence, rather than on anecdotes and assertions.

The ICJ has continued its efforts to understand the tangible economic effects of product liability suits by studying effects on product sales, stock prices, and media coverage in the automobile industry. This research has revealed that, although product liability verdicts generate substantial press coverage, particularly when juries award punitive damages, verdicts do not typically dampen sales. Furthermore, verdicts against manufacturers appear to affect stock prices only when the case is one of several similar pending cases or when award amounts are very large.

These analyses establish that the issue is more complex than indicated by the policy debate about whether there is either "too much or "too little" product liability. Most important, it suggests that a guiding principle for reform should be to aim for a system that sends clear and reliable signals to companies about acceptable and unacceptable behavior.