Transcript 6.01 Notes - Consumer Protection - chriswilliams

Objective 6.01 - Understand
Sales and Consumer Laws
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Why have consumer protection
laws?
• To ensure consumers get adequate decision-making
information to compare products
• to ensure fairness and competition in the marketplace
• to protect consumers against unfair and deceptive
practices or the sale of substandard or dangerous goods
• to require licenses and inspections to ensure compliance
with the law
• to provide remedies for injured parties
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Consumer Product Safety Act
• Created the Consumer Product Safety Commission
(CPSC)
• Sets product standards for hazardous products
• Requires manufacturer or seller to test quality and
reliability before marketing product
• Can require recall, repair, replacement or refunding of
the purchase price, of unsafe products
– Examples:
• Children’s toys with dangerous parts
• Defective vehicle tires that cause accidents
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Food, Drug and Cosmetic Act
• Created by the Food and Drug Administration
(FDA)
• Passed in 1903 after President Teddy Roosevelt
read “The Jungle” by Upton Sinclair
• Prohibits adulteration or mislabeling of foods,
drugs or cosmetics
• Creates standards for packaged foods, drugs
and cosmetics
• Approves new pharmaceuticals (prescription
drugs)
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Food, Drug and Cosmetic Act
• FDA regulates packaged Food, Drugs,
Cosmetics including:
– Inspecting production facilities for cleanliness
– Setting standards of purity and quality
– Approving ingredient lists as to fitness for human
consumption or use
– Requiring labeling with manufacturer, packager,
distributor, weight & nutritional information to assist
consumer in informed decision making
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Food, Drug and Cosmetic Act
• New drugs cannot be marketed in the US
without FDA approval.
• FDA is sometimes criticized for being too
cautious in granting new drug approvals.
• Some Americans go to other countries to
get drugs the FDA has not approved that
they feel may be life-saving.
• FDA recalls drugs from the market when
dangerous side effects are identified.
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NC Weights and Measures
• Promotes uniformity in weights and
measures laws, regulations, and
standards
• Allows consumers to make comparison
shopping decisions such as unit pricing
• Regulates scales in grocery stores,
produce stands, gas pumps, etc.
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FTC TRADE REGULATION RULES
Cooling-Off Rule
• adopted by the FTC to give consumers
three business days to cancel most
contracts made with door to door
salespersons.
• The rule relates to sales of $25 or more
made outside the salesperson’s regular
place of business.
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FTC TRADE REGULATION RULES
Pre-notification Negative Option Rule
How "Prenotification” Plans Work
• Buying plans
• Joining a plan means you agree to the plan's sales
method as long as you're a member.
• Company sends member information on merchandise
they can buy, and the merchandise is sent to member
automatically unless they return the form rejecting the
offer within the specified time.
• Example: Book clubs, Music clubs, Movie clubs
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FTC TRADE REGULATION RULES
How Negative Option Rule Works
• Requires companies give you information about their
plans, clearly and conspicuously, in any promotional
materials that consumers can use to enroll.
• If the sales presentation for a plan is made orally, say on
the phone, the terms and conditions still must be
disclosed clearly and conspicuously during the
presentation.
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TELEMARKETING SALES RULE
• Gives the FTC and state attorneys general law
enforcement tools to combat telemarketing fraud
• Gives consumers added privacy protections and
defenses against unscrupulous telemarketers
• Helps consumers tell the difference between fraudulent
and legitimate telemarketing.
• Prohibits calling consumers who have put their phone
numbers on the National Do Not Call Registry
• Limits when telemarketers may call consumers
• Requires transmission of Caller ID information
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UNFAIR AND DECEPTIVE ACTS
AND PRACTICES
Fraudulent Misrepresentation
• (any practice that misleads (or has the
potential to mislead) a consumer)
• Some examples includes
– Work at home schemes
– Illegal Lotteries and Scams
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UNFAIR AND DECEPTIVE ACTS
AND PRACTICES
Bait and Switch Advertising
• Advertising a non-existent bargain to lure
customers so they can be sold a more
expensive item.
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REMEDIES
• Contact Company
– Give notice of the problem and allow time to resolve
conflict with involved parties.
• Better Business Bureau
– A private, non-government agency available at local
and state levels that logs complaints from consumers
– Passes complaint information to businesses that are
members, frequently resolving issue
– Makes complaints available for public viewing
– Tries to steer consumers to reliable businesses that
conduct business ethically
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REMEDIES
• Government Regulation Agency
– Contact the government regulatory agency
related to your complaint.
– Examples:
•
•
•
•
Consumer Product Safety Commission
Federal Communication Commission
Federal Trade Commission
US Postal Service
• Attorney General
– Contact State Attorney General’s office for
assistance
REMEDIES
• File Lawsuit
– Cease and desist
• An order or request to halt an activity (cease) and
not to take it up again later (desist) or else face
legal action
• Can be issued by a judge or government agency
– Class action
• form of lawsuit in which a large group of people
collectively bring a claim to court
– NC Small claims court
• Local civil court that handles cases involving
$5,000 or less