1. Chapter 15
Consumer Protection

2. Ch. 15: Key Learning Objectives
Analyzing the reasons for consumer advocacy and the methods consumer organizations use to advance their interests
Knowing the five major rights of consumers
Assessing the ways in which government regulatory agencies protect consumers and what kinds of products are most likely to be regulated
Determining how consumer privacy online can best be protected
Examining how the courts protect consumers and efforts by businesses to change product liability laws
Evaluating how socially responsible corporations can proactively respond to consumer needs

3. Advocacy for Consumer Interests
As long as business has existed—consumers have tried to protect their interests when they go to the marketplace to buy goods and services
Consumerism/consumer movement – the organized activates, collective efforts by consumers in many countries to safeguard their own rights
Examples of U.S. advocacy organizations include Consumer Federation of America, National Consumers League, and the American Association for Retired People

4. Reasons for Consumer Movement
Complex products have enormously complicated the choices consumers need to make when they go shopping
Services, as well as products, have become more specialized and difficult to judge
When businesses try to sell both products and services through advertising, claims may be inflated or they may appeal to emotions
Some businesses have ignored product safety

5. The major rights of consumers

6. The right to be informed
Rights of Consumers
The right to be informed
Protection against misleading advertising, labeling; given the facts to make an informed purchasing decision
The right to safety
Protection against the marketing of good that are hazardous to health or life
The right to choose
Assurance of access to a variety of products and services at competitive prices
The right to be heard
Assurance that consumer interests will receive fair consideration in government policy and courts
The right to privacy
Assurance that information disclosed in a commercial transaction is not shared with others

7. Responsibilities of Consumers
Keep yourselves informed as best as possible
Exercise due care when making decisions in the
marketplace
Consider the detrimental consequences that
may arise from ill considered decisions
Honor reasonable obligations arising from your
decisions.

8. Example of Evolution in Product Safety
Circa early 1950s

9. Theways in which government regulatory agencies protect consumers and what kinds of products are most likely to be regulated

10. How Government Protects Consumers
Taken together the consumer protection laws are safeguards that reflect the goals of government policymakers and regulators in the context of the 5 rights of consumers.
The role of government protecting consumers is extensive in the United States as well as many other nations.

11. Goals of Consumer Laws
To provide consumers with better information when making purchases
To protect consumers against possible hazards
To promote competitive pricing
To promote consumer choice
To protect privacy.

12. Major Federal Consumer Protection
Agencies and their Main Responsibilities
Figure 15.2

13. Determining how consumer privacy online can best be protected

14. Consumer Privacy in the Digital Age
Rapidly evolving information technologies in the early 21st century have given new urgency to the issue of consumer privacy
New technologies have increasingly enabled businesses to collect and use vast amounts of personal data about their customers and potential customers
The danger is not only that this information might rarely be used fraudulently, but also that its collection represents an unwarranted incursion into personal privacy

15. Consumer Protection in the Digital Age
Dilemma: how to protect consumer privacy while fostering internet commerce
Proposed solutions:
Consumer self-help
Internet users should use technologies that enable them to protect their own privacy
Industry self-regulation
Internet-related businesses advocate being allowed to regulate themselves
Advantage is they have the best technology to do so, critics feel industry rules may be too weak
Privacy legislation
Favor new government regulations protecting consumer privacy online

16. Examining how the courts protect consumers and efforts by businesses to change product liability laws

17. Product Liability
The legal responsibility of a firm for injuries caused by something it made or sold
In U.S. and some other countries, consumers have right to sue and collect damages if harmed by unsafe product
Consumer advocates and trial attorneys have supported these legal protections
By contrast, some in the business community have argued courts and juries have unfairly favored plaintiffs and have called for reform

18. Product Liability
Strict liability – doctrine under which the U.S. courts have held that manufacturers are responsible for injuries resulting from use of their products, whether or not they were negligent or breached a warranty
Well-publicized case of McDonald’s and coffee spill where jury award was $2.9M: McDonald’s was held liable even though it provided warning and customer’s actions contributed to her burns
Huge settlements, like the McDonald’s case, are the exception. Statistics show plaintiffs win about 34% of the cases filed for an average $201,000 award

19. Product Liability
Product liability systems of other nations differ significantly from that of the United States
In Europe, judges (rather than juries) hear cases, punitive damages are not allowed, and victims’ health expenses are not an issue as they are covered by national health insurance
Historically, product liability cases have been exceedingly rare in China. But, that began to change in 2009, in the wake of China’s tainted-milk scandal

20. Product Liability Reform
In 2005, Congress passed the Class Action Fairness Act, the first significant product liability reform in many years.
The two key elements of this legislation were:
Most class-action lawsuits moved from state to federal courts
Attorneys in some kinds of cases were paid based on how much plaintiffs actually received, or how much time the attorney spent on the case

21. Business Efforts for CONTINUED Reform of Product Liability Laws
Set up uniform federal standards for determining liability
Shift the burden of proving liability to consumers
Require the loser to pay the legal costs of the winner
Limit punitive damages
Establish liability shields for certain kinds of products

22. Evaluating how socially responsible corporations can proactively respond to consumer needs

23. Positive Business Responses to Consumerism
Quality management
Emphasizes defining the customer’s needs, analyzing the quality of finished products to assure defect free, continually eliminating quality problems
Building products right the first time reduces liability and improves brand loyalty
Complex issue of what to do when business produces safe, high quality product but that is used by others in dangerous ways
Voluntary industry codes of conduct
Businesses in an industry have banded together to agree on voluntary codes of conduct, spelling out how they will treat their customers

24. Positive Business Responses to Consumerism
Voluntary industry codes of conduct
Businesses in some industries have banned together to agree on voluntary codes of conduct, spelling out how they will treat their customers
Consumer affairs departments
These centralized departments normally handle consumer inquiries and complaints about a company’s products and services, some
have consumer hot lines or interactive web sites
Product recalls
Occurs when a company, either voluntarily or under an agreement with a government agency, takes back all items found to be dangerously defective