Transcript Case 19.1 FTC v. Tashman (2003).

Chapter 19
Consumer Protection
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
Deceptive Advertising
• One of the earliest—and still one of the
most important—federal consumer
protection laws was the Federal Trade
Commission Act of 1914.
• The act created the Federal Trade
Commission (FTC) to carry out the broadly
stated goal of preventing unfair and
deceptive trade practices, including
deceptive advertising.
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
2
Deceptive Advertising
Defined
Generally, an advertising claim will be
deemed deceptive if it would mislead a
reasonable consumer.
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
3
Bait-and-Switch
Advertising
Advertising a lower-priced product (the
“bait”) when the intention is not to sell the
advertised product but to lure consumers
into the store and convince them to buy a
higher-priced product (the “switch”) is
prohibited by the FTC.
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
4
FTC Actions Against
Deceptive Advertising
• Cease-and-desist orders
– Require the advertiser to stop the challenged
advertising.
• Counter advertising
– Require the advertiser to advertise to correct the
earlier misinformation.
• Case 19.1 FTC v. Tashman (2003).
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
5
Telemarketing and
Electronic Advertising
• The Telephone Consumer Protection Act of
1991 prohibits telephone solicitation using
an automatic telephone dialing system or a
prerecorded voice, as well as the
transmission of advertising materials via
fax without first obtaining the recipient’s
permission to do so.
• Case 19.2 FTC v. Growth Plus
International Marketing, Inc. (2001).
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
6
Labeling and
Packaging
• Manufacturers must comply with labeling
or packaging requirements for their specific
products.
• In general, all labels must be accurate and
not misleading.
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
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Sales
Many of the laws that protect consumers
concern the disclosure of certain terms in
sales transactions and provide rules
governing the various forms of sales, such
as:
– Door-to-door sales.
– Telephone and mail-order sales.
– Online sales.
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
8
Health and Safety
Protection
• Laws discussed earlier regarding the
labeling and packaging of products go a
long way toward promoting consumer
health and safety.
• Laws include:
– Federal Food, Drug and Cosmetic Act. 
– Consumer Product Safety Act. 
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
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Federal Food, Drug
and Cosmetic Act
• The FFDCA of 1938, as amended, protects
consumers against adulterated and
misbranded foods and drugs.
• The act establishes food standards, specifies
safe levels of potentially hazardous food
additives, and sets classifications of food
and food advertising.
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
10
Consumer Product
Safety Act
• The Consumer Product Safety Act of 1972 seeks
to protect consumers from risk of injury from
hazardous products.
• The Consumer Product Safety Commission has
the power to remove products that are deemed
imminently hazardous from the market and to ban
the manufacture and sale of hazardous products.
• Case 19.3 U.S. v. Mirama Enterprises, Inc.
(2002).
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
11
Credit Protection
Because of the extensive use of credit by
American consumers, credit protection has
become an especially important area
regulated by consumer protection legislation.
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
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Truth-in-Lending
A disclosure law that requires sellers and
lenders to disclose credit terms or loan terms
in certain transactions, including:
–
–
–
–
retail and installment sales and loans.
car loans.
home improvement loans.
certain real estate loans.
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
13
Truth-in-Lending
The TILA provides for the following:
– Equal credit opportunity—Creditors are prohibited from
discriminating on the basis of race, religion, marital status,
gender, and so on.
– Credit-card protection—Credit-card users may withhold
payment for a faulty product sold, or for an error in billing,
until the dispute is resolved; liability of cardholders for
unauthorized charges is limited to $50, providing notice
requirements are met; consumers are not liable for
unauthorized charges made on unsolicited credit cards.
– Consumer leases—The CLA of 1988 protects consumers
who lease automobiles and other goods priced at $25,000 or
less if the lease term exceeds four months.
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
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Fair Credit Reporting
Entitles consumers to request verification
of the accuracy of a credit report and to
have unverified information removed
from their files.
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
15
Fair Debt Collection
Practices Act
• Prohibits debt collectors from using unfair
debt-collection practices, such as contacting
the debtor at his or her place of employment
if the employer objects or at unreasonable
times, contacting third parties about the
debt, harassing the debtor, and so on.
• Case 19.4 Snow v. Jesse L. Riddle, P.C.
(1998).
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
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State Consumer
Protection Laws
• State laws often provide for greater consumer
protection against deceptive trade practices than do
federal laws.
• In addition, the warranty and unconscionability
provisions of the Uniform Commercial Code protect
consumers against sellers’ deceptive practices.
• The Uniform Consumer Credit Code, which has not
been widely adopted by the states, also provides credit
protection for consumers.
Miller • Cross 4th Ed.
© 2005 by West Legal Studies in Business / A Division of Thomson Learning
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