Consumer Protection

1
Chapter 15

• Consumer Protection
• and Product Liability

2
Consumer

• Any person who purchases or leases goods,
  services, or property primarily for persona,
  family use.
• Caveat Emptor Let the Buyer Beware
• Caveat Venditor Let the Seller Beware

3
Unfair and Deceptive Practices
4

• One that misleads (or has the potential to
  mislead) consumers
• Almost all states have laws relating to this but
  they differ among states.

5
Fraudulent Misrepresentation

• Any statement that deceives the buyer
• i.e. misstating the facts

6
Deceptive Pricing

• Unfair for a store to raise the price of an
  article with the intention of lowering the price
  later and claiming a bargain
• Cannot claim prices are wholesale or factory if
  they are not
• Watch out for 2 for 1 sales that look too good to
  be true

7
Deceptive Service Estimates

• It is unfair to significantly underestimate the
  cost of repair or to charge for repairs that were
  not authorized.

8
Work-At-Home Schemes

• One of the oldest types of classified advertising
  fraud
• Hidden costs and membership fees

9
Unordered Merchandise

• Under federal and state laws, unordered
  merchandise may be considered a gift. You can
  keep it!
• Only two types of products can be sent legally
  free samples and merchandise mailed by charities

10
False Advertising
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Cease and Desist Orders

• Legally binding orders to stop a practice, to
  anyone using ads that would mislead the public
• Federal courts rarely overturn these orders from
  the FTC

12
Bait and Switch

• Advertise a non-existent bargain to lure
  customers so they can be sold more expensive
  merchandise
• SEE Pg. 321 Bullets

13
Negative Option Rule

• An Example CD Clubs
• The seller send you the months selection, if you
  want it - do nothing and if you dont send it
  back.
• There are guidelines for these companies on p.
  322.

14
The Cooling-Off Rule

• Gives consumers three business days to cancel
  most contracts made away from the sellers place
  of business (25. or more)
• Salesperson must inform you of your right to
  cancel
• Must give you two copies of the contract or
  receipt
• Contract or receipt should be dated, and show
  name address of seller, and explain your right
  to cancel

15
Under FTC, the seller must do the following
within 10 days

• Cancel and return any papers signed
• Refund your money
• Inform you about product pick ups
• Return any trade-ins
• Does not apply to real estate, insurance,
  securities, or emergency home repairs.

16
Telemarketing Fraud

• free or low cost vacations
• tickets for charity benefits
• 900-number scams
• FTC states you must be informed of the cost for
  the calls

17
Shopping by Mail, Phone, Fax, or Internet

• Sellers must ship goods within times stated if
  no time is stated then it is 30 days.
• Sellers must inform you of any delay

18
Product Liability

• Manufacturers and sellers are responsible for
  injuries to consumers when they place defective,
  unhealthy, or unsafe items on the market.

19
Strict Liability

• Makes manufacturers or suppliers responsible for
  selling goods that are unreasonably dangerous.
• This is true even if
• the manufacturer has not been negligent
• the user of the product is not the person who
  bought the product

20
Consumer Product Safety Act (1972)

• Test quality and reliability
• Obtain proof that it has been tested
• Have capability to recall the product
• Take action on any valid complaints

21
Food, Drug, and Cosmetic Act (1938)

• Prohibits the manufacture and shipment in
  interstate commerce of any food, drug, cosmetic
  or device for health purposes that is injurious,
  adulterated, or misbranded.

22
Adulterated Product

• One that contains any substance mixed or packed
  with it to reduce its quality or strength below
  minimum standards.

23
Misbranded

• Prohibits the manufacture and shipment in
  interstate commerce of any food, drug, cosmetic
  or device for health purposes that is injurious,
  adulterated, or misbranded.
• Requires that packaged drugs bear the name and
  address of manufacturer
• Labels on non-prescription drugs must give common
  name
• Labels must caution any use that may be unsafe

24
Delaney Amendment (1958)

• Gives the right to remove any food or food
  additive shown or believed to cause cancer in
  humans or animals.
• The government has taken action to discourage the
  sale of goods considered a threat to public
  health.
• Unusually High Taxes, Labeling and Packaging, and
  Outright Prohibition (Cigarette ads 1971)

25
Consumer Protection Assistance

• Better Business Bureau (BBB)
• A nongovernmental agency that hears consumer
  complaints at the local and state levels
• See p. 331 bullets