Miller Cross 4 th Ed. © 2005 by West Legal Studies in Business / A Division of Thomson Learning Chapter 19 Consumer Protection

Miller Cross 4 th Ed. © 2005 by West Legal Studies in Business / A Division of Thomson Learning 2 Deceptive Advertising One of the earliest—and still one of the most important—federal consumer protection laws was the Federal Trade Commission Act of 1914.One of the earliest—and still one of the most important—federal consumer protection laws was the Federal Trade Commission Act of The act created the Federal Trade Commission (FTC) to carry out the broadly stated goal of preventing unfair and deceptive trade practices, including deceptive advertising.The act created the Federal Trade Commission (FTC) to carry out the broadly stated goal of preventing unfair and deceptive trade practices, including deceptive advertising.

Miller Cross 4 th Ed. © 2005 by West Legal Studies in Business / A Division of Thomson Learning 3 Deceptive Advertising Defined Generally, an advertising claim will be deemed deceptive if it would mislead a reasonable consumer.

Miller Cross 4 th Ed. © 2005 by West Legal Studies in Business / A Division of Thomson Learning 4 Bait-and-Switch Advertising Advertising a lower-priced product (the “bait”) when the intention is not to sell the advertised product but to lure consumers into the store and convince them to buy a higher-priced product (the “switch”) is prohibited by the FTC.

Miller Cross 4 th Ed. © 2005 by West Legal Studies in Business / A Division of Thomson Learning 5 FTC Actions Against Deceptive Advertising Cease-and-desist ordersCease-and-desist orders –Require the advertiser to stop the challenged advertising. Counter advertisingCounter advertising –Require the advertiser to advertise to correct the earlier misinformation. Case 19.1 FTC v. Tashman (2003).Case 19.1 FTC v. Tashman (2003).

Miller Cross 4 th Ed. © 2005 by West Legal Studies in Business / A Division of Thomson Learning 6 Telemarketing and Electronic Advertising The Telephone Consumer Protection Act of 1991 prohibits telephone solicitation using an automatic telephone dialing system or a prerecorded voice, as well as the transmission of advertising materials via fax without first obtaining the recipient’s permission to do so.The Telephone Consumer Protection Act of 1991 prohibits telephone solicitation using an automatic telephone dialing system or a prerecorded voice, as well as the transmission of advertising materials via fax without first obtaining the recipient’s permission to do so. Case 19.2 FTC v. Growth Plus International Marketing, Inc. (2001).Case 19.2 FTC v. Growth Plus International Marketing, Inc. (2001).

Miller Cross 4 th Ed. © 2005 by West Legal Studies in Business / A Division of Thomson Learning 7 Labeling and Packaging Manufacturers must comply with labeling or packaging requirements for their specific products.Manufacturers must comply with labeling or packaging requirements for their specific products. In general, all labels must be accurate and not misleading.In general, all labels must be accurate and not misleading.

Miller Cross 4 th Ed. © 2005 by West Legal Studies in Business / A Division of Thomson Learning 8 Sales Many of the laws that protect consumers concern the disclosure of certain terms in sales transactions and provide rules governing the various forms of sales, such as: –Door-to-door sales. –Telephone and mail-order sales. –Online sales.

Miller Cross 4 th Ed. © 2005 by West Legal Studies in Business / A Division of Thomson Learning 9 Health and Safety Protection Laws discussed earlier regarding the labeling and packaging of products go a long way toward promoting consumer health and safety.Laws discussed earlier regarding the labeling and packaging of products go a long way toward promoting consumer health and safety. Laws include:Laws include: –Federal Food, Drug and Cosmetic Act.  –Consumer Product Safety Act. 

Miller Cross 4 th Ed. © 2005 by West Legal Studies in Business / A Division of Thomson Learning 10 Federal Food, Drug and Cosmetic Act The FFDCA of 1938, as amended, protects consumers against adulterated and misbranded foods and drugs.The FFDCA of 1938, as amended, protects consumers against adulterated and misbranded foods and drugs. The act establishes food standards, specifies safe levels of potentially hazardous food additives, and sets classifications of food and food advertising.The act establishes food standards, specifies safe levels of potentially hazardous food additives, and sets classifications of food and food advertising.

Miller Cross 4 th Ed. © 2005 by West Legal Studies in Business / A Division of Thomson Learning 11 Consumer Product Safety Act The Consumer Product Safety Act of 1972 seeks to protect consumers from risk of injury from hazardous products.The Consumer Product Safety Act of 1972 seeks to protect consumers from risk of injury from hazardous products. The Consumer Product Safety Commission has the power to remove products that are deemed imminently hazardous from the market and to ban the manufacture and sale of hazardous products.The Consumer Product Safety Commission has the power to remove products that are deemed imminently hazardous from the market and to ban the manufacture and sale of hazardous products. Case 19.3 U.S. v. Mirama Enterprises, Inc. (2002).Case 19.3 U.S. v. Mirama Enterprises, Inc. (2002).

Miller Cross 4 th Ed. © 2005 by West Legal Studies in Business / A Division of Thomson Learning 12 Credit Protection Because of the extensive use of credit by American consumers, credit protection has become an especially important area regulated by consumer protection legislation.

Miller Cross 4 th Ed. © 2005 by West Legal Studies in Business / A Division of Thomson Learning 13 Truth-in-Lending A disclosure law that requires sellers and lenders to disclose credit terms or loan terms in certain transactions, including: –retail and installment sales and loans. –car loans. –home improvement loans. –certain real estate loans.

Miller Cross 4 th Ed. © 2005 by West Legal Studies in Business / A Division of Thomson Learning 14 The TILA provides for the following: –Equal credit opportunity—Creditors are prohibited from discriminating on the basis of race, religion, marital status, gender, and so on. –Credit-card protection—Credit-card users may withhold payment for a faulty product sold, or for an error in billing, until the dispute is resolved; liability of cardholders for unauthorized charges is limited to $50, providing notice requirements are met; consumers are not liable for unauthorized charges made on unsolicited credit cards. –Consumer leases—The CLA of 1988 protects consumers who lease automobiles and other goods priced at $25,000 or less if the lease term exceeds four months. Truth-in-Lending

Miller Cross 4 th Ed. © 2005 by West Legal Studies in Business / A Division of Thomson Learning 15 Fair Credit Reporting Entitles consumers to request verification of the accuracy of a credit report and to have unverified information removed from their files.

Miller Cross 4 th Ed. © 2005 by West Legal Studies in Business / A Division of Thomson Learning 16 Fair Debt Collection Practices Act Prohibits debt collectors from using unfair debt-collection practices, such as contacting the debtor at his or her place of employment if the employer objects or at unreasonable times, contacting third parties about the debt, harassing the debtor, and so on.Prohibits debt collectors from using unfair debt-collection practices, such as contacting the debtor at his or her place of employment if the employer objects or at unreasonable times, contacting third parties about the debt, harassing the debtor, and so on. Case 19.4 Snow v. Jesse L. Riddle, P.C. (1998).Case 19.4 Snow v. Jesse L. Riddle, P.C. (1998).

Miller Cross 4 th Ed. © 2005 by West Legal Studies in Business / A Division of Thomson Learning 17 State Consumer Protection Laws State laws often provide for greater consumer protection against deceptive trade practices than do federal laws.State laws often provide for greater consumer protection against deceptive trade practices than do federal laws. In addition, the warranty and unconscionability provisions of the Uniform Commercial Code protect consumers against sellers’ deceptive practices.In addition, the warranty and unconscionability provisions of the Uniform Commercial Code protect consumers against sellers’ deceptive practices. The Uniform Consumer Credit Code, which has not been widely adopted by the states, also provides credit protection for consumers.The Uniform Consumer Credit Code, which has not been widely adopted by the states, also provides credit protection for consumers.