MGMT 311 Exam 2 - FLASHCARDS - Chapter 24
What is deceptive/false advertising?
when a reasonable consumer would be misled by the advertising claim
What was Cruz v. Anheuser-Busch Companies, LLC?
Sheila Cruz and others sued Anheuser-Busch Companies, LLC, for falsely advertising “Bud Light Lime-A-Rita” beverages as “light.” She argued that the word “light” was misleading because the drinks contained more calories than light beer (Bud Light). The court dismissed Cruz’s case, and a federal appellate court affirmed. The Lime-A-Rita beverages were advertised as “Margaritas with a Twist,” so no reasonable consumer would believe they were the same as light beer. Thus, the court concluded that the label was not misleading
What are claims based on half-truths?
The presented information is true but incomplete and may therefore lead consumers to a false conclusion
What is bait and switch advertising?
Advertising a very low price for a particular item that will likely be unavailable to the consumer, who will then be encouraged to purchase a more expensive item
How do we identify bait and switch advertising?
It is the first day of a sale, and the store has sold out of all of the item. The salesperson then shows you a much more expensive item
What does the FTC do when they go after deceptive advertisers?
When the FTC is after our business with deceptive advertising, if we cannot get a negitiated settlement, then the FTC will file a formal complaint
What are the orders and remedies of the FTC if they find your company responsible for deceptive advertising? What are they ordering your company to do?
1) Cease and Desist Order
2) Counter Advertising
3) Multiple Product Orders
4) Damages
5) Restitution
What is a document that instructs a person or company to stop an activity that is considered suspicious or unlawful?
Cease and desist order
What is corrective information for consumers which can be expensive and embarrasing to advertisers?
Counter advertising
What is an example of counter advertising?
Listerine was engaging in deceptive advertising by claiming that the mouthwash prevented colds. Once the FTC found out about their false advertising, they order Listerine to do counter advertising and run ads using the words” contrary to prior advertising, Listerine will not prevent colds”. They had to do this until they had spent 10 million dollars.
What are the remedies of the FTC if they find your company responsible for deceptive advertising?
Damages
Restitution
Who is the plaintiff in a deceptive advertising case?
The FTC
Who is the defendant in a deceptive advertising case?
The company engaging in deceptive advertising
Who do damages go to in deceptive advertising cases?
The plaintiff (FTC). If the FTC wins, they get the money
To who is restitution awarded to in a deceptive advertising case?
The defendant (company being sued)
What is the Texas Deceptive Trade Practices Act (DTPA)?
Texas consumer law that has a long list of deceptive and unfair practices for which a merchant/seller of goods can be liable
What are remedies under the DTPA?
Triple DAS, attorney fees, and costs of court
What act prohibits telephone solicitation using automatic dialing or a prerecorded voice?
Telephone Consumer Protection Act of 1991 (TCPA)
What act prohibits ads via fax without first obtaining the recipient’s consent?
Telephone Consumer Protection Act of 1991 (TCPA)
Who is the telephone consumer protection act enforced by?
The Federal Communications Commission (FCC)
What is the fine amount for violations of the Telephone Consumer Protection Act?
$11,000 per day
How does the Telephone Consumer Protection Act allow for private lawsuits?
1). Consumer can recover actual monetary loss; or
2). $500 for each violation, whichever is greater.
3). If willful or knowing violation of the Act, court can triple the damages.
What are the requirements of the Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994?
a. Before making sales pitch, telemarketer must inform the recipient that the call is a sales call and to identify the seller and the product.
b. Telemarketers must inform recipients of the total cost of the goods, any restrictions in obtaining or using the goods, and whether a sale will be considered final and nonrefundable.
c. Telemarketer must remove a consumer’s name from its list of potential contacts if the consumer requests
What act requires that before making sales pitch, the telemarketer must inform the recipient that the call is a sales call and to identify the seller and the product?
Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994
What act requires that telemarketers inform recipients of the total cost of the goods, any restrictions in obtaining or using the goods, and whether a sale will be considered final and nonrefundable?
Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994
What act requires that the telemarketer remove a consumer’s name from its list of potential contacts if the consumer wants?
Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994
What laws say that buyers of goods in certain circumstances can cancel their contracts within three business days?
Cooling off laws
What are the circumstances in which buyers of goods can cancel their contracts within three business days?
Trade show sales, home equity loans, internet purchase contracts, and door to door sales
What are home equity loans?
enables you as a homeowner to borrow money by leveraging the equity in your home. The loan amount is dispersed in one lump sum and paid back in monthly installments
What do FTC Mail, Internet, or Telephone Order Merchandise Rules require merchants to do?
1). Ship goods within promised times in advertisement
2). Notify customers when orders ship
3). Issue refunds within a certain amount of time after cancellation
True or false: Labels must be accurate and use words that are easily understood by the ordinary consumer?
TRUE
True or false: Sometimes, labels must specify the raw materials used, like cotton, nylon, etc?
TRUE
Is a warning label sometimes required?
Yes
What does the EPA require of car manufacturers with labeling?
Requires them to attatch a label to every new car which includes a fuel economy estimate for the vehicle
What does the Fair Packaging and Labeling Act require a food product label identify?
a. the product
b. net qualtity
c. serving size
d. manufacturer
e. packager or distributor
What act requires food labels state standard nutrition facts and control the use of words like fresh, low fat, trans fat free?
Nutrition Labeling and Education Act of 1990
What act applies to consumer products that are for personal, household use, school, or recreational purposes?
Consumer Product Safety Act (CPSA) of 1972
What act excludes products intended for industrial purposes and consumer products already covered by other regulatory agencies such as motor vehicles (EPA), and food and drugs (FDA)
Consumer Product Safety Act (CPSA) of 1972
What act established the Consumer Product Safety Commission?
Consumer Product Safety Act (CPSA) of 1972
What does the Consumer Product Safety Commission do?
- Set safety standards for consumer products.
2. Ban the manufacture/sale of any product commission believes poses an “unreasonable risk” to consumers.
3. Remove from market any product it believes to be “imminently hazardous”.
4. Require manufacturers to immediately notify CPSC of products already sold or intended for sale if manufacturer receives info. that the product is hazardous.
5. Administer other product safety legislation
What sets safety standards for consumer products?
Consumer Product Safety Commission
Who bans the manufacture and sale of any product that might pose an “unreasonable risk” to consumers?
Consumer Product Safety Commission
What removes from the market any product believed to be “imminently hazardous”?
Consumer Product Safety Commission
Cecil was showing Carlotta around his used car lot. He stopped at a 1972 Mustang convertible and popped the hood. “This is the best little car ever made. She’ll out-run a Cadillac any day.” Carlotta was impressed. She believed that statement meant the Mustang would go at least 80 miles an hour, because that’s what her old Cadillac would do, so she bought the Mustang. When she later found out the top speed the Mustang could reach was 70 miles an hour, she tried to return the Mustang, claiming Cecil had been deceptive with his statements comparing the speed of a Mustang to the speed of a Cadillac. In this case, Cecil’s statements
are deceptive, but Carlotta will not be able to return the Mustang.
are deceptive, and Carlotta will be able to return the Mustang for a full refund.
are not deceptive but do create a warranty.
are mere puffery and would not be considered deceptive.
are mere puffery and would not be considered deceptive.
Bell Laboratories spent 5 months developing a vaccine for COVID-19. Bell believes it has come up with a viable vaccine and wants to start manufacturing the drug immediately. Before Bell can manufacture and distribute the drug, in order to get approval from the U.S. Food and Drug Administration (FDA), Bell must
submit appropriate license fees to the U.S. Food and Drug Administration.
test the drug and make sure that information about the testing is available if a FOIA (Freedom of Information Act) request is filed.
submit appropriate license fees to the U.S. Food and Drug Administration and wait the required six-month period before distributing the drug.
test the drug and submit evidence that the drug is safe and effective, following FDA procedures.
test the drug and submit evidence that the drug is safe and effective, following FDA procedures.
Rosalyn sees an ad in the paper for a washing machine that says it is on sale for half price. Rosalyn goes to the store on the very first morning of the sale to buy the washing machine. The salesperson tells Rosalyn that he thinks they have plenty of washing machines, but says he wants to show her a better washing machine first. The salesperson shows Rosalyn a washing machine that costs twice the price of the washing machine in the ad. The salesperson tells Rosalyn that this is a much better-quality washing machine, and she would be wise to buy this one instead. Rosalyn insists that she wants to buy the washing machine that is on sale. The salesperson goes to the back of the store to check the supply and comes back and tells Rosalyn that they are sold out of the washing machine that is on sale. This salesperson has practiced bait-and-switch, and
bait-and-switch is an illegal deceptive trade practice.
bait-and-switch is a legal trade practice.
bait-and-switch is illegal under the TCPA.
bait-and-switch is allowed as long as the salesman does not present false information about the quality of the two washing machines.
bait-and-switch is an illegal deceptive trade practice.
Marvin places his telephone number on the national do not call list. After 6 months, Marvin is still receiving telemarketing calls. Particularly annoying to Marvin are the robocalls—those autodialed, prerecorded commercial telemarketing messages! Marvin hates telemarketing calls anyway, and if a live person cannot take the time to actually place the call, Marvin sure has no use for them. Marvin files a complaint with the Federal Trade Commission (FTC) about the robocalls. Marvin could also sue the companies that placed the calls. If Marvin chooses to sue the companies that placed the calls
nothing; sole authority for dealing with companies who make robocalls is with the FTC.
Marvin would receive no monetary compensation, but the calls would stop.
Marvin could recover $1,500 for the first call and $500 for each call after that.
Marvin could recover from $500 to $1,500 per call.
Marvin could recover from $500 to $1,500 per call.
Estes is behind on his credit card payments. Veronica works in the collection department of the credit card company that provides Estes with his credit cards. Veronica is working on Estes’ file and is trying to come up with a plan to get Estes’ accounts paid up to date. Veronica calls Estes every few days but has trouble getting in contact with Estes. Veronica does a little investigating and discovers that Estes leaves for work at 7:30 a.m. Therefore, Veronica decides to start placing her telephone calls to Estes at 7:00 a.m. Veronica calling Estes at 7:00 a.m. to attempt to collect a debt
would violate the Fair Debt Collection Practices Act.
would violate the Fair Credit Reporting Act.
is an allowable practice because creditors have unlimited rights to contact debtors in an attempt to collect a valid debt.
would not violate the Fair Debt Collection Practices Act.
would violate the Fair Debt Collection Practices Act.
