1. Consumer Protection and Product Liability
Mr. Sherpinsky
Council Rock School District

2. What You’ll Learn
How to explain the main differences between state and federal consumer protection law (p. 316)
How to describe two unfair and deceptive practices (p. 317)
How to recognize bait and switch advertising (p. 321)
How to identify four Federal Trade Commission rules that protect consumers (p. 321)

3. Why It’s Important
Knowledge of consumer protection laws will prevent you from falling victim to fraud and deception.

4. Legal Terms caveat emptor (p. 316) caveat venditor (p. 316)
consumer (p. 316)
unfair and deceptive practice (p. 317)
fraudulent misrepresentation (p. 318)
cease and desist orders (p. 320)
bait and switch (p. 321)
cooling-off rule (p. 322)
telemarketers (p. 323)
product liability (p. 327)
strict liability (p. 327)
adulterated (p. 329)
intrastate sales (p. 330)

5. Pre-Learning Question
How did consumer protection laws develop?

6. A pair of Chinese made flip-flops on sale in the USA
Advanced reaction to the highly toxic material used to make the flip-flops

7. CPSC has ordered recalls of millions of baby cribs, including cribs with detachable drop sides that can possibly trap and suffocate a child. New federal crib safety standards were adopted in June 2011

8. Fat substitute: Lay’s Light Chips, Pringles Light chips.
Olestra is Procter & Gamble’s synthetic fat that is not absorbed as it passes through the digestive system, so it has no calories. Procter & Gamble suggests that replacing regular fat with olestra will help people lose weight and lower the risk of heart disease.
Olestra can cause diarrhea and loose stools, abdominal cramps, flatulence, and other adverse effects. Those symptoms are sometimes severe.

9. The Development of Consumer Protection Law
Years ago, caveat emptor, which means “let the buyer beware,” reflected society’s attitude toward consumers.
There were few ways to seek compensation for damages and those injured had no recourse due to not being in privity of contract.
There was no course of action that could be taken if customer was injured by products purchased.
Today, however, society demands that manufacturers be held responsible for foreseeable injuries to people who use their products.

10. The Development of Consumer Protection Law
Caveat venditor, which means “let the seller beware,” now guides consumer transactions.
Today, however, society demands that manufacturers be held responsible for foreseeable injuries to people who use their products.

11. Pre-Learning Question
To whom do consumer protection laws apply?
Consumer protection laws apply to transactions between consumers and people conducting business

12. Federal and State Consumer Protection Laws
Consumer protection laws apply to transactions between consumers and people conducting business
A consumer is someone who buys or leases goods, real estate, or services for personal, family, or household purposes.

13. Federal and State Consumer Protection Laws
Consumer protection laws do not protect you if:
you acquire a product from another consumer
you buy a product to use in a business

14. What is the difference between caveat emptor and caveat venditor?
Caveat emptor is Latin for “let the buyer beware” and means the buyer is the responsible party. Caveat venditor is Latin for ”let the seller beware” and means that the seller is responsible.

15. State Consumer Protection
State consumer protection offices provide information and help enforce state consumer protection laws.
Offices may assist consumers with individual problems.

16. Federal Consumer Protection
Federal consumer protection law applies to businesses that sell real estate, goods, or services in interstate commerce, or business activity that touches more than one state.
The Federal Trade Commission (FTC) is the U.S. government agency that promotes free and fair trade competition in the American economy.
The Bureau of Consumer Protection safeguards consumers against unfair, deceptive, or fraudulent practices.
Both organizations investigate violations of federal consumer protection law.

17. Classwork Complete Chapter 15 Packet
Complete Chapter 15 Vocabulary Handout

18. Pre-Learning Question
What do you think are unfair and deceptive practices?

19. Unfair and Deceptive Practices
An unfair and deceptive practice is an act that misleads consumers. Most states have enacted some kind of unfair and deceptive trade practice law.
Examples include
work-at-home schemes
unordered merchandise
false advertising

20. Unfair and Deceptive Practices
If you feel you are the victim of an unfair or deceptive practice:
Speak to the business owner or manager about the problem
Write a complaint letter to the company.

21. Elements of a Complaint Letter
description of purchase
product name and serial and model number or service
statement and history of problem
ask for specific action, state reasonable time for action
copies of documents
your address and work and home phone numbers

22. Fraudulent Misrepresentation
A fraudulent misrepresentation is any statement that deceives the buyer.
A fraudulent misrepresentation usually occurs when a seller misstates the facts about something that is important to consumer.

23. Fradualent Misrepresentations
Making false statements about the construction, durability, reliability, safety, strength, condition, or life expectancy of a product is another deceptive practice.

24. Work-at-Home Schemes
Home employment … Work at Home schemes are among the oldest kind of advertising fraud.
Often these offers sound attractive
They often promise big incomes without explaining the costs.
Work many hours without pay

25. Unordered Merchandise
Under state and federal laws,
Unordered merchandise may be considered a gift,
You can keep it without paying for it.
It is illegal for anyone who sends free samples to:
Include a bill.

26. Unordered Merchandise
Only two kinds of goods can be sent legally through the mail without the consumer’s consent:
Manufacturers’ free samples
Merchandise mailed by charities

27. What does FTC stand for and what does it do?
The Federal Trade Commission is the agency of the U.S. government that promotes free and fair trade competition in the U.S economy.

28. Write a Letter of Complaint!
Think back to a problem you had with a specific company of product.
Research the name, address, and issue thoroughly on the Internet
Write a letter of complaint to the business
description of purchase
product name and serial and model number or service
statement and history of problem
ask for specific action, state reasonable time for action
copies of documents
your address and work and home phone numbers

29. Letter Re-Writes Try this approach: All I want is: I was disappointed
I am a regular customer
I intend to continue to be a regular customer
All I want is:
To get what I wanted
Meet my expectations
Refund or credit for my purchase
By or Before my next visit

30. Pre-Learning Question
What is an example of false advertising?

31. False Advertising
The FTC regulates false advertising on the national level and has the power to issue cease and desist orders.
These orders are legally binding orders to stop a practice that would mislead the public.

32. Bait and Switch
One example of false advertising is bait and switch advertising.
This happens when a store advertises bargains that do not really exist to lure customers in hopes that they will buy more expensive merchandise.

33. Bait and Switch Signs of such practices:
Refusing to show, demonstrate, or sell advertised product.
Criticizing advertised product to discourage purchases.
Claiming advertised product is out of stock
Refusing to promise delivery within a reasonable time.
Demonstrating products that are more expensive that the advertised items

34. Classwork Complete Chapter 15 Packet
Complete Chapter 15 Vocabulary Handout

35. Pre-Learning Question
What are some FTC trade regulation rules?
The FTC has established trade regulation rules for interstate commerce to correct wrongdoing in the marketplace.
They Include:
the negative option rule
the cooling-off rule
the telemarketing sales rule
900-telephone-number rules
rules for shopping by mail, telephone, fax or Internet

36. Negative Option Rule
When you subscribe to magazines or CD club or other plan that sends products regularly, the negative option rule applies.
Under such plans, the seller sends you announcements describing the current selection.
If you want the selection, you do nothing; the seller will ship it automatically.
If you do not want it, you must tell the seller not to send it, and there is a deadline for notification.

37. Negative Option Rule
Under Negative Option Rule, Sellers MUST tell you:
How many selections you must buy
How and when you can cancel membership
How to notify the seller when you do not want selection
When to return “negative option” to cancel shipment
When you’ll get credit for return of selection
How postage and handling costs are charged
How often you will receive announcements and forms

38. The Cooling-Off Rule
The cooling-off rule gives you three days to cancel contracts for most purchases made away from the seller’s regular place of business.
The rule applies to purchases of $25 or more made at the buyer’s home, workplace, or dormitory.
It does not apply for contracts of real estate, insurance, securities, or emergency home repairs.

39. Telemarketing Sales Rule
The Telemarketing Sales Rule protects you from abusive telemarketers, the people who try to sell you products by telephone
Illegal for them to call…
If you have asked them not to contact you again…. (No Call List)
Unless it is between 8A.M. and 9P.M.
Unless they identify the company that they represent
If they make false statements
Unless they tell you the total cost of the products offered and any restrictions that apply (Odds of winning, no purchase necessary)
If they withdraw money from your checking account without permission
If they make you pay for credit repair, recovery room, or advance-fee loans

40. Telemarketing Sales Rule
900-Telephone-Number Rules
Unlike 800 telephone numbers, if you dial a 900-area-code telephone number, you are charged for the call. Sometimes consumers are charged excessively for 900-number calls.
900 area code calls are free
When encouraged to call 900 numbers you must be…
Warned of the cost of the call
Given a chance to hang up before being charged
Able to block the number with telephone company

41. Protect Yourself Against 900-Number Scams
Deal only with reputable companies.
Think twice before calling a 900 number for a “free gift.”
Know precisely what the 900 call will cost—before you make the call.
Don’t confuse 900 numbers with toll-free 800 numbers.

42. Shopping by Mail, Telephone, Fax, or Internet
The FTC has established rules to protect you when ordering goods by mail, telephone, fax, and the Internet.

43. Shopping by Mail, Telephone, Fax, or Internet
Sellers must ship goods within the time they promise in the advertising.
If shipping time is not stated, they must ship within 30 days after receiving an order.
You have the right to cancel and get your money back if time limits are not met.
Sellers must notify you of any delay in shipment.

44. Work packets
Time to complete work packets….
NO COMPUTERS!

45. Product Liability What You’ll Learn How to:
Differentiate between product liability and strict liability (p. 327)
Describe the purpose of the Consumer Product Safety Act (p. 329)
Identify the prohibitions contained in the Food, Drug, and Cosmetic Act (p. 329)
Determine where to get consumer protection assistance (p. 330)
What You’ll Learn

46. What do you think product liability is?
Discussion Question
What do you think
product liability is?

47. Product Liability What Is Product Liability?
Under product liability law, someone who is injured from a product’s unsafe or defective condition may recover damages
Often times the products are recalled at NO COST to consumers
Manufacturers, sellers, and suppliers of goods can all be held responsible.

48. Product Liability What Is Strict Liability ?
You do not have to prove a negligent act on the part of the manufacturer or seller if you are hurt using a defective product.
Strict liability makes manufacturers or suppliers responsible for selling goods that are unreasonably dangerous.

49. Product Liability Strict Liability
People who are injured or who suffer property damage from a defective product may recover from the manufacturer or seller if they can prove that certain factors must be present:
The manufacturer or seller was engaged in the business of selling the product.
The product was unreasonably dangerous to the user or consumer.
The defective condition was the cause of the injury or damage.
The defective condition existed when the product left the hands of the manufacturer or seller.
The consumer suffered physical harm or property damage as a result of using the product.
Inadequate warning of danger and improper instructions for the product’s use are also considered defects

50. Pre-Learning Question
Product Liability
Pre-Learning Question
What are some federal and state consumer protection laws?

51. Federal and State Consumer Protection Laws
Both the federal and state governments pass laws to protect consumers in the marketplace.
Laws can only apply to items produced and purchased within that state
Two federal laws are the:
Consumer Product Safety Act
Food, Drug, and Cosmetic Act

52. Consumer Product Safety Act
This Act protects you from unreasonable risk of injury while using consumer products that are sold in interstate commerce.
Defects in products are divided into three categories:
Manufacturing defects
Poor design
Inadequate instructions and warnings about the safe use of the product

53. Consumer Product Safety Act
Manufacturers must test the quality and reliability (fitness) of all products
Must prove they are safe
They can recall the product if need be

54. Food, Drug, and Cosmetic Act
This law prohibits the manufacture and shipment of faulty products in interstate commerce.
Faulty products include any: food, drug, cosmetic, or health-related device that is injurious, adulterated, or misbranded.
A food or drug is said to be injurious if it contains any substance that may make it harmful to health.

55. Food, Drug, and Cosmetic Act
An adulterated food or drug is one that contains any substance that will reduce its quality or strength below minimum standards.
A food or drug is misbranded if its labeling or packaging is false or misleading.

56. Food, Drug, and Cosmetic Act
Drugs must:
Bear name and address of the manufacturer
Statement of the quantity or weight of contents
Non Prescription Drugs must:
Give the common name of drug
Detail directions for use
Have caution for any unsafe use
Indicate if the drug is addictive

57. Food, Drug, and Cosmetic Act
The government uses removal and other methods to discourage the sale of goods considered harmful to the public health. They include:
unusually high taxes
labeling and packaging
outright prohibition

58. Warning Labels

59. Pop Quiz Review
True or False: A food or drug is said to be injurious if it contains any substance that may make it harmful.

60. Product Liability State and Local Laws
If goods are manufactured and sold only within the boundaries of a state, the federal government has no control over the goods.
For this reason, many states have enacted their own product liability laws.
These laws apply to intrastate sales (sales within a state).
Nearly all states and localities license and regulate establishments that sell food.

61. Pop Quiz Review
True or False: The federal government applies unusually high taxes on harmful products in order to raise enough money to warn consumers of its dangers.

62. Pre-Learning Question
Product Liability
Pre-Learning Question
Where can you go to get consumer protection assistance?

63. Consumer Protection Assistance
Many state and local governments have offices of consumer affairs to educate the consumers and help protect them against fraud.
The federal Consumer Product Safety Commission establishes safety standards for consumer products.
Has the power to recall unsafe products and to impose fines on violators

64. Consumer Protection Assistance
Better Business Bureau
The Better Business Bureau (BBB) is an example of a nongovernment agency that hears consumer complaints at the local and state levels.
Its mission is to promote high ethical relationships between businesses and the public
while steering the public to reputable businesses.

65. EXAM NEXT CLASS Chapter 15 Exam Next Class 45 Questions True/False
Drop Down
Multiple Choice
Essay