Section 15.1

Consumer Protection Consumer Protection Section 15.1Section 15.1

Understanding Business and Personal Law


Consumer Protection and Product Liability

Section 15.1Section 15.1Consumer Protection Consumer Protection

Section 15.2Section 15.2Product Liability Product Liability

1515ChapterChapter Consumer Protection Consumer Protection and Product Liabilityand Product Liability




What You’ll Learn

How to explain the main differences How to explain the main differences between state and federal consumer between state and federal consumer protection law (p. 316)protection law (p. 316)

How to describe two unfair and deceptive How to describe two unfair and deceptive practices (p. 317)practices (p. 317)




What You’ll Learn

How to recognize bait and switch How to recognize bait and switch advertising (p. 321)advertising (p. 321)

How to identify four Federal Trade How to identify four Federal Trade Commission rules that protect Commission rules that protect consumers (p. 321)consumers (p. 321)




Why It’s Important

Knowledge of consumer protection laws will Knowledge of consumer protection laws will prevent you from falling victim to fraud and prevent you from falling victim to fraud and deception.deception.




Legal Terms

caveat emptorcaveat emptor (p. 316) (p. 316)caveat venditorcaveat venditor (p. 316) (p. 316)consumer (p. 316)consumer (p. 316)unfair and deceptive practice (p. 317)unfair and deceptive practice (p. 317)fraudulent misrepresentation (p. 318)fraudulent misrepresentation (p. 318)




Legal Terms

cease and desist orders (p. 320)cease and desist orders (p. 320)bait and switch (p. 321)bait and switch (p. 321)cooling-off rule (p. 322)cooling-off rule (p. 322)telemarketers (p. 323)telemarketers (p. 323)




The Development of Consumer Protection Law

Federal and State Consumer Protection Laws

Section OutlineSection Outline




Fraudulent MisrepresentationWork-at-Home SchemesUnordered Merchandise

Unfair and Deceptive Practices Section OutlineSection Outline




Bait and Switch Advertising

False Advertising Section OutlineSection Outline

Negative Option RuleThe Cooling-Off Rule

FTC Trade Regulation Rules




Telemarketing Sales Rule900-Telephone-Number RulesShopping by Mail, Telephone, Fax, or

Internet

FTC Trade Regulation Rules, continued

Section OutlineSection Outline




Pre-Learning Question Pre-Learning Question

How did consumer protection laws develop?




Years ago, Years ago, caveat emptorcaveat emptor, which , which means “let the buyer beware,” means “let the buyer beware,” reflected society’s attitude toward reflected society’s attitude toward consumers. consumers.

The Development of Consumer The Development of Consumer Protection Law Protection Law




There were few ways to seek There were few ways to seek compensation for damages and those compensation for damages and those injured had no recourse due to privity injured had no recourse due to privity of contract.of contract.





Today, however, society demands Today, however, society demands that manufacturers be held that manufacturers be held responsible for foreseeable injuries to responsible for foreseeable injuries to people who use their products. people who use their products.





Caveat venditorCaveat venditor, which means “let , which means “let the seller beware,” now guides the seller beware,” now guides consumer transactions.consumer transactions.






To whom do consumer protection laws apply?




Federal and State Consumer Federal and State Consumer Protection Laws Protection Laws

Consumer protection laws apply to Consumer protection laws apply to transactions between consumers and transactions between consumers and people conducting business.people conducting business.





A A consumerconsumer is someone who buys or is someone who buys or leases goods, real estate, or services leases goods, real estate, or services for personal, family, or household for personal, family, or household purposes. purposes.





Consumer protection laws do not Consumer protection laws do not protect you if: protect you if:

You acquire a product from another You acquire a product from another consumerconsumerYou buy a product to use in a You buy a product to use in a business business




What is the difference between caveat emptor and caveat venditor?




ANSWERANSWER

Caveat emptor is Latin for “let the buyer beware” and means that the buyer is the responsible party. Caveat venditor is Latin for ”let the seller beware” and means that the seller is responsible.




State Consumer Protection State Consumer Protection

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




Federal Consumer Protection Federal Consumer Protection

Federal consumer protection law Federal consumer protection law applies to businesses that sell real applies to businesses that sell real estate, goods, or services in interstate estate, goods, or services in interstate commerce, or business activity that commerce, or business activity that touches more than one state.touches more than one state.





The Federal Trade Commission (FTC) The Federal Trade Commission (FTC) is the U.S. government agency that is the U.S. government agency that promotes free and fair trade promotes free and fair trade competition in the American economy. competition in the American economy. The Bureau of Consumer Protection The Bureau of Consumer Protection safeguards consumers against unfair, safeguards consumers against unfair, deceptive, or fraudulent practices.deceptive, or fraudulent practices.





Both organizations investigate Both organizations investigate violations of federal consumer violations of federal consumer protection law.protection law.





What do you think are unfair and deceptive practices?




Unfair and Deceptive Practices Unfair and Deceptive Practices

An An unfair and deceptive practiceunfair and deceptive practice is is an act that misleads consumers. Most an act that misleads consumers. Most states have enacted some kind of states have enacted some kind of unfair and deceptive trade practice unfair and deceptive trade practice law. law.





Examples include:Examples include:

Work-at-home schemesWork-at-home schemesUnordered merchandiseUnordered merchandiseFalse advertising False advertising





If you feel you are the victim of an If you feel you are the victim of an unfair or deceptive practice:unfair or deceptive practice:

Speak to the business owner or Speak to the business owner or manager about the problemmanager about the problemWrite a complaint letter to the Write a complaint letter to the company.company.




Elements of a Complaint Letter Elements of a Complaint Letter

Description of purchaseDescription of purchaseProduct name and serial and model Product name and serial and model number or servicenumber or serviceStatement and history of problemStatement and history of problemAsk for specific action, state Ask for specific action, state reasonable time for actionreasonable time for action




Elements of a Complaint Letter Elements of a Complaint Letter

Copies of documentsCopies of documentsYour address and work and home Your address and work and home phone numbersphone numbers




Fraudulent Misrepresentation Fraudulent Misrepresentation

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




Work-at-Home Schemes Work-at-Home Schemes

Home employment schemes are Home employment schemes are among the oldest kind of advertising among the oldest kind of advertising fraud. fraud.

They often promise big incomes They often promise big incomes without explaining the costs.without explaining the costs.




Unordered Merchandise Unordered Merchandise

Under state and federal laws, Under state and federal laws, unordered merchandise may be unordered merchandise may be considered a gift. You can keep it considered a gift. You can keep it without paying for it. without paying for it.

It is illegal for anyone who sends free It is illegal for anyone who sends free samples to include a bill.samples to include a bill.




What does FTC stand for and what does it do?




ANSWERANSWER

The Federal Trade Commission is the agency of the U.S. government that promotes free and fair trade competition in the U.S. economy.





What is an example of false advertising?




False Advertising False Advertising

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




Bait and Switch Bait and Switch

One example of false advertising is One example of false advertising is bait and switchbait and switch advertising. advertising.

This happens when a store advertises This happens when a store advertises bargains that do not really exist to lure bargains that do not really exist to lure customers in hopes that they will buy customers in hopes that they will buy more expensive merchandise.more expensive merchandise.





What are some FTC trade regulation rules?




FTC Trade Regulation Rules FTC Trade Regulation Rules

The FTC has established trade The FTC has established trade regulation rules for interstate regulation rules for interstate commerce to correct wrongdoing in commerce to correct wrongdoing in the marketplace.the marketplace.




FTC Trade Regulation Rules FTC Trade Regulation Rules

They include:They include:

The negative option ruleThe negative option ruleThe cooling-off ruleThe cooling-off ruleThe telemarketing sales ruleThe telemarketing sales rule900-telephone-number rules900-telephone-number rulesRules for shopping by mail, Rules for shopping by mail, telephone, fax, or Internettelephone, fax, or Internet




Negative Option Rule Negative Option Rule

When you subscribe to a magazine or When you subscribe to a magazine or CD club or other plan that sends CD club or other plan that sends products regularly, the negative option products regularly, the negative option rule applies. rule applies. Under such plans, the seller sends Under such plans, the seller sends you announcements describing the you announcements describing the current selection.current selection.




Negative Option Rule Negative Option Rule

If you want the selection, you do If you want the selection, you do nothing; the seller will ship it nothing; the seller will ship it automatically. automatically.

If you do not want it, you must tell the If you do not want it, you must tell the seller not to send it, and there is a seller not to send it, and there is a deadline for notification.deadline for notification.




The Cooling-Off Rule The Cooling-Off Rule

The The cooling-off rulecooling-off rule gives you three gives you three days to cancel contracts for most days to cancel contracts for most purchases made away from the purchases made away from the seller’s regular place of business. seller’s regular place of business.




The Cooling-Off Rule The Cooling-Off Rule

The rule applies to purchases of The rule applies to purchases of $25 or more made at the buyer’s $25 or more made at the buyer’s home, workplace, or dormitory. home, workplace, or dormitory. It does not apply to contracts for It does not apply to contracts for real estate, insurance, securities, or real estate, insurance, securities, or emergency home repairs.emergency home repairs.




Telemarketing Sales Rule Telemarketing Sales Rule

The Telemarketing Sales Rule The Telemarketing Sales Rule protects you from abusive protects you from abusive telemarketerstelemarketers, the people who try to , the people who try to sell you products by telephone.sell you products by telephone.




900-Telephone-Number Rules 900-Telephone-Number Rules

Unlike 800-telephone-numbers, if you Unlike 800-telephone-numbers, if you dial a 900-area-code telephone dial a 900-area-code telephone number, you are charged for the call.number, you are charged for the call.

Sometimes consumers are charged Sometimes consumers are charged excessively for 900-number calls. excessively for 900-number calls.




Protect Yourself Against Protect Yourself Against 900-Number Scams 900-Number Scams

Deal only with reputable companies.Deal only with reputable companies.Think twice before calling a 900-Think twice before calling a 900-number for a “free gift.”number for a “free gift.”




Protect Yourself Against Protect Yourself Against 900-Number Scams 900-Number Scams

Know precisely what the 900-call Know precisely what the 900-call will cost—before you make the call.will cost—before you make the call.Don’t confuse 900-numbers with Don’t confuse 900-numbers with toll-free 800-numbers.toll-free 800-numbers.




Shopping by Mail, Telephone, Shopping by Mail, Telephone, Fax, or Internet Fax, or Internet

The FTC has established rules to The FTC has established rules to protect you when ordering goods by protect you when ordering goods by mail, telephone, fax, and the Internet.mail, telephone, fax, and the Internet.





Sellers must ship goods within the Sellers must ship goods within the time they promise in the advertising.time they promise in the advertising.If shipping time is not stated, they If shipping time is not stated, they must ship within 30 days after must ship within 30 days after receiving an order.receiving an order.





You have the right to cancel and get You have the right to cancel and get your money back if time limits are your money back if time limits are not met.not met.Sellers must notify you of any delay Sellers must notify you of any delay in shipment.in shipment.




Reviewing What You Learned

1. What are the main differences between state and federal consumer law?

Section 15.1 Assessment





State consumer law provides information and helps protect consumers in the state in which they live. They sometimes assist consumers with individual problems.


Answer





Federal consumer protection law applies to businesses that sell real estate, goods, or services in interstate commerce.


Answer





2. Describe two unfair and deceptive practices.






False advertising and work-at-home schemes.


Answer





3. What is bait and switch advertising?






Bait and switch advertising is an illegal practice in which nonexistent bargains are advertised to lure customers to more expensive merchandise.


Answer





4. What are four FTC rules designed to protect consumers?






Answers include the negative option rule, the cooling-off rule, the telemarketing sales rule, 900-telephone-number rules, and rules for shopping by mail, telephone, fax, or Internet.


Answer





Critical Thinking ActivityBait and Switch How do you think bait and switch advertising got its name? What is the bait? What is the switch?





Answers will vary. Bait is what one uses to lure or catch something, as a worm is bait for catching fish. A business advertises a bargain to lure customers into the store.

Critical Thinking Activity AnswerBait and Switch





The switch occurs when the salesperson tries to convince the customer to buy other, more expensive items.

Critical Thinking Activity AnswerBait and Switch





Legal Skills in ActionThe Federal Trade Commission Merta has been a member of a CD club for two years. She has made several unsuccessful attempts to cancel her membership.





Legal Skills in ActionThe Federal Trade Commission Roberto suggested she file a complaint with the Federal Trade Commission. Merta needs to know more information.





Legal Skills in ActionThe Federal Trade Commission Help Merta research the history of the FTC. Next, help her to find out how to file a complaint with the FTC.





Legal Skills in Action AnswerThe Federal Trade Commission Answers will vary, but research could include the FTC Web site at www.ftc.gov.

Consumer Protection Consumer Protection End of Section 15.1End of Section 15.1

Documents

Section 15.1