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P A R T P A R T Regulation of Business Administrative Agencies The Federal Trade Commission Act and Consumer Protection Laws Antitrust: The Sherman Act.

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Presentation on theme: "P A R T P A R T Regulation of Business Administrative Agencies The Federal Trade Commission Act and Consumer Protection Laws Antitrust: The Sherman Act."— Presentation transcript:

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2 P A R T P A R T Regulation of Business Administrative Agencies The Federal Trade Commission Act and Consumer Protection Laws Antitrust: The Sherman Act 11 McGraw-Hill/Irwin Business Law, 13/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

3 P A R T P A R T Regulation of Business The Clayton Act, The Robinson-Patman Act, and Antitrust Exemptions and Immunities Employment Law Environmental Regulation 11 McGraw-Hill/Irwin Business Law, 13/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

4 THE FEDERAL TRADE COMMISSION ACT AND CONSUMER PROTECTION LAWS PA E TR HC 48 “The most exciting thing happening in business is the rise of vigilante consumers.” Anita Roddick, The Body Shop founder, Marketing Week (Feb. 24, 2000)

5 Learning Objectives  The Federal Trade Commission  Anticompetitive behavior and deceptive practices  Consumer protection laws

6  General rule is caveat emptor – let the buyer beware – but Federal Trade Commission Act of 1914 created the Federal Trade Commission (FTC) as independent agency to keep U.S. economy both free and fair  FTC enforcement devices : issuing trade regulation rules, facilitating voluntary compliance, and adjudicative proceedings The FTC

7  FTC trade regulation rules have force of law and FTC can proceed directly against those who engage in prohibited practices  FTC promotes voluntary compliance with best practices and regulations by issuing advisory opinions and industry guides  FTC may take internal administrative action against those who violate regulations  Adjudicative proceeding or order FTC Enforcement Devices

8  Authorizes commission to prevent unfair methods of competition under the Sherman Act, Clayton Act, and Robinson-Patman Act, and anticompetitive behavior not covered by antitrust statutes  Also prohibits unfair or deceptive acts or practices in commercial settings  Commission must prove the activity is deceptive or unfair FTC Act Section

9  To be deceptive and violate § 5 of FTC Act, an activity must involve a material omission, misrepresentation, or practice that is likely to mislead a consumer who acts reasonably under the circumstances Deceptive Acts or Practices  Actual deception not required  Statements of opinion, sales talk, or puffery are not deceptive

10  Companies may sue another alleging the other is making false claims:  Pizza Hut sued Papa John’s alleging that the “Better Pizza. Better Ingredients.” claim was false and misleading  Storage bag manufacturer S.C. Johnson sued The Clorox Co. alleging that Clorox claims that Clorox-manufactured storage bags would not leak like other storage bags False Claims as Anticompetitive Behavior

11  Section 5 prohibits unfair acts or practices  FTC focuses on harm to consumers, which must be: substantial, not outweighed by any offsetting consumer or competitive benefits produced by the challenged practice, and a harm that consumers could not reasonably have avoided  See FTC Consumer Information webpageConsumer Information webpage Unfair Acts or Practices

12  FTC’s Telemarketing Sales Rule prohibits deceptive or abusive telemarketing practices  Telemarketing: sales or marketing using one or more telephones and more than one interstate telephone call  Telemarketer or seller engages in a deceptive practice if it fails to disclose certain information to customers before he pays for telemarketed goods or services Telemarketing and Consumer Fraud and Abuse Prevention Act

13  If seller provides a written warranty for a consumer product costing > $15, Act requires simple, clear, and conspicuous presentation of certain information Magnuson-Moss Warranty Act  Requires disclosure of limitations  Warranty must be available to consumer to review prior to sale

14 Truth In Lending Act  Applies to creditors who extend credit to consumers for amounts < $25,000, including credit cards and home equity loans  Required disclosures: finance charge, billing statement, due date, annual percentage rate, late charge, billing rights, etc.

15  Applies to consumer reporting agencies that regularly compile credit-related information on individuals for the purpose of furnishing consumer credit reports to users  Also imposes disclosure duties on users of credit reports (e.g., lenders, employers)  Person disputing accuracy or completeness of credit report’s information may compel a reinvestigation by credit reporting agency Fair Credit Reporting Act

16  Fair and Accurate Credit Transactions Act permits victims of identity theft to file theft reports with consumer reporting agencies Fair and Accurate Credit Transactions Act  Equal Credit Opportunity Act prohibits credit discrimination on the bases of sex, marital status, age, race, color, national origin, religion, and obtaining income from public assistance Equal Credit Opportunity Act Other FTC Credit Laws

17  Fair Credit Billing Act provisions cover credit card billing disputes Fair Credit Billing Act  Fair Debt Collection Practices Act prohibits debt collectors from contacting third parties (debtor’s employer, relatives, friends) and limits a collector’s contacts with debtor Fair Debt Collection Practices Act  Applies to debts that involve money, property, insurance, or services obtained by a consumer for consumer purposes Other FTC Credit Laws

18  Most important federal product safety law is the Consumer Product Safety Act (CPSA) which established the Consumer Product Safety Commission (CPSC)Consumer Product Safety Commission  CPSC issues consumer product safety standards, bans hazardous products, brings civil suits to eliminate dangers of imminently hazardous consumer products, and issues orders to firms to address “substantial product hazards” Product Safety Regulation

19 Test Your Knowledge  True=A, False = B  The FTC has rulemaking and enforcement powers, but must file a case in a federal court.  FTC gathers evidence about possible violations solely from government entities and FTC investigations.  A consent order is an order approving a negotiated settlement in which respondent promises to cease certain activities and/or pay certain fees

20 Test Your Knowledge  True=A, False = B  FTC Act Sec. 5 prohibits unfair or deceptive acts or practices in commercial settings.  The FTC Telemarketing Act prohibits telemarketing to individual citizens.  If a seller gives a written warranty for a consumer product costing > $15, the warranty must have simple, clear, and conspicuous presentation of warranty details

21 Test Your Knowledge  Multiple Choice  Deceptive practices under Sec. 5 must:  (a) involve a material misrepresentation  (b) the representation must be likely to mislead a consumer  (c) the consumer must act reasonable under the circumstances  (d) all of the above  (e) all of the above plus result in a sale

22 Test Your Knowledge  Multiple Choice  Jordan is late on paying a store charge card. Jordan received a call claiming that the store would have Jordan arrested for fraud unless payment was made in five days. Which of the following is true?  (a) Jordan must pay the bill or be arrested  (b) The store violated the Fair Debt Collection Practices Act  (c) Jordan must file a lawsuit against the store

23 Test Your Knowledge  Multiple Choice  Which of the following is not a consumer protection law?  (a) Fair Credit Reporting Act  (b) Federal Registration Act  (c) Truth in Lending Act  (d) Fair Debt Collection Practices Act  (e) Equal Credit Opportunity Act

24 Thought Questions  A 2003 FTC survey showed that over a one-year period nearly 10 million people (4.6 % of adult population) were victims of some form of identity theft.  Are you concerned about your privacy?


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