Transcript Chapter 15 Notes

Chapter 15
Consumer Protection
After finishing this section, you will
know how to:
Explain the main differences between
state and federal consumer protection
law
Describe two unfair and deceptive
practices
Recognize bait and switch advertising
Identify four Federal Trade Commission
rules that protect consumers
caveat emptor- “let the buyer
beware.”- standard in consumer
purchases in the early part of the
century
caveat venditor- “let the seller
beware.”- society demanded that
consumers be given more rights and
held that manufacturers be held
responsible
consumer- any person who
purchases or leases goods, services,
or property primarily for personal,
family, or household use
consumer protection laws- laws
designed to protect consumer against
unfair and deceptive acts or practices
by businesses
unfair and deceptive trade practicepractices that mislead or have the
potential to mislead consumers
deceptive pricing- raise prices for a
while then lower them and claim this
as a sale
Example 1
It is also deceptive for a store to claim
that the prices are wholesale or
factory prices if it is not true.
Advertising a two-for-one sale is also
a deceptive pricing practice.
Example 2
deceptive service estimates- it is
unfair and deceptive to understate
significantly the cost of repair
services.
Example 3
In all states, businesses are required to
provide a written estimate of the cost of
anticipated repairs.
cooling off rule- gives customers 3 days to
cancel contracts made with door-to-door
salespeople
Only applies to purchases of $25 or more
or made away from the seller’s place of
business
Also includes parties
FTC- The salesperson must inform
you of your cancellation rights at the
time of the sale; and give you two
copies of a cancellation form
Sign one copy and mail or hand
deliver it to the seller by midnight of
the third day after the sale.
You don’t have to give a reason for
canceling.
Under the FTC rule, the seller must
do the following within 10 days:
Cancel and return any papers you
signed
Refund your money
Tell you whether any product left with
you will be picked up.
Return any trade-in.
Cooling-off rule does not apply to:
Sales made totally by mail or phone
Real estate
Insurance
Securities
Home repairs
Fraudulent Misrepresentation- any
statement that has the effect of
deceiving the buyer
Example 4
Telemarketing Fraud:
calls on behalf of a charity
benefit shows
free or low cost vacations
Work at Home Ads- spend your own
money to place ads, make copies, or
buy envelopes and stamps for
customer mailings
“Would you like to earn hundreds of
dollars a week at home in your leisure
time? Many people are
supplementing their income in a very
easy way. Let us tell you how…”
False Advertising
FTC- regulates false advertising on
the national level
cease and desist order- legally
binding orders to stop a practice, to
anyone using advertising that would
mislead the public
anyone receiving this order has the
right to appeal to a federal court
Example 5
Bait and Switch- advertising a
nonexistent bargain to lure customers
so they can be sold more expensive
merchandise
Beware of the following types of bait and switch:
Refusal to show, demonstrate, or sell the
advertised product.
Attempts to discourage customers by criticizing
the advertised product.
Claims that advertised products are out of stock.
Refusal to promise delivery of advertised products
within a reasonable time period.
Demonstrations of products that are inferior to the
advertised item.
Example 6
Shopping By Mail
Seller must ship goods as promised.
No time mentioned—30 days
Buyers have the right to cancel an order
if the time is not met.
Sellers must notify buyers of any delay.
Unordered items can be treated as gifts!
Free samples
merchandise mailed by charities
Assignment
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Product Liability 15.2
After finishing this section, you will
know how to:
Differentiate between product liability
and strict liability
Describe the purpose of the Consumer
Product Safety Act
Identify the prohibitions contained in the
Food, Drug, and Cosmetic Act
Determine where to get consumer
protection assistance
Product Liability- manufacturers and
sellers are responsible for injuries to
consumers when they place
defective, unhealthy, or unsafe items
on the market.
Manufacturers and sellers are
responsible when:
the manufacturer or seller has not
been negligent in the care,
preparation, and sale of the product
the user of the product is not the one
who bought the item or entered into
the contract with the manufacturer
Example 7
Consumer Product Safety Act1972
Test the quality and reliability
(fitness) of the product before
shipping it from the plant and
placing it on the market.
Obtain proof that the product has
been tested and is safe.
Have the capability to recall the
product if the need should arise.
Take action on any valid complaints
made by users of the product.
The fine for violating federal act:
$500,000-civil
$50,000-criminal
1 year prison term
Food, Drug, and Cosmetic Act1938- prohibits the manufacture and
shipment in interstate commerce of
any food, drug, cosmetic, or device
for health purposes that is injurious,
adulterated, or misbranded.
injurious- a food or drug that contains any
substance that may make it harmful
adulterated- food or drug that contains any
substance mixed or packed with it to
reduce its quality of strength below the
prescribed minimum standards
misbranded- if the labeling or packaging is
false or misleading in any way
Delaney Amendment-1958- gives
the federal government the right to
remove from the market any food or
food additive shown or believed to
cause cancer in humans or animals
The government uses other “tools” in order to
discourage the sale of goods considered harmful
to the public health:
high taxes- excise taxes on liquor and tobacco
labeling and packaging- regulations on warning
labels
outright prohibition- cigarette advertising on TV
has been banned since 1971.
If products are manufactured and sold only within
one state, that state must have laws to regulate
Consumer Protection Assistance
Federal Office of Consumer Affairs1971- made laws covering liability
more accessible and easier to
understand
Assignment
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