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CONSUMER PROTECTION AND PRODUCT SAFETY

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CHAPTER 44 CHAPTER 44

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Principle of caveat emptor (“Let the buyer beware”) replaced by significant, statutory protections for consumers.

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Consumer Protection Laws

• Federal and state statutes and

regulations that promote product safety

and prohibit abusive, unfair, and

deceptive practices.

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Agencies Regulating Food Safety

• U.S. Department of Agriculture.

• U.S. Food and Drug Administration.

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Federal Food, Drug, and Cosmetic Act

• Regulates testing, manufacture, distribution, and sale of foods, drugs, cosmetics, and medicinal products and devices in the U.S.

• Administered by the Food and Drug Administration (FDA).– Before products and devices can be sold,

they must receive FDA approval.– FDA can conduct inspections, recall

products, etc.

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Regulation of Food

• Shipment, distribution, or sale of adulterated food prohibited under FDCA.

• False and misleading labeling of food products prohibited under FDCA.

• Nutrition Labeling and Education Act mandates nutrition information on food labels.– E.g., amount of calories, fiber, trans fat.– Also establishes standard definitions for terms

such as “low fat.”

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United Nations Biosafety Protocol for Genetically Altered Foods

• Signed in 2000 by 138 countries, including U.S.

• Requires that genetically engineered foods must be labeled with “may contain living modified organisms.”

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Regulation of Drugs

• FDA regulates testing, manufacture, distribution, and sale of drugs.– Licenses new drugs. After application filed,

agency conducts investigation and hearings. Approval process can take many years.

• Manufacturer must provide adequate warnings, directions for use.

– May revoke approval of previously licensed drugs.

– Prohibits adulterated, misbranded drugs.

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Regulation of Cosmetics

• Must be safe and properly labeled.– E.g., must contain warnings if carcinogenic

or otherwise dangerous.– Animal testing may be used to establish

product safety. • Adulterated or misbranded cosmetics

prohibited.• FDA may remove from commerce

cosmetics that contain unsubstantiated claims.– E.g., preserving youth or virility, growing hair.

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Regulation of Medicinal Devices

• FDA regulates devices; e.g., heart pacemakers, kidney dialysis machines, other diagnostic, therapeutic, and health devices.

• Mislabeling of medicinal devices is prohibited.• FDA is empowered to remove “quack” devices

from the market.

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Consumer Product Safety Act

• Federal statute that regulates potentially dangerous consumer products.

• Created the Consumer Product Safety Commission (CPSC).

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Consumer Product Safety Commission

• Adopts rules and regulations to interpret and enforce the Consumer Product Safety Act.

• E.g., product safety standards.• May seize or recall dangerous products.• May seek civil or criminal penalties for

violations.

• Conducts research on safety of consumer products, collects data regarding injuries.

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State Lemon Laws

• Provide a procedure for consumers to follow to correct recurring problems in vehicles.

• Car dealer must be notified of problem and be given a certain number of opportunities to fix the defects.

• If defect not corrected, consumer files claim with appropriate state agency.

• Arbitrator then decides the dispute between the consumer and car dealer.

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Unfair and Deceptive Practices

Federal Trade Commission Act (FTC Act) prohibits unfair and deceptive practices including:– False and deceptive advertising– Bait and switch– Abusive sales tactics– Consumer fraud

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False and Deceptive Advertising

• Section 5 of the FTC Act describes false and deceptive advertising as:– Containing misinformation or omitting

information that is likely to mislead a reasonable consumer, or

– Making an unsubstantiated claim.– Proof of actual deception not required.

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Bait and Switch

• Seller advertises low-cost item to attract customers.

• Seller pressures buyers to upgrade.– Often refuses to show advertised

merchandise.– Discourages employees from selling

advertised merchandise.– Fails to have adequate quantities on hand.

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Door-to-Door Sales

• Many state statutes permit consumers to rescind

contracts made at home with door-to-door sales

representatives within a set period after signing

the contract.

– FTC requires salesperson to permit

cancellation as specified.

• Consumer must send required notice of

cancellation to seller.

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Do-Not-Call Registry

• Created by FTC and FCC in 2003.

• Consumer signs up for registry.

• Telemarketers must remove consumer’s telephone number from sales call list.– Charitable and political solicitations exempt.– “Established business relationship” exempt.