Consumer Protection and Product Liability Flashcards
Years ago: Caveat Emptor
“Let the buyer beware”
-Shoppers had few ways to seek compensation for damages
Today: Caveat Venditor
“Let the seller beware”
-Society demands manufacturers to be held responsible for foreseeable injuries
Federal and State Consumer Protection Laws
-Apply to transactions between consumers and people conducting business
Federal and State Consumer Protection Laws DO NOT APPLY IF…
-You acquire a product from another consumer
-You buy a product to use in a business
Consumer
-Someone who buys or leases goods, real estate, or services for personal, family, or household purposes
State Consumer Protection officers
-Mediate complaints
-Conduct investigations
-Prosecute offenders of consumer laws
-Advocate for consumer rights
Federal Administrative Agencies
-Applies to businesses that sell real estate, goods, or services in interstate commerce (business in more than one state)
Federal Administrative Agencies: FTC
-Federal Trade Commision
-Promotes free and fair trade competition
-Regulates false advertising
FTC: Cease and desist orders
-The FTC has the power to issue cease and desist orders
-Legally binding orders to stop a practice that may mislead the public
FTC: Counter-advertise
-The FTC may also require a company to counter advertise
-New advertising to inform the public about the earlier false information
-Corrects the earlier false claims
Federal Administrative Agencies: Bureau of Consumer Protection
-Safeguards consumers against unfair, deceptive, and fraudulent practices
Unfair and Deceptive Practices
-Any acts that may mislead consumers
Deceptive false advertising
-Occurs if a reasonable consumer would be mislead by the advertising claim
-Vague generalities and obvious exaggerations are sales puffery- ALLOWED
-When it appears to be based on factual evidence that cannot be scientifically proved, it will be deemed deceptive
Half-Truths
-The information in the advertisement is true but incomplete and, therefore, leads consumers to a false conclusion
Bait-and-Switch Advertising
-Advertising a very low price for a particular item that will likely be unavailable to the consumer and then encouraging them to purchase a more expensive item
Fraudulent Misrepresentation
-Any statement that deceives the buyer
Work-At-Home Schemes
-Among the oldest kind of advertising fraud
-Often promises big incomes without explaining the cost
Unordered merchandise
-Under state and federal laws, unordered merchandise may be considered a gift
-You can keep it without paying for it
-It is illegal for anyone who sends free samples to include a bill
Negative Option Rule
-Any type of sales term or condition that allows a seller to interpret the customers silence, or failure to take an affirmative action, as an acceptance of an offer
-If the customer doesn’t want it they must tell the seller by the deadline
The Telemarketing Sales Rule
-Protects consumers from abusive telemarketers
-Requires a telemarketer to identify themselves, describe the product, and disclose all material facts
(Total cost, any restrictions, and whether a sale is considered final)
The Cooling-Off Rule
-Allows buyers to cancel door-to-door sales contracts within a certain period of time (3 days)
-Applies to purchases $25 or more made at their place of living/work
The Cooling-Off Rule does NOT apply to:
-Real estate contracts
-Insurance contracts
-Security contracts
-Emergency home repairs
Telephone, Mail-Order, Fax or Online Sales
-Seller must ship goods within the time they promise
-If shipping time is not stated, they must ship within 30 days after receiving an order
Seller must notify the buyer of any delay in shipment
-Buyer can cancel if these are not met
If you feel you are a victim of an unfair or deceptive practice:
-Speak to the business owner/manager
-Write a complaint letter
Product Liability
-Manufacturers, sellers, and suppliers of goods can be held responsible if a product proves to be unsafe and someone is injured
Strict Liability
-Makes manufacturers/ suppliers responsible for selling goods that are unreasonably dangerous
-Do NOT have to prove a negligent act on the part of the manufacturer/seller
*Also true when the user is not the one who bought the item
Strict Liability: The following must be proved:
- The manufacturer/seller was engaged in the business of selling the product
- The product was unreasonably dangerous to the user/consumer
- The defective condition was the cause of the injury/damage
- The defective condition existed when the product left the hands of the manufacturer/seller
- The consumer suffered physical harm or property damage as a result of using the product
The Consumer Product Safety Act
-Protects consumers from unreasonable risk of injury while using consumer products that are sold in interstate commerce
The Consumer Product Safety Act: Defects in products are divided into 3 categories:
- Manufacturing defects
- Poor design
- Inadequate instructions/warnings about the safe use of the product
Food, Drug, and Cosmetic Act
-Prohibits the manufacturer and shipment of faulty products in interstate commerce
-Protects consumers against food, drug, and cosmetics that are injurious, adulterated, or misbranded
Injurous
-If it contains any substance that may be harmful to health
Adulterated
If it contains any substance that will reduce its quality or strength below minimum standards
Misbranded
-If its labeling or packaging is misleading/false
FDA and USDA
-Food and Drug Administration and US Department of Agriculture
-Regulate food labeling
-Require where the food originated on meat, veggies and fruits
-Requires all restaurant chains with 20 or more stores to post caloric content and post guidelines on the daily calorie average
BBB
-Better Business Bureau
-A Non- government agency that:
-Hears consumer complaints at the local and state levels
-Tries to steer consumers to reliable business
BBB Mission
To promote highly ethical relationships between businesses and the public
-Provides:
Businesses past dealing
Helps resolve complaints
Provides info on charities
