Prevagen: 'Brain Boosting' supplement under fire by FDA for safety (2020)

 

Abstract

The war against aging has been waged for as long as we know. One of the most prominent battles within this war is the fight against memory loss. As people age their brains begin to deteriorate, leading to absentmindedness, decreased ability to multitask, difficulty with name and face recognition, along with other side effects. The race to create a drug that can reverse or even halt neurological diseases and age induced memory loss has been booming with advancements in the study of memory. Spear heading this race is a company called Quincy Bioscience and their exceedingly popular supplement, Prevagen. Although it has boosted revenue and sales for years, the Food and Drug Administration (FDA) and other agencies have questioned its safety and efficacy. Quincy Bioscience is now being tried for false/misleading advertising, creating improper procedures during production, and not specifying how it controlled production, which would all ensure quality and safety for consumers.

Prevagen uses protein found in jellyfish 

When analyzing this through the lens of the ethical theories, they would vary in responses. Individualists, who believe the only ethical responsibility is to increase profits of the owners, within the law, would not condemn Quincy Bioscience. They would applaud the company’s use of loopholes to remain within the law while maximizing profits. Utilitarianism argues that one must maximize the happiness for the majority of people to be ethical. Using this theory, a utilitarian would disapprove of this company’s practices because the majority of the people effected are the stakeholders and they are negatively impacted, leading to decreased happiness. The Kantian ethical theory analyzes the motivations and reasonings behind someone’s actions to tell if it was ethical or not. In this case a Kantian can argue that the founders of Prevagen are not ethical because their motivation to create this supplement was to make money fast, not necessarily for the betterment of its consumers. Finally, Virtue theorists would notice there is dishonesty, greed, self-interest, disrespect, and lack of empathy involved in this case. All of which completely go against the cardinal virtues described in the theory. Quincy Bioscience needs to listen to the FDAs recommendations, along with discontinuing to mislead the public about its supposed supplement.

Ethics Case Controversy

Timeline of events

Prevagen was advertised as a miracle drug that improved memory, learning, word recall, and executive function. Since the conception of the company, there has been controversy. For starters, Mark Underwood the founder, stole the idea for the product from his mother. Her intent was to use a protein found in jellyfish to create a proven medical treatment that can help people with neurological diseases. Mark took this idea and started Quincy Bioscience with the premise being to “make a totally obnoxious amount of money at an early age and spend the rest of my life spending it” (Wired). For years, the FDA has tried to make cases and find flaws in the marketing and production of Prevagen, always ending in Quincy Bioscience finding another loophole and avoiding disciplinary action. To begin, Quincy Bioscience took advantage of the differences between regulations for drugs and dietary supplements. Although they are both regulated, they are held to quite different standards. For drug manufacturers, the FDA requires them to undergo numerous testing to ensure that before the drugs are introduced, they are safe and effective. On the other hand, supplements are loosely monitored and have less regulations. In Underwood’s eyes, it was a no brainer to classify Prevagen as a supplement because he wanted to make money fast, “we didn't want to wait another 10 years—the time it could take to conduct clinical trials and request approval as a drug” (Wired). For example, for supplements, the companies are the ones responsibility of ensuring their products are safe and effective. This rule even applies if there is a new supplement introduced to the market, in many cases these companies do not have to notify the FDA and are presumed safe until proven otherwise. The exception to this rule is, if there is a supplement that contains a new dietary ingredient that is not in the current food supply. In this case, they must provide the FDA with evidence that the substance is safe for people to consume at least 75 days before the company introduces the product to consumers. This was an issue for Prevagen at the beginning because their main ingredient, a protein from jellyfish called apoaequorin, has never been a part of the current food supply. Although they needed to submit the documents for this “new dietary supplement” with 75 days’ notice, Underwood signed the forms a day before his company started selling Prevagen. Quincy Bioscience began sales in 2007, in 2011 the FDA began doing inspections to observe the procedures and manufacturing process that Underwood used to create and produce his supplement. During their inspections, the agents found many violations in Quincy Bioscience’s manufacturing process, quality control testing, which is used to safeguard the consumers from unsafe products, and the companies handling of customer complaints. While conducting their check up at Quincy Bioscience headquarters in Madison, Wisconsin, the FDA found records of “more than 1,000 adverse events and product complaints that had been reported to the company since May 2008. Only two adverse events had been relayed to the FDA by Quincy. An inspection report documents significant potential violations, or “observations,” investigators listed 18 cases that Quincy had decided not to classify as serious and did not share with the FDA. They included five reports of seizures, three of strokes or mini-strokes, and four of vertigo, dizziness, or falling that merited medical attention” (Wired). The FDA then realized that Underwood was manufacturing apoaequorin synthetically and not naturally as they stated earlier. They wrote Quincy a letter explaining that after review, the manufacturing of apoaequorin is considered not safe. The Federal Trade Commission (FTC) also question the claim made by Underwood that Prevagen can pass through the gastrointestinal system and cross the blood-brain barrier. If a company claims that a supplement can improve a part of human health through a process, while being taken orally, the company must prove and support that claim with evidence. This evidence was never brough forth, further discrediting the product and leading to more lawsuits. Studies have showed that these claims made by Underwood are false and misleading, “the product cannot work as advertised because its only purported active ingredient, apoaequorin (a protein), is completely destroyed by the digestive system and transformed into common amino acids no different than those derived from other common food products” (Justice). In contradiction, Quincy Bioscience relies on one study done, the Madison Memory Study. In this experiment, Quincy workers took individuals, gave half of them a placebo pill and the other half a Prevagen pill, they then had them do tasks and accessed how well they did, continuing this process for 90 days, recording results after 30, 60, and 90 days. They concluded that the individuals taking Prevagen has increased cognitive function, along with other mental benefits. This study is scrutinized because it did not show statistical improvement when observing the population as a whole, the study was sponsored by Quincy and authored by company employees, which leads to implicit bias. “As “proof” of power, a bar graph shows a rise from 5% to 10% to 20% over 90 days in “recall tasks.” But there is no way to know what these numbers refer to, how many people were studied, or other important details. And no information is provided about effects on memory after 90 days. The fine print under the graph says that the supplement “improved recall tasks in subjects” without explaining what this means” (Harvard). This study was used in all their advertisements and sales calls to mislead people into believing this supplement is effective. A Quincy Bioscience sales team member, Jovan Chavez, said he capitalized on the Madison Memory Study because it allegedly showed improvements in memory within 90 days. Using this information to his advantage, he encouraged customers to buy a three-month supply because purchasing more bottles decreased the shipping cost, while giving you the supply of Prevagen you need. Along with this, he promoted a more expensive extra strength variation, that will help customers faster. Eventually, this direct sales team was discontinued because customers would call and tell the employees about adverse side effects they experienced, that would then need to be documented. Quincy laid off 13 percent of its staff and “a year and a half later, in November 2016, FDA inspectors observed a “noticeable decrease” in the number of adverse event reports Quincy received after they stopped the calls” (Wired) leaving them with over 4,000 reports of health complications expressed by their customers.

With all these issues cited in this case, lawsuits have become a powerful tool to combat and regulate companies like Quincy Bioscience. Prevagen has been specifically targeted in multiple proceedings, mainly surrounding their false advertising claims. While the FTC’s false advertising case against Quincy Bioscience is still ongoing, other settlements are flawed and keep the power in Quincy’s hands rather than the affected customers. This is due to customers not making any substantial compensation in these cases, and the ratio of awards to legal fees being opposite to how they should be. Ultimately, resulting in little to no individuals making a claim against the makers of Prevagen.

Madison Memory Study falsely advertised effects of 

Prevagen that are not scientifically proven.

 

Stakeholders

Quincy Bioscience relies on their relationship with its stakeholders to ensure they stay in business and continue making profit. The company will need to make reparations with its consumers after misleading and manipulating them into buying an unsafe and unregulated product. They would then have to mend the broken trust with other stakeholders, such as federal agencies in charge of regulating the industry. Quincy betrayed their trust by exploiting loopholes internally and not following regulations, even when instructed to. This relationship with these stakeholders will need to be repaired, especially if Quincy Bioscience wants to remain in the industry and get approval for future business actions.

Individualism

From an individualist perspective, the production and sale of Prevagen would be ethical. This is due to Milton Freedman theory that management was responsible for maximizing business profits and any action taken without considering profit is stealing from the owners of the company (Salazar 17), but to always do so within the law. Freedman would look at what Underwood did with Prevagen and see the loopholes that he took to ensure profit and approve of the steps taken. If Underwood classified Prevagen as a drug, it would have taken years of research and experiments just to not be released due to it not being effective. Instead, he knew the loophole around the FDA and classified Prevagen as a dietary supplement, ensuring a quick and profitable route with this new product. This tactic seemed to work because “from 2007 through the middle of 2015, sales of Prevagen totaled about $165 million and the company claims Prevagen is now a “best-selling branded memory supplement in chain drug stores across the United States”’ (Elemental). Taking this route for Prevagen is attractive for an individualist because the safety of the product and compliance needed are very loose in this industry, furthermore, leading to people taking advantage of areas that the FDA falls short in. Quincy profited drastically by how “the marketers of Prevagen preyed on the fears of older consumers experiencing age-related memory loss” (elemental), it is not illegal to instill fear in consumers in order to sell a product, therefore, being ethical in an individualistic analysis. Also, by Quincy ending outbound sales calls, they were able to minimize their customer complaints and sell more Prevagen without having to document cases of adverse effects. This is ethical within individualism because it does not taint the companies records, it has less jobs since the direct sales department closed, and does not violate any laws. Eventually leading to increased profit in multiple areas. Although, with new changes to the FDA, including requirements for supplements to have experimental evidence and not mislead their customers, Quincy Bioscience will need to change their strategy to ensure they stay within the law.

Utilitarianism

On the other hand, a Utilitarian would analyze this case as unethical because of Quincy’s misleading advertising and lack of concern for the health and safety of their customers. The theory of utilitarianism states that “we can determine the ethical significance of any action by looking to the consequences of that act” (DesJardins 29). Using this as a basis of what is ethical, one would see that the actions of Underwood, who stole his mother’s idea to quickly sell a new product, without ensuring its safety and doing the proper experimentation just to make money, are all unethical actions.

For this to be ethical through the lens of a Utilitarian, Underwood would have classified Prevagen as a pharmaceutical drug, gone through the proper testing and regulations to ensure safety and effectiveness of the product. He then would have to not mislead his customers on the effects of the drug and report to the FDA the actual adverse effects that have been reported to the company. If he followed the regulations without exploiting, did not deceive his customers into purchasing a product that was not scientifically supported, and used his customers as an ends and not simply a mere means, then the business would “maximize happiness in the long run for all conscious beings that are affected by the business action” (Salazar 17). One of the fundamental regulations for Utilitarianism is to maximize pleasure and minimize pain with the focus being on the stakeholders. In this case, Underwood has more self-interest than the interest of the stakeholders. As seen from the business actions he took, it was all aimed at making profit and not aimed at creating a proven medical treatment. This directly goes against the ideals of a Utilitarian because they will “avoid short-sighted thinking that often boosts profits momentarily but leads to a quick demise” (Salazar 20), and that is the opposite of what Underwood did. Furthermore, being ethical from a utilitarian point of view is more important that just being just that. Being deemed unethical leads to more financial loss due to lawsuits from customers and agencies that report adverse effects, misleading advertising, and improper manufacturing procedures.

Kantianism

When analyzing this case as a Kantian theorist, the main deciding factor of whether the act was ethical or not depends on the will of the person behind the action. “Kantianism does not make decisions based on consequences” (Salazar 21), which is the major difference between that and utilitarian decision making. This can be applied in this situation because Underwood’s decision for Prevagen to be classified as a supplement rather than a pharmaceutical drug was expressing bad will. His reasoning was to make more money as fast as possible, instead of ensuring the safety and effectiveness of the product before introducing it. Along with that, another main concept to consider is that “Kant tells us that we should act only according to those maxims that could be universally accepted and acted on” (DesJardins 38). With that being said, the question would arise whether a universal law could be made to absolve supplement companies from providing evidence of their products safety and effectiveness and advertise dishonestly. This law cannot be made universal because if everyone was allowed to release a supplement without having to prove its effectiveness and is safe and can market it however they want, then that will cause a major health and safety risk for consumers. It would also not hold those companies legally liable if this kind of laxity were permitted. Furthermore, when creating universal laws one must consider that, “truth telling could, but lying could not, be made a universal law” (Salazar 38) and since Quincy Bioscience was accused of false and misleading advertising, they cannot say their actions are universally accepted.

When Quincy received warnings from the FDA, they would either deny them or make small changes that did not solve the issue at hand. When analyzing this using Kantianism, one would see that the company only made changes when they were demanded to, and their intent was to deter the FDA. Underwood is being unethical and practicing bad will because the reasoning behind making these changes should be for the betterment of his customers, not for his own self-interest.

Virtue Theory

From a Virtue Theorist perspective, a person’s character and how their actions reflect who they are as a person is much more important than the outcome. Virtue theory is based on 4 Cardinal Virtues including, prudence, courage, temperance/self-control, and justice/fairness. Virtue Theorists use these to analyze if people are ethical by seeing if they “act so as to embody a variety of virtuous or good character traits and so as to avoid vicious or bad character traits” (Salazar 22). When looking through this lens, Underwood’s decisions display a poor character that a Virtue Theorist would see as being unethical.

Quincy Bioscience has infringed on numerous virtues that are crucial to being deemed ethical. For example, through misleading and false advertising, Quincy has not expressed the virtues of justice/fairness, which also include honesty. With the FDA citing issues with the company’s manufacturing processes, complaint handling, and the quality control testing, along with the FTC’s complaints on false, deceptive advertising, nothing aligns with the virtues of justice/fairness. The lack of compliance to regulations and feedback from the FDA has led Quincy to lie to agencies and their customers and ultimately be regarded as unethical. When analyzing virtue theory, it is good to use the analogy of a table, the legs are each virtue that someone must have to be ethical. If one of the legs are missing (justice/fairness), and someone does not have that virtue, then the table will collapse, and the person is unethical.

Justified Ethics Evaluation

In my opinion, I believe that Quincy Bioscience’s actions were unethical in every sense. Even the foundation and creation of the company was based on an unethical action, taking the idea from his mother, and changing it from the course she hoped it would have gone. It has then followed that trend of unethical behavior at almost every decision made. Whether it be from classifying Prevagen as a supplement and not a pharmaceutical drug, to not listening to agencies regulations, and false advertising, there are multiple aspects of this company that are unprofessional and express negligence. Underwood’s main goal of profit is ethical through the lens of an Individualist but analyzing it using any of the other ethical theories, one would evaluate that Underwood and Quincy Bioscience is unethical.

Even when customers started to complain about adverse effects and the FDA questioned the safety and processes within the company, Quincy tried to sweep everything under the rug. They would either deny or not report adverse effects that were reported to them and they did not listen to the FDA’s feedback and recommendations for reform. This negligence led to more people experiencing negative side effects that were detrimental to their health, all while not being held accountable for it. Even when they were given opportunities to change for the better, they continued down the unethical road by persisting to misinform, take advantage of, and manipulate the public, along with the FDA. Overall, Quincy Bioscience acted on its own self-interests and used unethical motivations, that drove every decision away from ethical thinking.

Company Action Plan

Quincy Bioscience has numerous issues that need to be resolved to continue making profit and regain the trust of their customers and stakeholders. The company classified Prevagen as a supplement instead of a pharmaceutical drug to make quick profits and bypass important regulations. This would be the first issue that needs to be resolved. The company should reclassify Prevagen as a pharmaceutical drug and put it through rigorous tests to ensure its safety and effectiveness. Although this will take a long time and they might encounter issues along the way, it will prove to their stakeholders that they are serious about reform and will act ethically. Underwood did not want to take this route because he wanted quick profits, but this way of thinking is unethical and short term. This is true because rushing and taking short cuts leads more flaws in the products and eventually a decrease in profits, along with lawsuits in the future. Classifying Prevagen as a drug is more of an investment, it will take longer to get profits but the product is trusted and proven to work, so in the long run the company will make more money through credibility and proven facts.

Another issue that Quincy needs to solve is their relationship with the agencies like the FDA. Through the lifespan of the company, they continuously took advantage of loopholes and did not listen to warnings given by these agencies. Multiple times the FDA has requested to come do inspections, during them, they cited changes that need to be made. In these instances, the agency was met with opposition and a complete lack of self-responsibility, either being ignored by the company or denying the violations that were reported. If Quincy listened to the FDA, they would have a smoother manufacturing process, they would not have to worry about breaking any violations, and consequently make more money by having the support of the FDA. Underwood should apologize to the agency and promise to be compliant with past and future issues.

Quincy Bioscience has also received backlash due to their poor relationship with their customers. Agencies are calling for lawsuits for the misleading and false advertising expressed by the company. They would deceive their customers into ordering more of their product by relying on a noncredible study, taking advantage of peoples fears, and exaggerating the effects it has on the body. The Madison Memory study has been refuted multiple times as not showing any conclusive evidence into the effectiveness of Prevagen. The sales team would market Prevagen to older consumers and prey on their fear of age-related memory loss. Quincy also claimed that Prevagen improves memory by being able to cross the blood-brain. This claim is false because the main protein that is supposed to improve memory, gets broken down into amino acids during digestion, before reaching the brain. With all their claims “Quincy Bioscience failed to show that Prevagen works better than a placebo in any measure of cognitive function” (NBC). To resolve these issues and create a better relationship with customers, Quincy must first apologize and take responsibility for their deception, then they must pay reparations to those negatively impacted by their use of Prevagen. Once those steps are done Quincy should conduct a credible study, their marketers should not take advantages of people fear, and only make claims that are supported by multiple credible findings. This will take time and money, but in the long run, they will have a better relationship with customers and be trusted again.

Aside from issues within the company, one of the biggest issues in this case is the agencies lack of resources to combat companies that exploit regulations. The lack of funding to adequately police this industry is a large part of the problem and creates situations where agencies are not prepared to take regulatory action, instead they must resort to citing voluntary action to a company. This leads to companies taking advantage and not being held accountable to following the rules. With the FDA recently announcing plans to modernize its regulation of supplements, many companies will be forced to obey new rules to ensure the safety and validity of every aspect in the industry.

Quincy Bioscience needs to change their mission statement from being about making money any way possible, to making sure people see their growth and that they strive to be more ethical. My recommendation would be “Quincy Bioscience is a biotechnology company based in Madison, Wisconsin, that devotes new discoveries, developments and commercialization of novel technologies to support cognitive function while emphasizing factual evidence, trust, and transparency”. This mission statement stays true to the original vision while adding key elements that they were deficient in historically.

The core values that are expressed in that mission statement, if implemented, resolve the issues that the company faces, along with confirming their ethical status when analyzing the company using all the ethical theories.

Values:

·         Factual Evidence – Making sure every claim made is factual is crucial for every company. This was a shortcoming with Quincy Bioscience, so if they stress that all their statements are supported by evidence, the issue will be resolved.

·         Trust – Loyalty is vital when it comes to its stakeholders. Underwood lost the trust of these individuals by lying and deceiving. If they can regain this trust, then their customers will be loyal and business partners will be proud to be associated with them.

·         Transparency – Being transparent and honest with a company’s stakeholders is of the utmost importance. This was a major issue with Quincy Bioscience not being transparent with customers and the FDA on facts, figures, and reports. If they emphasize honesty, then they will be more ethical and resolve many issues.

To ensure ethical productivity and monitoring of ethics Quincy Bioscience can become more transparent with agencies and customers. This transparency will hold them accountable for their actions and keep their record clean. They can also implement ethical trainings with advocacy groups that can speak up if they see anything that is unethical. These groups can either be apart of the company or apart of an independent organization that solely monitors the ethical state of the company. They can promote employees that give ideas on how to be more ethical, along with firing individuals that were the leading cause of claims against the company for unethical behavior. Quincy Bioscience needs a completely new marketing strategy that showcases their reforms they have done and how they shed away their wrong, unethical past.

My plan will take time and be expensive, but it is worth the investment if the company wants to continue profiting and be ethical. If Quincy Bioscience does not change, then they will face financial ruin through lawsuits and violations of regulations. Since Underwood tried to take shortcuts in the beginning stages of this company, he is now facing the consequences of these unethical actions. If Quincy Bioscience implements these changes, they will profit from gaining back the trust of their stakeholders, become a reputable company that people can rely on, and ensures good ethics through maintaining their core values.

Conclusion

The supplement industry is very underregulated with a lot of opportunities for companies to take advantage for financial gain. This is exactly what Mark Underwood and Quincy Bioscience did with the memory loss “supplement” Prevagen. They took advantage of loopholes, preyed on the fear of their customers through false and misleading advertising, to sell them a drug that is not proven to be effective or safe. The only way they can comeback from this is to follow the correct regulations that are set in place by the FDA and have their main goal be to create a proven medical treatment. The product needs to be tested in multiple, reputable, studies, factually advertised, and held accountable in every facet of production and reports. Even though there are differences between the ethical theories, there are commonalities amongst them that, when used correctly, can ensure a company is acting ethical. Hopefully, Quincy Bioscience learns from their mistakes and are better able to effectively improve the health of the public in the future.

                                                                                                        Ethan Valdes

 

References

Carroll, Linda. “'Brain-Boosting' Supplements May Contain Unapproved Drugs, Study Says.” NBCNews, NBCUniversal News Group, 24 Sept. 2020, www.nbcnews.com/health/health-news/brain-boosting-supplements-may-contain-unapproved-drugs-study-says-n1240880.

DesJardins, Joseph. An Introduction to Business Ethics. New York City: The McGraw-Hill Companies Inc, 2014.

Eisner, Chiara. “Americans Took Prevagen for Years-as the FDA Questioned Its Safety.” Wired, Conde Nast, 21 Oct. 2020, www.wired.com/story/prevagen-made-millions-fda-questioned-safety/.

Janet, Howard A, et al. “Prevagen under FDA Investigation.” JJS Janet Janet & Suggs, LLC Attorneys at Law, Hotjar, 2020, www.jjsjustice.com/prevagen-fda-investigation/.

(Image) Katz, Mitchell  J, et al. “FTC, New York State Charge the Marketers of Prevagen With Making Deceptive Memory, Cognitive Improvement Claims.” Federal Trade Commission, 9 Jan. 2017, www.ftc.gov/news-events/press-releases/2017/01/ftc-new-york-state-charge-marketers-prevagen-making-deceptive.

Robert H. Shmerling, MD. “FDA Curbs Unfounded Memory Supplement Claims.” Harvard Health Blog, Harvard Health Publishing, 29 Sept. 2020, www.health.harvard.edu/blog/fda-curbs-unfounded-memory-supplement-claims-2019053116772.

Salazar, Heather. The Business Ethics Case Manual. n.d.

(Image) “Prevagen Extra Strength Capsules.” Walgreens, 2020, www.walgreens.com/store/c/prevagen-extra-strength-capsules/ID=300402930-product.

Zaleski, Andrew. “The Predatory Scam of Memory Supplements.” Elemental, Medium, 14 Oct. 2020, elemental.medium.com/the-predatory-scam-of-memory-supplements-c49c8a17d14b.

Grubhub: Fees and Sign Ups

 

Delivery apps have been growing more and more around the world. But many of these apps have been causing many problems for restaurants, leading to them having a harder time being successful. Grubhub is a food delivery company that started in 2004. Obviously not being the only delivery service available, Grubhub has made a good name for themselves and has rose to be one of the top delivery services around. Despite their success, many complaints have come up with Grubhub, mainly from the restaurants they work with.

            Multiple lawsuits have been filed against Grubhub for a couple of different reasons. One reason being Grubhub putting restaurants on their site without ever contacting that restaurant. Many restaurants have claimed this, leading to multiple cases against them. Another issue that has been mentioned multiple times was the amount of money taken from each order. Many restaurants that are partnered with Grubhub feel that they get too much money per order. This also led to multiple lawsuits being filed against them.

            This paper will compare the actions of Grubhub to ethical theories like individualism, utilitarianism, Kantianism, and the virtue theory. Comparing the actions of Grubhub to these theories will prove if the company is acting ethical or not. From an individualist view, Grubhub would be considered an ethical company because they focus on maximizing their profit. But for the other three theories, Grubhub would be considered an unethical company. For utilitarianism, maximizing happiness for both parties is what is most important. Grubhub only focused on the happiness for their company and not the businesses they worked with. For Kantianism, acting rationally and following the rules is very important. Also, respecting people’s needs is important in Kantianism. The restaurants that work with Grubhub have their own needs that need to be considered before working together. Forcing them to join and taking a big percentage of earnings proves that Grubhub doesn’t fully listen to the needs of these establishments.

           

Background

            Grubhub is a food delivery company founded by Matt Maloney and his co-worker, Mike Evans. People from around the U.S can sign up to deliver food for Grubhub. It started when Maloney and Evans were working as developers for a company called Apartments.com. Working in Chicago, Maloney and Evans were getting tired of the lack of dinner options and the hassle of calling and ordering food. They started by going around to different restaurants in Chicago and getting their menus to put onto their site. Restaurants were charged $140 to be on Grubhub for six months. Many of these restaurants already had their own website so they didn’t see a reason to pay to be on the Grubhub site. Restaurants agreed with Grubhub when they offered to take a 10% commission on what they sold. After getting business in Chicago, Maloney and Evans flew out to San Francisco in 2007 to try and start business over there. Once they realized that business was going good in San Francisco, they started expanding all over the U.S. In 2010, Maloney and Evans developed a mobile app to make ordering even easier, which led to more and more business. Maloney and Evans knew about competition that would make expanding in some places a little more difficult. In New York, a company called Seamless was already doing a similar thing. In 2013, Grubhub bought Seamless but kept it running in New York. Keeping it running made it cheaper for them because they wouldn’t have to advertise Grubhub in New York and they didn’t have to advertise Seamless outside of New York. As of 2020, Grubhub is one of the biggest food delivery services in the United States.  

Matt Maloney and Mike Evans

Case

            Two restaurants filed a class-action lawsuit against Grubhub for the fact that they have been listing restaurants without their permission. The Farmer’s Wife in California and Antonia’s Restaurant in North Carolina filed a lawsuit with Gibbs law Group. Both these restaurants claimed that they were added to the Grubhub site without wanting too. These aren’t the only restaurants this has been happening to. 150,000 restaurants have claimed that they have also been listed on to the Grubhub site without agreeing to the partnership. Grubhub incorporated this as a business strategy to get more restaurants to agree to a partnership. This has caused many problems for these restaurants, the people ordering, and the Grubhub drivers. If a restaurant was on the Grubhub site without knowing, they wouldn’t get the order called into them. The grubhub drivers would have to find a way to get the food from the restaurant and deliver it to who ordered. Some cases, the menu used on the Grubhub site was outdated and had wrong items and prices on them, so when the drivers went into the restaurant, they weren’t able to order anything and would have to cancel the order. When asked about the lawsuit, they claimed that they wanted to keep doing this to other restaurants, so they had more dining options than the competitors. Grubhub claimed that if someone were to have an issue with being on their site, they could reach out to Grubhub and they would be taken off the site.

            This is not they only case against Grubhub. Many restaurants that partner with Grubhub filed a class-action lawsuit against them for the percentage of money that they take from orders. Every time an order is ordered and delivered through Grubhub, around 30% of that order goes to Grubhub. For smaller restaurants, 30%could really be an issue if they do not have much in store activity. Another complaint that came with the amount of money they take is how they charge for non-orders. When a restaurant partners with Grubhub, they are given a new phone number for the app. The number is used for communicating with the restaurant and ordering food from that restaurant. Grubhub has an algorithm that they use to determine when a call to a restaurant is an order or not. The problem is, Grubhub, in many cases, has charged for calls that weren’t orders. It was seen at a restaurant in Philadelphia called Tiffin. Minush Marula, the owner of Tiffin, claimed that they were charged up to $9 for non-orders. In the lawsuit, it was argued that charging for calls isn’t fair because majority of phone calls are to ask questions and not order food.

 

Stakeholders

            If Grubhub wants to continue being successful, they are going to have to fix these issues to gain new restaurants and keep the ones that they have. If Grubhub keeps forcing these restaurants into these unfair and unwanted partnerships, then they are going to have a tougher time getting restaurants to willingly partner with them. The company will not grow if they try to force businesses to work with them. Stakeholders also aren’t going to want to work with Grubhub if they don’t change the way they make money from these businesses. Taking too much money can easily loose them business. For some orders, taking 30% would leave restaurants with a small profit margin, causing some restaurants to not produce as much revenue as expected. This can lead to smaller restaurants to not put their business on this site.

            Grubhub also has to make sure that they keep the consumers happy. With the news in the case, some restaurants are put on without knowing. This causes some restaurants to get orders that won’t ever be delivered to the consumer. Many people try to order from certain restaurants without knowing that the food will never actually get to them, causing many customers to be upset with Grubhub. If Grubhub doesn’t change their ways, they are going to lose business to other delivery services.

 

Individualism

            From an individualist point of view, Grubhub is running their business well and trying to maximize their profits. Milton Friedman was an economist that has a theory of individualism claiming that the only goal for a business is to gain profit. Tibor Machan is a philosopher and libertarian a slightly different individualist theory. Machan agrees that a business should always try to maximize their profits. The only difference is that Machan claims that other goals can be had. Not just profit. Grubhub fits under this category for many reasons.

 First, Grubhub was trying to force these restaurants to partner with them. As explained throughout the case, a technique that Grubhub uses to gain new partners is putting menus from different businesses on their site without communicating with that business. Their plan was to put these restaurants on their site without actual confirmation in hopes that eventually, they would agree to a partnership. This technique has been incorporated because Grubhub wants to grow and make money. Another way that Grubhub fits this category is because of the amount of money they charge these restaurants per delivery. The main case against Grubhub is how they take around 30% of the money from each order delivered. Many restaurants claim that this is too much and for some orders, they make almost nothing. This follows the individualist theory because Grubhub is still working towards making a profit. When a business decides to partner with Grubhub, the percentages that they are charged are explained. Although the restaurants make money, and in some cases more business, the 30% can add up. Grubhub also makes money from restaurants when customers call in an order. Grubhub provides a new number for restaurants when they agree to a partnership. This number can be used for when an order needs to be placed or to contact the establishment with any questions. Grubhub incorporated an algorithm to tell when an order is placed, automatically charging the restaurant. The problem is, this algorithm has proven to be flawed, charging non-order calls, and practically stealing money from these businesses.

 

Utilitarianism

            Utilitarianism is maximizing happiness for yourself and others. For a perfect utilitarian view, both parties, Grubhub and their partners, would both be happy with the outcome. The cases prove that what Grubhub is doing would be considered unethical in the utilitarian theory.

            Grubhub has been maximizing happiness for themselves. Grubhub has a lot of business around the country, being one of the biggest delivery services. They can get many restaurants to agree with their terms of the partnership and spread their name around enough to get plenty of customers. The problem comes with how they deal with their partners. Many complaints come in from businesses about the rates they get charged from Grubhub. With all the money this company makes, it comes from other businesses that feel they are taking too much. Because of this, they clearly aren’t maximizing the happiness of these companies. To fit this theory, Grubhub would have to fix their rates to something that more people would agree with. The cases against them prove that something can be done to make more people happy. It is also seen with the cases against them signing restaurants up without permission. Again, this is maximizing the happiness of Grubhub because they are giving themselves more partners to make money. But the problem comes because they aren’t considering the other party. If a business doesn’t want to work with Grubhub, then forcing it onto them will not make them happy. The fact that they don’t communicate with the restaurant before putting them on their site causes the unhappiness. To connect with the utilitarian theory, Grubhub should reach out to these establishments beforehand. This way, both parties can get a say in what they want to maximize happiness on both ends.

 

Kantianism

            Kantianism is a theory that was developed by a man named Immanuel Kant. One of the main rules of Kantianism is to act rationally and not consider yourself exempt from the rules. Another important rule for Kantianism is to respect people and their needs. The last main rule of Kantianism is to do what is right because it is right. Both cases prove how Grubhub would be considered an unethical business under Kantianism.

            With focus mainly being on doing what is right because it is right, the first case proves how Grubhub doesn’t follow the rules of Kantianism. The first case explains how many restaurants were put on the Grubhub site without knowing. For Grubhub, the right thing to do is contact the business and explain what they have to offer. The second case also proves that Grubhub isn’t focused on doing what is right. If Grubhub were to fit into the rules of Kantianism, they wouldn’t charge restaurants so much per delivery and they wouldn’t charge for phone calls to the restaurant. Grubhub is basically stealing money from restaurants in situations like this. Charging 30% per order also doesn’t help this case. Some restaurants, especially smaller ones, have a hard time affording this. Recently, COVID-19 has caused more people to order food due to restaurants not allowing people inside. Taking 30% from small restaurants during the pandemic barely leaves any money for them to stay running. If Grubhub were to focus on the rules of Kantianism, they would realize this is the wrong thing to do but because they continue to stay the same, they are considered unethical.

 

Justified Ethics Evaluation

            In my opinion, Grubhub is an overall unethical business. Both of the cases against Grubhub prove how they really care about personal gain and not the wellbeing of their partners. If Grubhub wants to be deemed ethical, they have to change the way they get new partners. Forcing restaurants into a deal is not ethical. They also need to realize that they can’t charge these restaurants so much money. It gets to the point where they’re basically stealing money from these businesses. Both of these cases can be fixed but also could’ve easily been avoided.

 

Action Plan

            It is easy to see what two complaints occur most when businesses partner with Grubhub based of the cases. As of now, there hasn’t been a solution to either of these issues, meaning that Grubhub has still been adding restaurants to their site and they still charge restaurants too much. Because there hasn’t been a solution incorporated yet, other restaurants might start filing their own cases against Grubhub. If they don’t come up with a plan to make their partners happier, then their success could be in jeopardy.

            On the positive side of things, the solutions can be fairly simple for Grubhub to fix. The first main problem mentioned was how many businesses found themselves on the Grubhub site without ever communicating with Grubhub. Grubhub claimed that putting restaurants on their site without permission was a business technique. Their plan was to have more restaurants available on their site than their competitors. This technique would also help in convincing restaurants to join Grubhub. The easiest way to fix these complaints for Grubhub is to start reaching out to new restaurants. Sending out an email to businesses around the country is an easy way for Grubhub to find new restaurants to put on their site without making anyone upset. Another way Grubhub could gain restaurants is reaching out to them and giving them a trial of their services. After reaching out to these restaurants, Grubhub could set them up in their site for a few months so a restaurant can get an idea of what working with them is like. A simple solution such as this can make business grow. Instead of forcing people into a partnership, they explain what the service is and let the restaurant try it out. After the trial is over, they reach out again and finalize if they want to partner or not.

            The second case also has some fairly simple solutions. Many restaurants argue that Grubhub charges them too much per order in a partnership. Especially with the global pandemic, 30% per order can cause some serious revenue issues for businesses. Also, giving these businesses a different number and charging them for calls causes a lot of issues, especially if they continue getting charged for non-order calls. A simple solution is incorporating different levels of partnerships. For example, bigger restaurants could likely afford the 30% per order rather than smaller businesses that could not. When starting a partnership, Grubhub should offer options of a partnership that restaurants could choose from. Grubhub should offer bonuses to the businesses that decide to choose the 30% per order deal and offer a deal that has a lower percentage per order and no bonuses. Giving the option will allow Grubhub to gain new partners and keep the partners they also have. Also, to help with keeping their existing partners, they should get rid of the new phone numbers. Instead, put the actual phone number of the restaurant on their site and incorporate a new program for them to put orders in themselves. Clearly, the algorithm Grubhub uses now is occasionally faulty, charging restaurants for no reason. If a worker at the restaurant is able to answer the phone and fill out the order themselves, there won’t be any situations a business gets charged for a non-order.

            In order to keep their business successful, Grubhub need to incorporate some core values. These values will focus on keeping partners happy, so they don’t lose business. These core values should be being honest, being supportive, and being fair. When approaching a new restaurant, Grubhub should consider the size of the business. If Grubhub wants to partner with a smaller restaurant, they should be honest and let them know if it a good idea financially. They should also let them know which plan would be best for them. Grubhub should also be supportive of these businesses, especially during the pandemic. Many restaurants have been having a hard time staying in business because of COVID-19. Being supportive could mean being understanding of the struggles a business can face and not forcing money out of their pockets. Being fair comes with gaining new partners. Grubhub should value communicating with new partners before putting them on their site. Sometimes partner with Grubhub wouldn’t be beneficial for a business so forcing them into a partnership isn’t fair and pretty selfish.

            In order to ensure ethical productivity and monitoring of ethics, Grubhub needs to keep up with communication after partnering with a restaurant. Grubhub needs to ensure that their partners are satisfied with working with them. This communication could come in the form of a monthly form. Sending a form for restaurants to fill out monthly can let the people at Grubhub know how people are feeling with working with them and knowing if they need to change anything to keep business going.

References

“Fees.” Grubhub for Restaurants : Learning Center, learn.grubhub.com/archives/basics/what-fees-does-grubhub-charge.

“Grubhub History.” Grubhub, Inc. - About Us - Company Timeline, about.grubhub.com/about-     us/company-timeline/default.aspx

  Salazar, Heather. The Business Ethics Case Manual: The Authoritative Step-by-Step Guide to             Understanding and Improving the Ethics of Any Business. Print.

Saxena, Jaya. “Delivery Apps Aren't Getting Any Better.” Eater, Eater, 29 May 2019, www.eater.com/2019/5/29/18636255/delivery-apps-hurting-restaurants-grubhub-seamless-ubereats.

Saxena, Jaya. “Grubhub Hit With Lawsuit for Listing Restaurants Without Permission.” Eater, Eater, 28 Oct. 2020, www.eater.com/21537215/restaurants-sue-third-party-delivery-service-grubhub-for-listing-businesses-without-permission.

TodayShow. “This Is How Much Restaurants Really Make When You Order from Grubhub or Uber Eats.” TODAY.com, 11 May 2020, www.today.com/food/viral-post-raises-questions-about-how-much-restaurants-earn-delivery-t180675.

Welch, Liz. “How GrubHub Got Its Start.” Inc.com, Inc., 31 Oct. 2014, www.inc.com/magazine/201411/liz-welch/how-i-did-it-matt-maloney-of-grubhub-and-seamless.html.

Airbnb Sues Guest who Hosted a Party that Resulted in Gunfire (August 2020)

Airbnb CEO, Brian Chesky (2016)

Airbnb is one of the fastest-growing companies in the world and for most users, Airbnb is a very safe and useful platform. In August 2020 however, an Airbnb guest violated the company’s policies in addition to California health guidelines by throwing an unauthorized party of over 15 people. Not only did this party increase the risk of COVID transmission, three people were shot and wounded at the party. In a first, Airbnb has decided to sue the guest and has pledged to donate any money from the case to a charitable organization in the Sacramento area that is against gun violence.

            Most ethical theorists would agree with Airbnb’s actions in this case. A classical individualist would agree with the company’s decision to sue the guest, but they would disagree with Airbnb’s future decision to donate any settlement money to a non-profit organization. From a more revised individualist’s view, Airbnb is doing the right thing by donating the money from the guest. It is clear that Airbnb’s actions were ethical in a utilitarian’s view and that happiness was maximized in for most parties to the best of the company’s ability while also taking into account the long-term effects as well. Most Kantian thinkers would view Airbnb’s actions as ethical and that the company had good motivations. In this case, Airbnb expressed good character and made ethical decisions that a virtue theorist would agree with.

            In the wake of this shooting, Airbnb must show that they are committed to bettering the community as opposed to just using the communities to gain profit for the company. Airbnb must strive to implement and embrace the values of Safety, Guest Accountability, and Contribution to Community into their operations in order to move past this incident and to retain trust between Airbnb, its guests and the community.

Case

At about 1:15 a.m. on August 9, 2020, residents reported gunfire as well as people being shot in the neighborhood of Howe Avenue and Delma Way in Sacramento, CA (ABC 10). Police discovered that three victims had been shot and were taken to nearby hospitals, all with non-life-threatening injuries. At the time this is written, police have yet to arrest anyone for the shooting and the reason for the shooting is still unknown. The shooting occurred at an unauthorized party which took place in a rental-house listed on Airbnb. The party consisted of at least 15 people, most of them being in their early 20s, and was being held in violation of the Airbnb listing rules as well as California State COVID regulations. The home was immediately removed from the site listing, pending police investigation, and the party host was banned from the platform. By mid-week, Airbnb had announced that the company would be suing the host for violating their ban on house parties which is the first time Airbnb has sued a guest for throwing an unauthorized party. The company added that any money awarded from the lawsuit would be donated to a non-profit organization that strives to fight gun violence. Airbnb has gone even further to allow hosts in the Sacramento area to vote on which non-profit the money would go to. ABC 10 added that Airbnb bad been preparing for their initial public offering and have been trying to sharpen their company image in preparation of the IPO.

Airbnb Rental where three
people were shot (August 9,200)

In a statement, “The company [Airbnb] notified the guest on Monday of its intent to bring legal
action, alleging negligence and violation of local health orders, violation of Airbnb's Community Standards, and that the Guest booked the listing under false pretenses (KCRA Staff). The information and rules from the listing at which the shooting occurred have not been made public, nor have the guest’s booking details. Airbnb can choose to settle informally, go to arbitration, or go to small claims court (Airbnb 23.2).

            At the time of the shooting, the California Department of Public Health (CDPH) had issued a statewide regulation on gatherings in attempt to slow the transmission of COVID-19. The guidelines stated that all non-essential social gatherings were to be postponed or cancelled, a gathering defined by CDPH as, “Any event or convening that brings together people in a single room or single space at the same time.” This adds strength to Airbnb’s case against the host as they were also in violation of the regulations set forth by the CDPH by throwing the party.

            A month prior to the Sacramento shooting, Airbnb had strengthened their ban on unauthorized parties by disallowing guests under the age of 25 with less than 3 positive reviews from booking homes in their area of residence (AP). The rule had been piloted in Canada, resulting in a significant drop in unauthorized parties. Guests who are unable to book within their area are still allowed to book individual rooms within in their area, as well as homes in different locations. Although this rule was implemented during the COVID Crisis, the rule was implemented as a result of a deadly shooting that occurred at an unauthorized party at an Airbnb rental on Halloween 2019. 

            On Halloween night of 2019, police in Orinda, CA responded to a shooting that occurred on the 100 block of Lucille Way (Orinda Police Department). Upon arrival, it was discovered that there was an unauthorized house party being thrown at an Airbnb rental. Over 100 people attended the party, as it was advertised on social media sites. Three victims died on scene and two others succumbed to their injuries at local hospitals. Others were treated for non-life-threatening gunshot wounds as well as injuries related to fleeing the scene. Two firearms and shell casings were recovered at the scene and five arrests were made, but those individuals were released within a couple days due to lack of evidence. Sheriff David Livingston said that the shooting involved San Francisco’s Paige and Marin City Jungle gang members and that there was an attempted robbery within the rental that might have led to the shooting (ABC7). However, the investigation is still open, and a perpetrator has yet to be held accountable for the killings.  

Memorial for Halloween (2019) Shooting Victims

    As a result of the shooting, Airbnb immediately rolled out new measures to detect and deter
unauthorized house parties (Forbes). One of the biggest changes that is coming soon is to verify all 7 million listings on the site. Unverified hosts have the ability to post false listings with false identities which is a contributing factor in unauthorized parties. Another change that is currently being implemented is a 24/7 neighbor hotline for hosts’ neighbors to call and report things such as unauthorized parties. In addition, high-risk reservations will now undergo human review in order to prevent unauthorized parties, high-risk entailing elements such as large, last-minute bookings in the city of residence of the user who has few ratings. This goes to show that Airbnb has established a reputation of integrity and acting fast to remedy issues.

    On November 16, 2020, Airbnb publicly filed for their IPO and has applied for their stock to be traded on Nasdaq (CNBC). Best estimates place Airbnb’s initial public offering around December 2020. Revenue has been down due to COVID and the company has recognized that its listings and bookings have been down as well. In response, the company established a $250 million COVID relief fund for its hosts, but some have accused it of being a publicity stunt. As the IPO date nears closer, it is important for them to do as much as they can to clean up their company image for the best possible stock market debut. Filing suit against this guest could be seen as a way for Airbnb to exhibit their integrity as a company, improving their company image. But more importantly, the company is ensuring that the person who endangered the lives of other guests is being held accountable for their actions and that any settlement money goes towards gun violence prevention.

    Although the case is still pending and there is no clear dollar amount that the company is demanding, it is very likely that Airbnb will win the lawsuit against the guest for violating Airbnb’s rules on parties. Airbnb is in good position to win the case considering that the guest violated the company policy on unauthorized house parties as well as the CDPH state mandate against gatherings. Airbnb’s policies are clearly listed on their website as well as on the individual listings within the platform. Also, the fact that the party resulted in partygoers getting shot will be held against the guest. Even if Airbnb does not win the case, it was still stated by the company that they intended to donate the proceeds to non-profit organizations which displays the company’s desire to benefit charitable causes, regardless of the outcome.

Stakeholders

The stakeholders in this specific case would include the Party Host (Airbnb Guest), Party Guests/Injured, Future Shareholders, Future Airbnb Guests, and the General Public. Airbnb’s reputation and future success are affected by the actions they take in relation to the case. Airbnb’s actions also determine the correct level and amount of punishment for the guest who violating the Airbnb community standards. The guests and those injured as a result of the gunfire can have a better or worse outcome from the situation, depending on the actions that Airbnb take. Future shareholders are affected because the way the company handles the situation can alter the future value of the company’s stock once they go public. Future Airbnb guests are affected because the rules that Airbnb have implemented will alter the experience of those future guests. The general public is affected because Airbnb’s are spread all across the world, in countless communities which means that the actions of Airbnb guests and events at those rentals can have effects on the public. Further analysis of the stakeholders is later discussed in the utilitarianism portion.

Individualism

An individualist could view this case from either a classical or more revised individualistic view. In classical individualism, Milton Freidman believes that management’s actions should maximize profits for the owners of a business while doing so within the law (Salazar 17). Also, businesses should not try to be socially responsible by doing things like donating money because doing so is equivalent to stealing from money from the owners of the company. Tibor Machan believes that classical individualism should be revised in order for businesses to acknowledge the fact that other goals besides profiting, such as donating to charitable causes, can actually help boost profits (Salazar 18).

In Airbnb’s case, a classical individualist would agree with the company’s decision to sue the guest, but they would disagree with Airbnb’s future decision to donate any settlement money to a non-profit organization. This is because a classical individualist would rather the company retain the settlement money for themselves. By donating to charity, Airbnb is stealing money from the owners. From a more revised individualist’s view, Airbnb is doing the right thing by donating the money. This is because Airbnb realizes the fact that by donating the proceeds to a charitable cause, they are promoting a positive company image that will likely translate into a more profitable IPO. In the long run, donating the settlement money would likely yield a higher net profit as opposed to just pocketing the money upfront.

Utilitarianism

A utilitarian would view Airbnb’s way of handling the situation as the most ethical beneficial. Under utilitarianism, business actions should seek to maximize the happiness in themselves and others in the short-term as well as the long-term (Salazar 17). Salazar (19) also states that, “Long-range perspective can help businesses avoid short-sighted thinking that often boosts profits momentarily but leads to a quick demise”.

In Airbnb’s case, happiness was maximized for most of the stakeholders which is as follows:

Party Host (Airbnb Guest): The party host will ultimately be negatively impacted as a result of this case. Currently, the host has been permanently banned from the platform and could possibly be denied from using other similar sites in the future. Also, the host could be facing criminal charges from the pending investigation as well as fines from the city for violating CDPH guidelines. Furthermore, the host will likely be facing some sort of settlement fee as the odds are stacked in Airbnb’s favor.

Party Guests/Injured: The guests, including the ones injured, will benefit overall from Airbnb’s actions. By filing suit against the party host, Airbnb is ensuring that the person who caused trauma and injury to the guests is held accountable and punished for their actions.

Future Shareholders: Taking into consideration the upcoming IPO, the future shareholders will also benefit from this case. By quickly responding to the shooting and holding the party host accountable for their actions, Airbnb is making themselves a more attractive company for future investors. This will likely increase the money earned from the IPO which is beneficial to the shareholders. Also, the actions in this case are consistent with their actions in similar cases from the past. This consistent integrity gives the shareholders more confidence in the company’s ability to make good decisions that will raise the value of the company and its stock price.

Future Airbnb Guests: In terms of future Airbnb guests, they are both positively and negatively impacted from Airbnb’s actions. On the positive side, by implementing a 24/7 neighbor hotline, neighbors can report unauthorized parties, preventing parties from getting out of hand and resulting in guests getting injured. Also, by verifying all future hosts, guests will feel reassured and safer knowing that the listings and hosts are legitimate. On the flip side, Airbnb guests must now realize that Airbnb takes rule enforcement seriously and that Airbnb is not afraid to ban and sue their users.

General Public: Overall, the public is positively impacted by Airbnb’s actions. By donating future settlement money to non-profit organizations, Airbnb is contributing to causes that help improve the community and its members. By taking steps to reduce unauthorized parties, Airbnb is protecting the neighboring homes and residents by limiting the chance of violent acts occurring in their neighborhood. Also, by limiting the occurrence of unauthorized parties, the community is at less of a risk of increased COVID transmission from irresponsible parties.

            It is clear that Airbnb’s actions were ethical in a utilitarian’s view and that happiness was maximized for the most people. The company had been in similar situations in the past and as they did before, Airbnb acted quickly and ethically in this case which not only addressed the current issue, but their actions also take into consideration the long-term effects.

Kantianism

Kantians would analyze this case by checking to see if Airbnb acted in ways that violated the formula of humanity which states that it is wrong to use people as a mere means to get what you want because it devalues their rationality and freedom and treats them as lesser than a human being (Salazar 21). Also, in order for a company’s actions to have a positive moral gain, they must have the right motivation. A company must act with good intentions in order to get moral credit for their actions. In this case, most Kantian thinkers would agree with Airbnb’s actions and that the company had good motivations.

Anyone who has used Airbnb knows that the rules of the rental are clearly listed and Airbnb’s policies on matters are easy to find on their website. So, the party host clearly knew what the rules were and that they ran the risk of punishment. As it pertains to COVID guidelines, Airbnb’s current position was that all hosts must require their guests to abide by the appropriate health guidelines (Airbnb). Although it is a first, Airbnb was completely within their rights to ban the guest from the platform and to sue the guest for violating Airbnb’s policies. By formally suing the guest rather than just banning them or coming up with violation fees, Airbnb is treating the guest with respect and dignity by giving the guest a chance to plead their case and have possible settlement amounts accurately determined.

Some could argue that because of the looming IPO, Airbnb was just using the party guest as a mere means to attain a better public image, resulting in a more successful IPO. However, I do believe that Airbnb’s motivations were truly good in this case. Their decision to sue the guest will deter future guests from endangering the lives of others and donating any money from the case will help others are all reflective of the company’s desire to do the right thing, not just what’s best for the company. Looking back at the 2019 Halloween shooting, five people were shot and killed at an Airbnb rental and the killers are still on the loose, leaving the victims’ families searching for answers to this day and in this 2020 shooting, the perpetrator is still at large as well. From a purely humanistic standpoint, Airbnb and its workers cannot feel good knowing that unauthorized parties at their rentals are resulting in unsolved shootings of their guests. Airbnb donating any money from the case to non-profits against gun violence is the right thing to do and they are deserving of moral gain because they are motivated to help prevent more innocent people from being injured.

 

Virtue Theory

Virtue theorists expect companies to act in ways that embrace virtuous or good character traits and to avoid bad character traits (Salazar 22). While there are many traits, some specific virtues that are considered to be positive include prudence, courage, temperance, and justice. In this case, Airbnb expressed good character and made ethical decisions that a virtue theorist would agree with.

Prudence includes caring for ones future self and making the right decisions at the right time. In this case, Airbnb decided to sue a guest for throwing an unauthorized party in order to address the current situation while also deterring future guests from throwing similar parties by dishing out a severe punishment. Airbnb could be greedy and sue for a lot of money and keep it all for themselves as profit. Instead, they figured that they would benefit in the long run from being a charitable company and donating the money as opposed to just pocketing this settlement money. It is tough to tell how much Airbnb will sue the guest for, but I would expect the company to express temperance by not suing for too large of an amount.

A company’s courage is their ability to stay on course when the going gets tough, their implementation of decisions, and their boldness. Airbnb expressed all of these factors considering that a large party occurred at one of their rentals during a pandemic and it also resulted in three people getting shot. This is without a doubt one of the worst scenarios that a company could face but Airbnb addressed the situation head-on and quickly announced new changes to be implemented to deter similar incidents from occurring in the future. Airbnb also acted bold by banning the party host from the platform and suing them to show that the company is not afraid to punish those who violate their policies and put the lives of others at risk. All of these actions go to show that Airbnb embraces the trait of justice which entails practicing empathy, truthfulness, sincerity, and friendship.

Ethics Evaluation

In my opinion, Airbnb acted very ethically and appropriately and were also right in suing the guest whose party resulted in people getting shot. As previously mentioned, Airbnb has a track record of taking actions and implementing changes after incidents occur and this case further solidifies this track record. Additionally, the company has pledged to donate any settlement money to charity which exhibits the fact that company has the well-being of the community in their mind. The company could just keep the settlement money and promise to invest it in better deterrence measures, but by donating directly to non-profits, everyone will know that the money actual went towards something related to the incident.

            I believe that the guest was completely in the wrong by throwing an authorized party in direct violation of the Airbnb guidelines. It was very irresponsible of them to be hosting a party which ran the risk of increasing the spread of COVID amongst the party goers and the people they encounter away from the party. I believe that they deserve to be sued and removed from the platform as they should be punished for their actions. This case should act as a deterrence to anyone who might think about hosting similar parties.

            Since the case is still on-going, I can only hope that the party host is rightfully punished and that the proceeds go to an organization that will better the community. If so, Airbnb would look very good going into their initial public offering and they would be a very attractive company to invest in. Airbnb rentals can be in anyone’s neighborhood, so it is in our best interest that Airbnb be a company of integrity that cares about the communities they operate in and not just profit.      

Action Plan

Considering that there have been shootings at Airbnb rentals in the past, it is especially important for Airbnb to act accordingly and act to resolve the current issue in the best way possible. So far, Airbnb has handled the situation very well and the company is doing its best to mitigate the damage from the event. By banning and suing the party host, Airbnb is showing that they strictly enforce their policies and will punish those who violate those policies. Also, by implementing new rules and measures, they are decreasing the risk of similar situations from occurring in the future. All of these actions combined gives future customers, hosts and the community reassurance that Airbnb takes seriously the well-being of everyone, including the general public. If they have not done so, I would like to recommend that Airbnb privately settle with the injured and traumatized guests that way Airbnb directly benefits those people as well.

Currently, “Airbnb's mission is to help create a world where you can belong anywhere and where
people can live in a place, instead of just traveling to it (Fortune).” My recommendation for a new statement is, “Airbnb’s mission to is to ensure the safety and protection of everyone and to create a world where feel like you can belong anywhere. Instead of just traveling to it, renters should feel that they are part of the community.” This encourages Airbnb’s actions to have more focus on the community and the safety of the community and shows the public that Airbnb intends for their rentals to mesh well with the community and not be a burden.  

In order for the company to move past this party shooting incident and to follow through with its new mission statement, Airbnb will benefit from focusing on implementing these three values within their operations:

Safety- The safety of both guests and the community should be a top priority of Airbnb. There have been multiple shootings arising from unauthorized parties at Airbnb rentals, so it is crucial that Airbnb continues to take measures to decrease the likelihood of similar incidents from occurring. Also, it is even more important to deter parties from occurring due to the spread of COVID amongst guests and within the public.

Guest Accountability- By holding guests accountable for their actions, it will deter future guests from acting in similar ways. Policy violations that can jeopardize the well-being of others should be punished heavily, such as the throwing of a large unauthorized party. By taking action such as banning and suing users, future users will be much less likely to violate Airbnb policies.

Contribution to Community- Considering that Airbnb rentals can arise in essentially any neighborhood, it is important for the public to be aware that Airbnb is mindful of the space they operate in and that they give back to the community. Airbnb could do something along the lines of publicly donating money or public recreation areas to communities that have high densities of Airbnb rentals. Acting in ways such as that will show the public that Airbnb is not looking to take over or disregard the communities they operate in, Instead, Airbnb is interested in recognizing the community and seeks to intertwine with the community as best they can.

To ensure that Airbnb can follow their new mission statement and to successfully implement their new measures against unauthorized parties, a few mew internal measures must be taken. First, Airbnb must hire a new fleet of employees that will verify each rental listing. By verifying each listing, Airbnb will assure that each user is being truthful in their postings on the site, thus increasing safety of its guests and decreasing the likelihood of false or misleading listings. Another internal measure to be taken is that when users are being reviewed for suspension or banning after violating Airbnb policies, the employees responsible for determining punishments must be more inclined to ban users that throw unauthorized parties, especially during the current pandemic. Doing so is consistent with previous actions and it shows that the company has a zero-tolerance policy against party policy violation. Also, Airbnb must set up and adjust accordingly call centers that will take calls 24/7 from neighbors of Airbnb rentals. By having a 24/7 hotline, the company will have a better chance at stopping unauthorized parties from occurring and taking turns for the worse. Taking these measures will help lower the risk of similar cases from occurring in the future.

From an internal standpoint, Airbnb currently has no issues with hiring, firing, and promoting and the current Airbnb employees have made great actions and have acted ethically. So, no adjustments to those procedures need to be altered. But as a result of this party shooting, there should be adjustments made to which users are verified and suspended. Previously, anyone could post a rental on the Airbnb website, but as a result of the occurrence of unauthorized parties, all listings will now be verified meaning that it will be much harder for fake listings to be posted. Also, Airbnb should be more inclined to ban users that throw unauthorized parties as opposed to just suspending the users for a period of time. There have been multiple cases in which shootings have occurred from unauthorized parties, so it should not be taken lightly when users violate Airbnb’s policy on parties as peoples’ lives could be at stake. All of these changes if implemented correctly would allow the company to flourish and have the best IPO possible.

As far as remarketing goes, Airbnb is not in a position in which it needs to undergo any kind of remarketing. The company addressed the issue head-on and sternly and the issue was more so the result of an outside factor. Also, Airbnb has previously taken its stance on unauthorized parties, including those that have resulted in gunfire, meaning that people already know where Airbnb stands on the general issue. Rather than remarketing, it is more important for Airbnb to remain firm in their suit against the party host and follow through with donating any proceeds from the settlement. It is also important for Airbnb to be public about the status of the case, meaning that they should announce the outcome and to which charities they are donating to. Depending on the amount received from the settlement, I would say that Airbnb could also pledge to match the amount for more good publicity.

My plan will allow Airbnb to put themselves into the best position for their IPO, act in accordance with their new mission statement and values, all while doing so in the most ethical ways possible. The headlines of a shooting occurring from a large party at an Airbnb rental during a pandemic is not good publicity, especially ahead of an IPO. So, it is very important for Airbnb to make actions that reflect on the values of safety and supporting the community, in response to the party shooting. Acting accordingly will show investors and the public that Airbnb Is genuinely interested in acting in support of communities and that they are a company of high ethical standards. Their new 24/7 hotline will add an increased layer of protection for all guests, hosts, and those in the surrounding communities by allowing neighbors to report any suspect activity at neighboring Airbnb rentals, such as parties that are getting out of hand. This hotline shows that Airbnb is dedicated to the safety of everyone and it provides the company another way of ensuring that guests are adhering to the company policies. By verifying all listings, Airbnb will be able to ensure a higher customer satisfaction rate while also weeding out high-risk or irresponsible hosts. Also, Airbnb will be making sure that hosts are not lying to their guests about the rental which will lead to higher satisfaction for all stakeholders and higher profits. As long as Airbnb adheres to the plan and continually implements what they have planned, they will continue to establish their reputation as that of a company that is good for our communities with higher ethical standards, all while remaining profitable.

Conclusion

               Despite Airbnb being faced with a case involving multiple guests of theirs being shot at  house rental, Airbnb really stepped up to the plate and acted very appropriately and ethically in ensuring that the party host is held accountable for their actions while also minimizing the negative publicity as much as possible ahead of their upcoming IPO. Most ethical theorists would agree with Airbnb’s actions in this case. So, it is now up to Airbnb to follow through with their plans to deter similar cases from occurring in the future while also following the advice given in the action plan above. Airbnb is unique in that their business has the ability to affect each and every one of us without us having any input or say. There is no controlling whether your neighbors post their house on Airbnb. So, it is in everyone’s best interest for Airbnb to be a company that is focused on protecting the community as best they can through appropriate measures and continue to operate with high ethical standards.

B. Thompson

References

Airbnb. (August 2020). Party and Events Policy. Policies. https://www.airbnb.com/help/article/2704/party-and-events-policy

Angell, S. (March 16, 2020). CDPH Guidance for the Prevention of COVID-19 Transmission for Gatherings. California Department of Public Health. https://www.cdph.ca.gov/Programs/CID/DCDC/Pages/COVID-19/CDPH-Guidance-for-the-Prevention-of-COVID-19-Transmission-for-Gatherings.aspx

Brinkley, L. (November 15, 2019). Rival Gangs Involved in ‘Bloodbath’ at Airbnb in Orinda: Sheriff. ABC7-KGO. https://abc7news.com/rival-gangs-involved-in-bloodbath-at-airbnb-in-orinda-sheriff/5700430/

Carson, B. (November 6, 2019). Airbnb Is Fixing Its Safety Problems After California Shooting Leaves 5 Dead. Forbes. https://www.forbes.com/sites/bizcarson/2019/11/06/airbnb-to-verify-all-listings-after-orinda-shooting/?sh=438e0a2be49a

Durbin, D. (July 2, 2020). To Stop Parties, Airbnb won’t let some Guests Book Homes. Associated Press.  https://apnews.com/article/17b47cd40f89931cf1a5cf60cea8783f

Gallagher, L. (December 22, 2016). How Airbnb Found a Mission – and a Brand. Fortune. https://fortune.com/longform/airbnb-travel-mission-brand/

KCRA Staff. (August 13, 2020). Airbnb Pursues Legal Action Against Party Guest After Sacramento County Shooting. NBC3-KCRA. https://www.kcra.com/article/airbnb-pursues-legal-action-against-party-guest-sacramento-county-shooting/33597254

Nuttle, M. (August 12, 2020).  Airbnb Files Suit Against Guest who Held Party that Ended with a Shooting in Sacramento. ABC10-KXTV. https://www.abc10.com/article/news/crime/airbnb-files-suit-sacramento-house-party/103-4314ab3b-9b2a-4280-b3ec-61608441e179

Orinda Police Department. (November 1, 2019). Press Release Update – Orinda Shooting Investigation. Contra Costa Sheriff-Official Page (Facebook).  (https://www.facebook.com/224837426560/posts/press-release-update-orinda-shooting-investigationthe-orinda-police-department-a/10156428769671561/

Rodriguez, S. (November 16, 2020). Airbnb files to go public, turned a profit last quarter. CNBC. https://www.cnbc.com/2020/11/16/airbnb-s-1-ipo-filing-drops.html

Salazar, H. The Business Ethics Case Manual. n.d.