Transcript Chapter 045- Consumer Protection

CHAPTER 44
CONSUMER
PROTECTION AND
PRODUCT SAFETY
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Principle of caveat emptor
(“Let the buyer beware”)
replaced by significant,
statutory protections for
consumers.
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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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Agencies Regulating Food Safety
• U.S. Department of Agriculture.
• U.S. Food and Drug Administration.
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Federal Food, Drug, and Cosmetic Act
• Regulates testing, manufacture, distribution,
and sale of foods, drugs, cosmetics, and
medicinal products and devices in the U.S.
• Administered by the Food and Drug
Administration (FDA).
– Before products and devices can be sold,
they must receive FDA approval.
– FDA can conduct inspections, recall
products, etc.
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Regulation of Food
• Shipment, distribution, or sale of adulterated
food prohibited under FDCA.
• False and misleading labeling of food products
prohibited under FDCA.
• Nutrition Labeling and Education Act
mandates nutrition information on food labels.
– E.g., amount of calories, fiber, trans fat.
– Also establishes standard definitions for terms
such as “low fat.”
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United Nations Biosafety Protocol for
Genetically Altered Foods
• Signed in 2000 by 138 countries, including
U.S.
• Requires that genetically engineered foods
must be labeled with “may contain living
modified organisms.”
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Regulation of Drugs
• FDA regulates testing, manufacture, distribution,
and sale of drugs.
– Licenses new drugs. After application filed,
agency conducts investigation and hearings.
Approval process can take many years.
• Manufacturer must provide adequate warnings,
directions for use.
– May revoke approval of previously licensed
drugs.
– Prohibits adulterated, misbranded drugs.
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Regulation of Cosmetics
• Must be safe and properly labeled.
– E.g., must contain warnings if carcinogenic
or otherwise dangerous.
– Animal testing may be used to establish
product safety.
• Adulterated or misbranded cosmetics
prohibited.
• FDA may remove from commerce
cosmetics that contain unsubstantiated
claims.
– E.g., preserving youth or virility, growing hair.
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Regulation of Medicinal Devices
• FDA regulates devices; e.g., heart pacemakers,
kidney dialysis machines, other diagnostic,
therapeutic, and health devices.
• Mislabeling of medicinal devices is prohibited.
• FDA is empowered to remove “quack” devices
from the market.
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Consumer Product Safety Act
• Federal statute that regulates potentially
dangerous consumer products.
• Created the Consumer Product Safety
Commission (CPSC).
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Consumer Product Safety Commission
•
Adopts rules and regulations to interpret and
enforce the Consumer Product Safety Act.
• E.g., product safety standards.
• May seize or recall dangerous products.
• May seek civil or criminal penalties for
violations.
• Conducts research on safety of consumer
products, collects data regarding injuries.
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State Lemon Laws
• Provide a procedure for consumers to follow to
correct recurring problems in vehicles.
• Car dealer must be notified of problem and be
given a certain number of opportunities to fix the
defects.
• If defect not corrected, consumer files claim with
appropriate state agency.
• Arbitrator then decides the dispute between the
consumer and car dealer.
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Unfair and Deceptive Practices
Federal Trade Commission Act (FTC Act)
prohibits unfair and deceptive practices
including:
– False and deceptive advertising
– Bait and switch
– Abusive sales tactics
– Consumer fraud
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False and Deceptive Advertising
• Section 5 of the FTC Act describes false
and deceptive advertising as:
– Containing misinformation or omitting
information that is likely to mislead a
reasonable consumer, or
– Making an unsubstantiated claim.
– Proof of actual deception not required.
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Bait and Switch
• Seller advertises low-cost item to attract
customers.
• Seller pressures buyers to upgrade.
– Often refuses to show advertised
merchandise.
– Discourages employees from selling
advertised merchandise.
– Fails to have adequate quantities on hand.
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Door-to-Door Sales
• Many state statutes permit consumers to rescind
contracts made at home with door-to-door sales
representatives within a set period after signing
the contract.
– FTC requires salesperson to permit
cancellation as specified.
• Consumer must send required notice of
cancellation to seller.
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Do-Not-Call Registry
• Created by FTC and FCC in 2003.
• Consumer signs up for registry.
• Telemarketers must remove consumer’s
telephone number from sales call list.
– Charitable and political solicitations exempt.
– “Established business relationship” exempt.
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