Consumer Protection


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Consumer Protection

  1. 1. Consumer Protection Business Law Unit 12 Smithtown High School West Mr. Como
  2. 2. Caveat Emptor <ul><li>The Latin phrase ‘ caveat emptor ’ translates to ‘let the buyer beware’. </li></ul><ul><li>The expression basically meant that the person who purchased the product had no recourse if they were injured by faulty merchandise. </li></ul>
  3. 3. Caveat Emptor <ul><li>The consumer had no recourse since they had no privity of contract with the manufacturer. </li></ul><ul><ul><li>Since the retailer had purchased the merchandise from the manufacturer, it was only the retailer who had privity. </li></ul></ul>
  4. 4. Caveat Venditor <ul><li>Society demanded that the manufacturers be held responsible for the injuries their products caused to consumers. </li></ul><ul><li>Now, the phrase that guides consumers is ‘ caveat venditor ’ or “let the seller beware” </li></ul>
  5. 5. Consumer Protection Laws <ul><li>Consumer protection laws are designed to protect the consumer against unfair and deceptive acts or practices by a business. </li></ul><ul><li>These laws apply to transactions between consumers and people conducting business . </li></ul>
  6. 6. Consumers <ul><li>A consumer is someone who buys or leases goods, real estate or services for personal, family or household purposes. </li></ul><ul><ul><li>When you buy a concert ticket from Ticketmaster, you are protected by certain laws. If you buy the same ticket from another person, these laws do not protect you. </li></ul></ul>
  7. 7. State and Federal Consumer Protection Laws <ul><li>State Consumer Protection offices provide information and help enforce any consumer protection issue that occurs within that state. </li></ul><ul><li>Federal Consumer Protection laws concern businesses that sell real estate, goods, or services in interstate commerce, or business activity that touches more than one state. </li></ul>
  8. 8. Unfair and Deceptive Practice <ul><li>Unfair and deceptive practices are acts that intentionally mislead consumers. </li></ul><ul><ul><li>Deceptive Pricing – raising a price with the intention of lowering it later to claim a bargain price. </li></ul></ul>
  9. 9. Deceptive Service Estimates <ul><li>In most states, a business must provide a consumer with a written estimate of the cost of anticipated repairs. </li></ul><ul><ul><li>If the estimate and the actual are different, the business must notify the customer first. </li></ul></ul>
  10. 10. Fraudulent Misrepresentation <ul><li>Fraudulent misrepresentation is any statement that deceives the buyer. </li></ul><ul><li>This usually occurs when a seller misstates the facts about something that is important to the consumer. </li></ul>
  11. 11. Fraudulent Misrepresentation <ul><li>Example: </li></ul><ul><ul><li>Jon was visited by a salesman who said that his house was filled with carcinogens and toxins and this special air purifier would remove them, and demonstrated with a filter that would automatically turn black when exposed to any air. Jon bought, even though he did not really need it. </li></ul></ul>
  12. 12. Work-at-Home Schemes <ul><li>Work-at-Home schemes often fail to describe fees that you have to pay, long hours with no pay, costs to enter the business…. </li></ul><ul><li>Many people who think they can earn money quickly at home usually end up losing money through hidden costs, etc. </li></ul>
  13. 13. Unordered Merchandise <ul><li>Any materials that arrive at your house unordered, but with a bill, can be viewed as a gift. You are under no obligation to return the merchandise, nor pay for it, as long as you did not request the items. </li></ul><ul><li>The only exceptions that can be legally sent without consent are free samples and anything sent by a charity. </li></ul>
  14. 14. False Advertising <ul><li>The Federal Trade Commission (FTC) regulates false advertising. </li></ul><ul><li>The FTC can issue a cease and desist order – a binding decree to stop a practice that would mislead the public. </li></ul>
  15. 15. False Advertising <ul><li>Listerine used to have ads that stated that by using Listerine, you could minimize colds or lessen their severity. </li></ul><ul><li>None of this was true, and the FTC ordered the company to stop airing them, and ordered corrective advertising. </li></ul>
  16. 16. Bait and Switch <ul><li>In bait and switch advertising, a store advertises a bargain that does not really exist in order to try to sell someone a more expensive item. </li></ul><ul><ul><li>If PC Richard advertised $300 plasma screen tvs, only to try to sell someone a $1000 model because its so much better – this is illegal. </li></ul></ul>
  17. 17. Bait and Switch Techniques <ul><li>Bait and Switch may be evidenced when the store: </li></ul><ul><ul><li>Refuses to show, demonstrate or sell the advertised product. </li></ul></ul><ul><ul><li>Criticize the advertised product to discourage the prospective buyer </li></ul></ul><ul><ul><li>Claiming the advertised item is out of stock </li></ul></ul><ul><ul><li>Refusing to promise delivery of the advertised item within a reasonable period of time </li></ul></ul><ul><ul><li>Demonstrating products that are more expensive than the advertised items </li></ul></ul>
  18. 18. Negative Option Rule <ul><li>Many mail order clubs (CDs, movies, books) have plans where they send you a magazine for the month’s selection – if you do nothing they send it to you. If you do not want it, you have to notify the company. </li></ul>
  19. 19. Negative Option Rule <ul><li>The seller must tell you: </li></ul><ul><ul><li>How many selections you must buy, if any </li></ul></ul><ul><ul><li>How to notify if you do not want the selection </li></ul></ul><ul><ul><li>When to return the ‘negative option’ form to cancel the selection </li></ul></ul><ul><ul><li>When you can get credit for a returned item </li></ul></ul><ul><ul><li>How postage and handling costs are handled </li></ul></ul><ul><ul><li>How often you will receive announcements and forms </li></ul></ul>
  20. 20. Cooling Off Rule <ul><li>When you buy something at a location that is not the seller’s permanent business location, you may be able to cancel the transaction if you have second thoughts. </li></ul><ul><li>This is the cooling off rule . </li></ul>
  21. 21. Cooling Off Rule <ul><li>Under the cooling off rule, you have three business days to cancel contracts for $25 or more made at the buyer’s home, workplace or other location, including product parties made at private homes, fairgrounds, restaurants…. </li></ul>
  22. 22. Cooling Off Rule <ul><li>Under the FTC rule, the salesperson must tell you your right to cancel at the time of purchase. </li></ul><ul><li>The salesperson must also give you two copies of the cancellation form. You will send one back before the third day ends. </li></ul><ul><li>Send by registered mail for proof of delivery. </li></ul>
  23. 23. Cooling Off Rule <ul><li>Once you have stated your intent to cancel, the seller must: </li></ul><ul><ul><li>Cancel and return any papers you signed </li></ul></ul><ul><ul><li>Refund your money </li></ul></ul><ul><ul><li>Inform you when any merchandise left with you will be picked up </li></ul></ul><ul><ul><li>Return to you anything you traded in </li></ul></ul>
  24. 24. Cooling Off Rule <ul><li>The cooling off rule does not apply to contracts for real estate, insurance, securities or emergency home repairs. </li></ul>
  25. 25. Telemarketers <ul><li>Telemarketers are individuals who try to sell people items over the phone. </li></ul><ul><li>Companies often run scams on unsuspecting consumers to entice them to buy items they normally would not. </li></ul><ul><li>Recent legislation has created the ‘Do Not Call’ Registry that bans these companies from calling people who do not want to be contacted. </li></ul>
  26. 26. Telemarketers <ul><li>It is illegal for telemarketers to contact you if you have asked not to be called. </li></ul><ul><li>Calling times are restricted to 8 am – 9 pm </li></ul><ul><li>It is illegal to make false statements about their products </li></ul><ul><li>Telemarketers must tell you the total cost of the items, and if you have won a prize (or are entered into a contest) the actual odds of winning. </li></ul><ul><ul><li>If you are asked to pay for a prize, hang up. </li></ul></ul>
  27. 27. 900 Numbers <ul><li>A 900 series number costs the dialer per minute </li></ul><ul><li>Some scams entice people to call, but people do not realize that they may be paying excessive amounts for the call. </li></ul>
  28. 28. Shopping By Mail, Phone, Fax or Internet <ul><li>The FTC has established rules to protect customers who buy goods from home. </li></ul><ul><li>These rules cover shipping, cancellation, delays, etc. </li></ul><ul><li>Under law, shipping must take place within 30 days </li></ul>
  29. 29. Product Liability <ul><li>Product liability states that the manufacturers and sellers are responsible for injuries to consumers when they place defective, unhealthy or unsafe items on the market. </li></ul>
  30. 30. Strict Liability <ul><li>Strict liability makes manufacturers or suppliers responsible for selling goods that are unreasonably dangerous. </li></ul><ul><li>The defective condition may be found through faulty product design or faulty manufacturing. </li></ul><ul><ul><li>Inadequate warning of danger or improper instructions for the product’s use are also considered defects. </li></ul></ul>
  31. 31. Strict Liability <ul><li>People who are injured by a product or suffer property damage from a defective product may collect damages if they can prove all of the following: </li></ul><ul><ul><li>Manufacturer/seller was engaged in the business of selling the product </li></ul></ul><ul><ul><li>Product was unreasonably dangerous to the user </li></ul></ul><ul><ul><li>Defective condition was the cause of the injury or damage </li></ul></ul><ul><ul><li>Defective condition existed when the product left the manufacturer </li></ul></ul><ul><ul><li>Consumer suffered physical harm or property damage as a result of using the product. </li></ul></ul>
  32. 32. Consumer Product Safety Act <ul><li>This law, written in 1972, states that manufacturers must test the quality and reliability before placing a product on the market. </li></ul><ul><li>The product may be recalled if there are valid complaints about a product. </li></ul>
  33. 33. Consumer Product Safety Act <ul><li>Defects are divided into three categories: </li></ul><ul><ul><li>Manufacturing defects (missing key bolt on a ladder) </li></ul></ul><ul><ul><li>Poor design (toy with small parts that can lead to choking) </li></ul></ul><ul><ul><li>Inadequate instructions and warnings about the safe use of the product. (chain saws) </li></ul></ul>
  34. 34. Food, Drug and Cosmetic Act <ul><li>The Food, Drug and Cosmetic Act prohibits the manufacture and shipment of faulty products in interstate commerce. </li></ul><ul><li>Faulty products include any item that is injurious, adulterated or mislabeled. </li></ul>
  35. 35. Adulterated Products <ul><li>An adulterated product is one that contains any substance that will reduce its quality or strength below minimum standards. </li></ul><ul><li>Often referred to as watered down. </li></ul>
  36. 36. Misbranded Items <ul><li>Any food or drug item with false or misleading labeling or packaging are prohibited. </li></ul><ul><ul><li>Certain items are required to have warning labels and tamper proof packaging. </li></ul></ul>