Ch 18 - Consumer Stakeholder Issues <ul><li>Consumer Protection Bodies: </li></ul><ul><li>A. FTC </li></ul><ul><ul><li>Pro...
Ch 18 - Consumer Stakeholder Issues <ul><li>Are Consumer Protection Laws Necessary? </li></ul><ul><ul><li>One view: Market...
Ch 18 - Consumer Stakeholder Issues <ul><li>Deceptive Advertising </li></ul><ul><ul><li>Advertising that may be interprete...
Ch 18 - Consumer Stakeholder Issues <ul><li>Deceptive advertising by car dealerships </li></ul><ul><ul><li>Advertising dis...
Ch 18 - Consumer Stakeholder Issues <ul><li>$70 million jet fighter offer just a joke, Pepsi says </li></ul><ul><li>John L...
Ch 18 - Consumer Stakeholder Issues <ul><li>Leonard, a student at Shoreline Community College, saw a promotion in which cu...
Ch 18 - Consumer Stakeholder Issues <ul><li>Is this deceptive advertising? </li></ul><ul><li>No, it does not pass the reas...
Ch 18 - Consumer Stakeholder Issues <ul><li>Bait - and - switch advertising </li></ul><ul><ul><li>An alluring but insincer...
Ch 18 - Consumer Stakeholder Issues <ul><li>Bait - and - switch advertising occurs when the seller either </li></ul><ul><u...
Ch 18 - Consumer Stakeholder Issues <ul><li>'Free PC' Net Fraud Cases  </li></ul><ul><ul><li>Bait-switch advertising cases...
Ch 18 - Consumer Stakeholder Issues <ul><li>'Free PC' Net Fraud Cases  </li></ul><ul><ul><li>the companies also failed to ...
Ch 18 - Consumer Stakeholder Issues <ul><li>'Free PC' Net Fraud Cases  </li></ul><ul><ul><li>Consent Agreements </li></ul>...
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Stakeholder Issues

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Stakeholder Issues

  1. 1. Ch 18 - Consumer Stakeholder Issues <ul><li>Consumer Protection Bodies: </li></ul><ul><li>A. FTC </li></ul><ul><ul><li>Protection from </li></ul></ul><ul><ul><ul><li>False advertising </li></ul></ul></ul><ul><ul><ul><li>Labeling & packaging </li></ul></ul></ul><ul><ul><ul><li>Credit discrimination </li></ul></ul></ul><ul><ul><ul><li>False practices in sales </li></ul></ul></ul><ul><li>B. FDA </li></ul><ul><ul><li>Seizures & recalls </li></ul></ul><ul><ul><li>Tobacco Laws </li></ul></ul><ul><li>C. CPSC </li></ul><ul><ul><li>Protection from injury </li></ul></ul><ul><ul><li>Safety standards </li></ul></ul><ul><li>D. State Laws </li></ul><ul><ul><li>Deceptive Practices </li></ul></ul><ul><ul><li>More Protection </li></ul></ul>
  2. 2. Ch 18 - Consumer Stakeholder Issues <ul><li>Are Consumer Protection Laws Necessary? </li></ul><ul><ul><li>One view: Marketplace guards rights </li></ul></ul><ul><ul><ul><li>consumers are smart </li></ul></ul></ul><ul><ul><ul><li>consumers can sue </li></ul></ul></ul><ul><ul><ul><li>competitors will expose unscrupulous sellers </li></ul></ul></ul><ul><ul><ul><li>Merchant reputations are important </li></ul></ul></ul><ul><ul><ul><li>but…. </li></ul></ul></ul><ul><ul><ul><li>Asymmetric information </li></ul></ul></ul><ul><ul><ul><li>Lack of technological sophistication </li></ul></ul></ul><ul><ul><ul><li>Bewildering variety of products limit the marketplace’s ability to police itself </li></ul></ul></ul>
  3. 3. Ch 18 - Consumer Stakeholder Issues <ul><li>Deceptive Advertising </li></ul><ul><ul><li>Advertising that may be interpreted in a false or misleading way </li></ul></ul><ul><ul><li>Reasonable belief </li></ul></ul><ul><ul><li>Applies to measurable claims (statements of fact), puffery (statement of opinion) permissible </li></ul></ul><ul><ul><li>“ Professor Wonder” ad </li></ul></ul><ul><ul><li>Claim: Wonder bread w/ calcium improves children’s brain function and memory. “Wonder helps build strong bodies – and minds.” </li></ul></ul><ul><ul><li>No evidence for this. </li></ul></ul><ul><ul><li>FTC pursued seller and ad agency (Campbell Mithun) that created this ad. </li></ul></ul><ul><li>FTC Requirements for Deceptive Ads : </li></ul><ul><ul><li>Representation or Omission </li></ul></ul><ul><ul><ul><li>Is likely to mislead. </li></ul></ul></ul><ul><ul><ul><li>Must be material. </li></ul></ul></ul><ul><ul><ul><li>Must be likely to mislead a reasonable consumer. </li></ul></ul></ul><ul><ul><ul><li>Must be likely to cause harm. </li></ul></ul></ul>
  4. 4. Ch 18 - Consumer Stakeholder Issues <ul><li>Deceptive advertising by car dealerships </li></ul><ul><ul><li>Advertising discounts from fabricated prices </li></ul></ul><ul><ul><li>Falsely implying that all consumers could get financing regardless of creditworthiness </li></ul></ul><ul><ul><li>Failing to disclose significant financial information that greatly affects the value of advertised offers </li></ul></ul><ul><ul><li>Falsely implying that sales events were forced liquidations providing special bargains to buyers </li></ul></ul>
  5. 5. Ch 18 - Consumer Stakeholder Issues <ul><li>$70 million jet fighter offer just a joke, Pepsi says </li></ul><ul><li>John Leonard collected his Pepsi points and now he wants his prize. A fighter jet. And he's not kidding. </li></ul><ul><li>The 21-year-old business student sued PepsiCo Inc., demanding that the soft drink maker give him a Harrier fighter jet like the one pictured in a Pepsi Stuff TV commercial. </li></ul><ul><li>&quot;I am simply trying to take Pepsi up on an offer it made to the public,&quot; Leonard said. </li></ul><ul><li>Pepsi maintains the commercial was a spoof and says it has a perfect right to use humor in its advertising. </li></ul><ul><li>&quot;If we have to put disclaimers on spots that are obviously farces, where does it end?&quot; Pepsi spokesman Jon Harris said. </li></ul><ul><li>Leonard's lawsuit accuses Pepsi of breach of contract, fraud, deceptive and unfair trade practices, and misleading advertising. </li></ul>
  6. 6. Ch 18 - Consumer Stakeholder Issues <ul><li>Leonard, a student at Shoreline Community College, saw a promotion in which customers who had racked up points by drinking Pepsi beverages could claim a variety of prizes. Those who finish a 12-pack of 12-ounce cans, for example, earn five points. </li></ul><ul><li>As a joke, the company also &quot;offered&quot; the $70 million fighter jet for 7 million points. That means Leonard would have had to drink 16,800,000 cans of Pepsi to earn the Harrier - except during August, when all point values double and he would have had to finish only 8,400,000 cans. </li></ul><ul><li>Leonard, who didn't want to drink that much Pepsi, said he called the company and was told he could buy Pepsi points for 10 cents each. </li></ul><ul><li>Leonard, of suburban Lynnwood, rounded up five investors who committed to put up the $700,000 he needed to claim his prize. </li></ul><ul><li>Leonard delivered to Pepsi 15 original Pepsi Points plus a check for $700,008.50 for the remaining 6,999,985 points, &quot;plus shipping and handling,&quot; the lawsuit says. </li></ul>
  7. 7. Ch 18 - Consumer Stakeholder Issues <ul><li>Is this deceptive advertising? </li></ul><ul><li>No, it does not pass the reasonable belief test: would a reasonable person be deceived into believing that the claim was true? </li></ul>
  8. 8. Ch 18 - Consumer Stakeholder Issues <ul><li>Bait - and - switch advertising </li></ul><ul><ul><li>An alluring but insincere offer to sell a product or service which the advertiser in truth does not intend or want to sell. Its purpose is to switch consumers from buying the advertised merchandise, in order to sell something else, usually at a higher price or on a basis more advantageous to the advertiser. </li></ul></ul>
  9. 9. Ch 18 - Consumer Stakeholder Issues <ul><li>Bait - and - switch advertising occurs when the seller either </li></ul><ul><ul><li>Refuses to show the advertised item </li></ul></ul><ul><ul><li>Deliberately fails to have adequate quantities available </li></ul></ul><ul><ul><li>Fails to deliver the item within a reasonable time </li></ul></ul><ul><ul><li>Discourages employees from selling the item </li></ul></ul><ul><li>FTC Actions </li></ul><ul><ul><ul><li>Complaint settlement </li></ul></ul></ul><ul><ul><ul><li>cessation </li></ul></ul></ul><ul><ul><ul><li>counter advertising </li></ul></ul></ul><ul><li>Labeling & packaging Laws </li></ul><ul><ul><li>Product data & nutritional info </li></ul></ul>
  10. 10. Ch 18 - Consumer Stakeholder Issues <ul><li>'Free PC' Net Fraud Cases </li></ul><ul><ul><li>Bait-switch advertising cases brought against Buy.com, Value America and Office Depot </li></ul></ul><ul><ul><li>According to the FTC, ads run by the three companies offering &quot;free&quot; and &quot;low-cost&quot; computers were misleading because the promotions required purchase of three-year Internet service contracts, and the companies failed to disclose the total cost of the offers. </li></ul></ul><ul><ul><li>the ads either did not fully disclose the terms, or the terms appeared in very small and inconspicuous disclaimers. </li></ul></ul><ul><ul><li>The &quot;free&quot; or &quot;low-cost&quot; computers touted in the ads were in some cases far more expensive than advertised. For example, one advertisement featured a computer for $269 (US$). However, the purchaser's actual cost, taking into account the cost of the Internet service contract, was over $1,000, nearly four times greater than the advertised price. </li></ul></ul>
  11. 11. Ch 18 - Consumer Stakeholder Issues <ul><li>'Free PC' Net Fraud Cases </li></ul><ul><ul><li>the companies also failed to inform customers that in order to receive the rebate on the price of the computer, they had to sign up for three years of Internet access with an Internet service provider, such as CompuServe, MSN, or Prodigy. In some instances, customers had to pay long-distance charges and expensive hourly surcharges because the chosen ISP did not have a local number. Consumers who chose to cancel their contracts before the term was up faced the loss of their rebates and, in many cases additional penalties. </li></ul></ul><ul><ul><li>Office Depot and Value America falsely represented that the computer systems in question included a monitor at no additional cost. However, the monitor was not part of the offer and had to be purchased separately at a cost of $140 to $200. </li></ul></ul><ul><ul><li>Value America was also charged with failing to ship products within the promised delivery time and failing to send late delivery notices to customers giving them the option of canceling their orders or getting a refund. </li></ul></ul>
  12. 12. Ch 18 - Consumer Stakeholder Issues <ul><li>'Free PC' Net Fraud Cases </li></ul><ul><ul><li>Consent Agreements </li></ul></ul><ul><ul><li>The consent agreements which ended the cases prohibit the companies from misrepresenting the price of any computer, computer-related products, or Internet access services. </li></ul></ul><ul><ul><li>If a price or rebate is dependent upon the purchase of any other product or service, the companies must disclose that requirement and the price of the other product and service. The disclosures must be clear and conspicuous, and in close proximity to the price claim. </li></ul></ul><ul><ul><li>The companies are also required to provide full disclosure of all Internet service cancellation policies and information regarding possible long distance telephone charges, and to offer customers the chance to cancel orders and request a refund if orders are not shipped on the promised date. </li></ul></ul>

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