They Don't Make'em Like They Used To, eh?

I don't mind paying almost $30 for a 2 piece bathtub diverter valve assembly. Really, I don't. I know it's just some plastic and rubber, but the dimensions have to be reasonably precise, so I'll give the manufacturer the benefit of the doubt. I do very much mind pulling one out less than 3 years after initial installation and finding what you see in the pictures below.
Here, the stem had failed (the pointy part on the tip is supposed to be a flat), preventing rotation of the valve using the knob. That means it was very tough to switch the water from the spigot to the shower:
But over a year ago, water began to leak between the spigot and the shower head. I wonder why could that be? This picture tells the tale:

Notice the two holes on the rubber gasket on the bottom. Thirty dollars really ought to buy some pretty high quality rubber and plastic.