Chapter 17. Consumer Protection

Consumer Protection Laws

Caveat Venditor (Beware): Seller must me aware that they must abide by state and federal protection laws

Federal Trade Commission Act: Passed in which outlined federal guidlines that sellers must abide by. This was since the FTC was passed

Bylsma v. Burger King Corporation: The Washington Product Liability Act permits relief for emotional distress damages, in the absence of physical injury, caused to the direct purchaser by being served and touching, but not consuming, a contaminated food product. The emotional distress is a reasonable reaction and manifest by objective symptomatology, the district court’s dismissal of plaintiff’s suit is reversed and remanded because plaintiff must be given another opportunity to amend his complaint

An ad is only an invitation to make an offer

I. Historical Perspective

Early part of the century consumer protection laws were nonexistent. “Caveat Emptor” let the buyer beware, was common phrase used by many consumers of the time due to the lack of protection laws. People who were injured from a defective product had no recourse. The phrase “Caveat Venditor” means let the seller beware, and is what we say now due to all the laws that have been passed to protect the consumer.

The Federal Trade Commission Act- passed in which outlined federal guidelines that sellers had to abide by. Individual states have adopted their owe statutes regulating commerce since the FTC was passed. II. What is meant by “Consumer Protection?”

Consumer Protection- Laws created to protect consumers from faulty merchandise and dangerous merchandise (laws of negligence), fraud, deceptive practices, false advertising, mail order fraud, and the enforcement of express and implied warranties

III. Unfair and Deceptive Practices

Deceptive Pricing

sellers who raises the price of an item with the intention of lowering the price later and claiming the lower price is a bargain A seller must not claim that prices are wholesale or are factor prices when it is not ture. It is a deceptive practice to offer a two-for-one sale and claim the consumer is getting a bargain Referral Schemes

Seller promises to give a cash rebate if buyer can supply a list of friends who might be interested in the product Deceptive Services Estimates

Understating the cost of repair services or to charge for repairs that were not authorized by the customer Door-to-Door Sales

due to the pressure door-to-door salespeople can put on consumers the FTC rule states that the consumer has 3 business days to change his/her mind and cancel the order. “Cooling-off rule” The salesperson must inform you of your cancellation rights at the time of the agreement. You must also receive a canellation for from the salesperson in the event that you canel the order 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 wheter any product left with you will picked up Return any trade-in “Cooling-off rule” does not apply to: Sales made totally by mail or telephone, real estate insurance, securities, emergency home repairs Fraudulent Misrepresentations:

a. false statements made by the seller that deceives the buyer. Making false statements about the construction, durability, reliability, safety, strength, condition, or life expectancy of a product is deceptive practice.

b. The consumer has the choice of voiding the contract or suing in tort for money damages

IV. False Advertising: The FTC regulates false advertising on the national level and has the power to issue cease and desist orders (orders to stop) to anyone using advertising that wold mislead the public

A. Advertising of Guarantees- a promise or assurance of the quality or life of a product (also known as an express warranty, given by the seller or merchant of a product) Under the TC’s guidelines, an advertising guarantee must disclose:

The product or part of the product that is guaranteed The specific charactersitics of the product that are covered by the guarantee The time limit of the guarantee. (lifetime guarantee, 60 day guarantee…..) What someone must do to make a claim on a guarantee How claims will be settled The identity of the person making the guarantee, the manufacturer or retailer B. Advertising of Consumer Credit: “No-money down,” or “No payments til 1998″

Is an alluring but insincere invitation to customers to buy a product or service that the advertiser does not really want to sell. Usually the seller wants the customer to purchase a more expensive product. This is a FTC violation.

refusal to show product advertised Attempts to discourage customer from advertised product Claims that the product is out of stock V. Shopping by mail

*Seller must ship merchandise within time period stated, if no time state, product must be received within 30 days. Buyer has the right to cancel their order if these time limits are not met.

A. Unordered Merchandise

Under both federal and state law, consumers can consider such unordered merchandise as a gift. They do not have to pay for them

There are only two kinds of products that can be sent legally without consent:

Product free samples Charities VI. Product Liability

Manufacturers and sellers are accountable or responsible for the products that they market

The manufacturer or seller are responsible for injuries caused by a product even if:

The manufacturer or seller was not negligent in the care and preparation of the product The user of the product was not the one who bought it. The buyer must prove:

The manufacturer or seller sold the product in a defective condition The product was reasonably dangerous to the user The defective condition was the cause of the injury The defective condition existed when the product left the manufacturer The consumer sustained physical harm or propery damage A. Consumer Product Safety Act of 1972

This states that a manufacturer or seller who places an item on the market must follwoing guidelines set by the government in order to ensure safety of an item Violators of this safety act face up to $500,000 in civil fines and $50,000 in criminal fines, along with all the individual tort suits that can be filed B. Food, Drug and Consmetic Act

*Prohibits the manufacture and shipment in interstate commerce of any food, drug, consmetic, or device for health purposes that is

Injurious- contains substance that may harm you Adulterated- food or drug that contains any substance mixed in to reduce the quality or strength below minimum standards Misbranded- labeling or packaging a product in a false manner VII. Consumer Protection Assistence

How do you report consumer abuse?

*State and local government have set up various consumer protection agencies that will take a full report of your claim and investigate it to determine if the manufacturer or seller was invovled in any form of deception or product liability

Consumer Protection

I. Historical Perspective: early in our nation’s history consumer protection laws were non-existent. “Caveat Emptor” or “Let the buyer be ware” which was a common phrase. Now there’s  phrase “Caveat Venditor” or “Let the seller be ware” is what is said now.

  • Federal Trade Commision Act (FTC) was passed in which outlined federal guidelines that seller had to abide by. Individual states habe adopted ther own statutes regulating commerce before the FTC.

II. What is meant by “Consumer Protection”?

Consumer Protection: laws created to protect consumers from faulty merchandise and dangerous merchandise(laws of negligence), fraud, deceptive practices, false advertising, mail order fraud, and the enfocement of express and implied warranties.

III. Unfair and Deceptive Practices: any act that misleads consumers.

1. Deceptive Pricing:

a. sellers raise an item’s price, with intention to lower price and claim as bargain is illegal

b. sellers cannot claim prices are wholesale or factory prices

c. deceptive practice to offer a two-for-one sale and claim the consumer is getting a bargain

2. Referral Schemes:

a. seller promises to give a cash rebate if buyer can supply a list of friends who might be interested in the product

3. Deceptive Service Estimates:

a. understanding the cost of repair services or to charge for repairs that were not authorized by the customer. (A written estimate must be provided for anticipated repairs and the time it will take to repair)

4. Door-to-Door Sales:

a. due to the pressure door-to-door salespeople can put on consumers the FTC rule states that the consumer has 3 business days to change his/her mind and cancel the order. “Cooling off rule”

b. The salesperson must inform you of your cancellation rights at the time of the agreement. You must also recieve a cancellation form from the salesperson in the event that you cancel the order.

c. Under the FTC rule the seller must do the following within 10 days:

1. Cancel and return any papers you signed

2. Refund your money

3. Tell you whether any product left with you will be picked up

4. Return any trade-in

d. “Cooling-off rule” does not apply to:

1. Sales made totally by mail or telephone, real estate insurance, securities, emergency home repairs.

5. Fraudulent Misrepresentations:

a. false statements made by the seller that deceives the buyer. Making false statements about the construction, durability, reliablility, safety, strebgth, condition, or life expectancy of a product is a deceptive practice.

b. The consumer has the choice of voiding the contract or suing in tort for money or damages.

IV. False Advertising: The FTC

V. Shopping by Mail

VI. Product Liability

Doctrine of “Strict Liability” the manufacturers are held responsible for the products they market. Responsible for any resulting injuries even if:

1. The manufacturer was not negligent in the care and preparation of the product

2. The user of the product was not the one who bought it

A. The buyer must prove:

1. The manufacturer or seller sold the product in a defective condition

2. Product was reasonably dangerous to the user

3. The defective condition was the cause of the injury

4. The defective condition existed when the product left the manufacturer

5. The consumer sustained physical harm or property damage

Consumer Product Safety Act 1972

Manufacturer or seller must follow guidelines set by the government to ensure the safety of the tiem. Can face up to $500,000 in civil damages and $50,000 in criminal fines as well as an individual tort.

Food, Drug, and Cosmetic Act

Prohibits the manufacture and shipment in interstate commerce of any food, drug, cosmetic, or device for health purpose that is:

1. Injurious-contains substance that may harm you

2. Adulterated- mixed in with another substance to reduce quality

3. Misbranded- false labeling

Early part of the century consumer protection laws were nonexistent. “Caveat Emptor” let the buyer beware, was common phrase used by many consumers of the time due to the lack of protection laws. People who were injured from a defective product had no recourse.  The phrase “Caveat Venditor” means let the seller beware, and is what we say now due to all the laws that have been passed to protect the consumer.

  1. The Federal Trade Commission Act- passed in which outlined federal guidelines that sellers had to abide by.  Individual states have adopted their owe statutes regulating commerce since the FTC was passed.

II.  What is meant by “Consumer Protection?”

Consumer Protection- Laws created to protect consumers from faulty merchandise and dangerous merchandise (laws of negligence), fraud, deceptive practices, false advertising, mail order fraud, and the enforcement of express and implied warranties

III. Unfair and Deceptive Practices

Deceptive Pricing

  1. sellers who raises the price of an item with the intention of lowering the price later and claiming the lower price is a bargain
  2. A seller must not claim that prices are wholesale or are factor prices when it is not ture.
  3. It is a deceptive practice to offer a two-for-one sale and claim the consumer is getting a bargain

Referral Schemes

  1. Seller promises to give a cash rebate if buyer can supply a list of friends who might be interested in the product

Deceptive Services Estimates

  1. Understating the cost of repair services or to charge for repairs that were not authorized by the customer

Door-to-Door Sales

  • due to the pressure door-to-door salespeople can put on consumers the FTC rule states that the consumer has 3 business days to change his/her mind and cancel the order. “Cooling-off rule”
  • The salesperson must inform you of your cancellation rights at the time of the agreement. You must also receive a canellation for from the salesperson in the event that you canel the order
  • Under the FTC rule the seller must do the following within 10 days:
  1. Cancel and return any papers you signed
  2. Refund your money
  3. Tell you wheter any product left with you will picked up
  4. Return any trade-in
  • “Cooling-off rule” does not apply to: Sales made totally by mail or telephone, real estate insurance, securities, emergency home repairs

Fraudulent Misrepresentations:

a. false statements made by the seller that deceives the buyer. Making false statements about the construction, durability, reliability, safety, strength, condition, or life expectancy of a product is deceptive practice.

b. The consumer has the choice of voiding the contract or suing in tort for money damages

IV. False Advertising: The FTC regulates false advertising on the national level and has the power to issue cease and desist orders (orders to stop) to anyone using advertising that wold mislead the public

A. Advertising of Guarantees- a promise or assurance of the quality or life of a product (also known as an express warranty, given by the seller or merchant of a product) Under the TC’s guidelines, an advertising guarantee must disclose:

  1. The product or part of the product that is guaranteed
  2. The specific charactersitics of the product that are covered by the guarantee
  3. The time limit of the guarantee. (lifetime guarantee, 60 day guarantee…..)
  4. What someone must do to make a claim on a guarantee
  5. How claims will be settled
  6. The identity of the person making the guarantee, the manufacturer or retailer

B. Advertising of Consumer Credit: “No-money down,” or “No payments til 1998″

Is an alluring but insincere invitation to customers to buy a product or service that the advertiser does not really want to sell. Usually the seller wants the customer to purchase a more expensive product.  This is a FTC violation.

  1. refusal to show product advertised
  2. Attempts to discourage customer from advertised product
  3. Claims that the product is out of stock

V. Shopping by mail

*Seller must ship merchandise within time period stated, if no time state, product must be received within 30 days.  Buyer has the right to cancel their order if these time limits are not met.

A. Unordered Merchandise

Under both federal and state law, consumers can consider such unordered merchandise as a gift. They do not have to pay for them

There are only two kinds of products that can be sent legally without consent:

  • Product free samples
  • Charities

VI. Product Liability

Manufacturers and sellers are accountable or responsible for the products that they market

The manufacturer or seller are responsible for injuries caused by a product even if:

  1. The manufacturer or seller was not negligent in the care and preparation of the product
  2. The user of the product was not the one who bought it.

The buyer must prove:

  1. The manufacturer or seller sold the product in a defective condition
  2. The product was reasonably dangerous to the user
  3. The defective condition was the cause of the injury
  4. The defective condition existed when the product left the manufacturer
  5. The consumer sustained physical harm or propery damage

A. Consumer Product Safety Act of 1972

  • This states that a manufacturer or seller who places an item on the market must follwoing guidelines set by the government in order to ensure safety of an item
  • Violators of this safety act face up to $500,000 in civil fines and $50,000 in criminal fines, along with all the individual tort suits that can be filed

B. Food, Drug and Consmetic Act

*Prohibits the manufacture and shipment in interstate commerce of any food, drug, consmetic, or device for health purposes that is

  1. Injurious- contains substance that may harm you
  2. Adulterated- food or drug that contains any substance mixed in to reduce the quality or strength below minimum standards
  3. Misbranded- labeling or packaging a product in a false manner

VII.  Consumer Protection Assistence

How do you report consumer abuse?

*State and local government have set up various consumer protection agencies that will take a full report of your claim and investigate it to determine if the manufacturer or seller was invovled in any form of deception or product liability

(Ex: Better Business Bureau)

Language of the Law:

  1. The cooling off rule gives consumers three business days to cancel most contracts made with door-to-door salespersons.
  2. Today, the power of consumers has increased; the phrase caveat venditor or let the seller beware, is a guide for business.
  3. The consumer is the person who buys or leases products or services
  4. The FTC has the power to issue a cease and desist order to stop false advertising
  5. An adulterated  food or drug contains an ingredient that reduces its standard of quality
  6. When a business intentionally misleads consumers in any way, it is guilty of unfair and deceptive practice
  7. Before consumer protection laws were developed, caveat emptor, or let the buyer beware, was standard in business transactions
  8. Manufacturers and sellers have product liability; they are responsible for injuries to consumers from defective, unhealthy, or unsafe items
  9. An fraudulent misrepresentation is any statement that has the effect of deceiving the buyer
  10. Advertising a nonexistent bargain to lure customers so they can be sold more expensive items is an illegal practice called bait and switch.
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