Transcript Chapter 045- Consumer Protection

PowerPoint Slides to Accompany
BUSINESS LAW
E-Commerce and Digital Law
International Law and Ethics
5th Edition
by Henry R. Cheeseman
Chapter 45
Consumer Protection
Slides developed by
Les Wiletzky
Wiletzky and Associates, Puyallup, WA
Copyright © 2004 by Prentice-Hall. All rights reserved.
Caveat Emptor
“Let the buyer beware” – the
traditional guideline of sales
transactions.
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Consumer Protection Laws
 Federal
and state statutes and regulations
that promote product safety and prohibit
abusive, unfair, and deceptive practices.
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Landmark Law: Federal Food, Drug, and
Cosmetic Act (FDCA) of 1938 (as amended)
Provides the basis for the regulation of much
of the testing, manufacture, distribution, and
sale of foods, drugs, cosmetics, and medicinal
products and devices in the United States.
 Administered by the Food and Drug
Administration (FDA).
 The FDA is empowered to regulate food, food
additives, drugs, cosmetics, and medicinal
devices.

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Regulation of Food
The FDCA prohibits the shipment, distribution,
or sale of adulterated food.
 The FDCA prohibits false and misleading
labeling of food products.
 It mandates affirmative disclosure of
information on food labels.
 A manufacturer may be held liable for
deceptive labeling or packaging.

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Regulation of Drugs
The FDCA gives the FDA the authority to
regulate the testing, manufacture, distribution,
and sale of drugs.
 The Drug Amendment to the FDCA gives the
FDA broad powers to license new drugs in the
United States.
 The manufacture, distribution, or sale of
adulterated or misbranded drugs is prohibited.

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Regulation of Drugs (continued)

The law requires all users of prescription and
nonprescription drugs to receive:
Proper directions for use
 Including method and duration of use
 Adequate warnings about any related side
effects

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Regulation of Cosmetics

The FDA has issued regulations that require
cosmetics:
To be labeled
 To disclose ingredients
 To contain warnings if they are carcinogenic
or otherwise dangerous to a person’s health

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Regulation of Cosmetics (continued)
The manufacture, distribution, or sale of
adulterated or misbranded cosmetics is
prohibited.
 The FDA may remove from commerce
cosmetics that contain unsubstantiated
claims.

e.g., preserving youth
 e.g., growing hair

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Regulation of Medicinal Devices
The Medicinal Device Amendment to the
FDCA gives the FDA authority to regulate
medicinal devices and equipment.
 The mislabeling of medicinal devices is
prohibited.
 The FDA is empowered to remove “quack”
devices from the market.

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Other Acts Administered by the FDA (1 of 2)
Pesticide Amendment of 1954
Authorizes the FDA to establish tolerances for
pesticides used on agricultural products.
Food Additives Amendment of 1958
Requires FDA approval of new food ingredients or articles that come in contact with food
(e.g., wrapping and packaging materials)
Color Additives Amendment of 1960 Requires FDA approval of color additives used
in food, drugs, and cosmetics.
Animal Drug Amendment of 1968
Requires FDA approval of any new animal
drug or additive to animal food.
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Other Acts Administered by the FDA (2 of 2)
Biologies Act of 1902
Gives the FDA power to regulate biological
products. This includes: vaccines, blood, blood
components and derivatives, and allergenic
products.
Section 361 of the Public Health
Service Act
Gives the FDA power to regulate and set
standards for sanitation at food service
establishments and on interstate carriers.
Section 354 of the Public Health
Service Act and the Radiation for
Health and Safety Act of 1968
Empowers the FDA to regulate the manufacture, distribution, and use of X-ray machines,
microwave ovens, ultrasound equipment, and
other products that are capable of emitting
radiation.
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Regulation of Product Safety: Consumer
Product Safety Act (1972)

Federal statute that regulates potentially
dangerous consumer products.

Created the Consumer Product Safety
Commission (CPSC).
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Regulation of Product Safety: Consumer
Product Safety Commission
Independent federal regulatory agency
empowered to:
1. Adopt rules and regulations to interpret and
enforce the Consumer Product Safety Act.
2. Conduct research on safety.
3. Collect data regarding injuries.
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Regulation of Product Safety: Fair Packaging
and Labeling Act
Federal statute that requires the labels on
consumer goods to identify:
 The product
 The manufacturer, processor, or packager of the
product and its address
 The net quantity of the contents of the package
 The quantity of each serving
 Administered by the Federal Trade Commission
and the Department of Health & Human Services

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Regulation of Product Safety: Poison
Prevention Packaging Act

Federal act requiring manufacturers to
provide “childproof” containers and packages
for all household products.
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Lemon Laws
Provide a procedure for consumers to follow
to correct recurring problems in vehicles.
 Establish an administrative procedure that is
less formal than a court proceeding.
 Require that an arbitrator decide the dispute
between a consumer and car dealer.

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Unfair and Deceptive Practices: Section 5 of
the Federal Trade Commission Act

Prohibits unfair and deceptive practices
including:
False and deceptive advertising
 Bait and switch
 Abusive sales tactics
 Consumer fraud

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Door-to-Door Sales

Many states have enacted statutes that permit
consumers to rescind contracts made at home
with door-to-door sales representatives within
a three-day period after signing the contract.
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Unsolicited Merchandise
Postal Reorganization Act – makes the
mailing of unsolicited merchandise an unfair
trade practice.
 Persons who receive unsolicited merchandise
through the mail may retain, use, discard, or
otherwise dispose of the merchandise without
incurring any obligation to pay for it or return it.

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Truth-in-Lending Act
(TILA)
Federal
Consumer-Debtor
Protection Laws
Fair Debt Collection
Practices Act
Consumer Leasing
Act
Fair Credit & Charge
Card Disclosure Act
Equal Credit
Opportunity Act
Fair Credit Reporting
Act
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Federal Consumer-Debtor Protection Laws
(1 of 2)
Truth-in-Lending Act (TILA) of 1968
(as amended)
Requires creditors to make certain disclosures
to debtors in consumer transactions that do
not exceed $25,000 and real estate loans of
any amount on the debtor’s principal dwelling.
Consumer Leasing Act
An amendment to the TILA. Extends the
TILA’s coverage to lease terms in consumer
leases.
Fair Credit and Charge Card
Disclosure Act of 1988
Amendment to the TILA. Requires disclosure
of certain credit card terms on credit- and
charge-card solicitations and applications.
Provides the following protections: (1) Unsolicited credit cards, (2) Faulty products
purchased with credit cards, (3) Lost or stolen
credit cards.
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Federal Consumer-Debtor Protection Laws
(2 of 2)
Equal Credit Opportunity Act
(ECOA) of 1975
Prohibits discrimination in the extension of
credit based on: sex, marital status, race,
color, national origin, religion, age, or receipt
of income from public assistance programs.
Fair Credit Reporting Act of 1970
An amendment to the TILA. Protects
customers who are subjects of a credit report
by setting out guidelines for credit bureaus.
Fair Debt Collection Practices Act
(FDCPA) of 1977
Protects consumer-debtors from abusive,
deceptive, and unfair practices used by debt
collectors. Prohibits certain contact by the
creditor with third parties and the debtor.
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