Chapter 15 Consumer Protection and Product Liability.
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Transcript of Chapter 15 Consumer Protection and Product Liability.
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Chapter 15
Consumer Protection and Product Liability
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Consumer:
Any person who purchases or leases goods, services, or property primarily for persona, family use.
Caveat Emptor: Let the Buyer Beware
Caveat Venditor: Let the Seller Beware
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Unfair and Deceptive Practices
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One that misleads (or has the potential to mislead) consumers
Almost all states have laws relating to this but they differ among states.
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Fraudulent Misrepresentation
Any statement that deceives the buyer
i.e.: misstating the facts
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Deceptive Pricing
Unfair for a store to raise the price of an article with the intention of lowering the price later and claiming a “bargain”
Cannot claim prices are
wholesale or factory if they are not
Watch out for 2 for 1 sales that look too good to be true
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Deceptive Service Estimates
It is unfair to significantly underestimate the cost of repair or to charge for repairs that were not authorized.
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Work-At-Home Schemes
One of the oldest types of classified advertising fraud
Hidden costs and membership fees
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Unordered Merchandise
Under federal and state laws, unordered merchandise may be considered a gift. You can keep it!
Only two types of products can be sent legally; free samples and merchandise mailed by charities
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False Advertising
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Cease and Desist Orders
Legally binding orders to stop a practice, to anyone using ads that would mislead the public
Federal courts rarely
overturn these orders from the FTC
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Bait and Switch
Advertise a non-existent bargain to lure customers so they can be sold more expensive merchandise
SEE Pg. 321 Bullets
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Negative Option Rule
An Example: CD Clubs The seller send you the month’s
selection, if you want it - do nothing and if you don’t – send it back.
There are guidelines for these companies on p. 322.
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The Cooling-Off Rule
Gives consumers three business days to cancel most contracts made away from the seller’s place of business ($25. or more)
Salesperson must inform you of your right to cancel
Must give you two copies of the contract or receipt
Contract or receipt should be dated, and show name & address of seller, and explain your right to cancel
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Under FTC,
the seller must do the following within 10 days:
Cancel and return any papers signed Refund your money Inform you about product pick ups Return any trade-ins
Does not apply to real estate, insurance, securities, or emergency home repairs.
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Telemarketing Fraud
“free” or “low cost” vacations
tickets for charity benefits
900-number scams FTC states you must be informed of
the cost for the calls
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Shopping by Mail, Phone, Fax, or Internet
Sellers must ship goods within times stated; if no time is stated then it is 30 days.
Sellers must inform you of any delay
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Product Liability
Manufacturers and sellers are responsible for injuries to consumers when they place defective, unhealthy, or unsafe items on the market.
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Strict Liability
Makes manufacturers or suppliers responsible for selling goods that are unreasonably dangerous.
This is true even if: the manufacturer has not been negligent the user of the product is not the person
who bought the product
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Consumer Product Safety Act (1972)
Test quality and reliability
Obtain proof that it has been tested
Have capability to recall the product
Take action on any valid complaints
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Food, Drug, and Cosmetic Act (1938)
Prohibits the manufacture and shipment in interstate commerce of any food, drug, cosmetic or device for health purposes that is injurious, adulterated, or misbranded.
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Adulterated Product
One that contains any substance mixed or packed with it to reduce its quality or strength below minimum standards.
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Misbranded
Prohibits the manufacture and shipment in interstate commerce of any food, drug, cosmetic or device for health purposes that is injurious, adulterated, or misbranded.
Requires that packaged drugs bear the name and address of manufacturer
Labels on non-prescription drugs must give common name
Labels must caution any use that may be unsafe
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Delaney Amendment (1958)
Gives the right to remove any food or food additive shown or believed to cause cancer in humans or animals.
The government has taken action to discourage the sale of goods considered a threat to public health.
Unusually High Taxes, Labeling and Packaging, and Outright Prohibition (Cigarette ads 1971)
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Consumer Protection Assistance
Better Business Bureau (BBB) A nongovernmental agency that
hears consumer complaints at the local and state levels
See p. 331 bullets