Consumer ProtectionBusiness Law

Unit 12

Smithtown High School West

Mr. Como

Caveat Emptor The Latin phrase

‘caveat emptor’ translates to ‘let the buyer beware’.

The expression basically meant that the person who purchased the product had no recourse if they were injured by faulty merchandise.

Caveat Emptor The consumer had no

recourse since they had no privity of contract with the manufacturer. Since the retailer had

purchased the merchandise from the manufacturer, it was only the retailer who had privity.

Caveat Venditor Society demanded that

the manufacturers be held responsible for the injuries their products caused to consumers.

Now, the phrase that guides consumers is ‘caveat venditor’ or “let the seller beware”

Consumer Protection Laws Consumer protection

laws are designed to protect the consumer against unfair and deceptive acts or practices by a business.

These laws apply to transactions between consumers and people conducting business.

Consumers A consumer is someone

who buys or leases goods, real estate or services for personal, family or household purposes. 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.

State and Federal Consumer Protection Laws State Consumer Protection offices provide

information and help enforce any consumer protection issue that occurs within that state.

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.

Unfair and Deceptive Practice Unfair and deceptive

practices are acts that intentionally mislead consumers. Deceptive Pricing –

raising a price with the intention of lowering it later to claim a bargain price.

Deceptive Service Estimates In most states, a

business must provide a consumer with a written estimate of the cost of anticipated repairs. If the estimate and the

actual are different, the business must notify the customer first.

Fraudulent Misrepresentation Fraudulent

misrepresentation is any statement that deceives the buyer.

This usually occurs when a seller misstates the facts about something that is important to the consumer.

Fraudulent Misrepresentation Example:

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.

Work-at-Home Schemes Work-at-Home

schemes often fail to describe fees that you have to pay, long hours with no pay, costs to enter the business….

Many people who think they can earn money quickly at home usually end up losing money through hidden costs, etc.

Unordered Merchandise 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.

The only exceptions that can be legally sent without consent are free samples and anything sent by a charity.

False Advertising The Federal Trade

Commission (FTC) regulates false advertising.

The FTC can issue a cease and desist order – a binding decree to stop a practice that would mislead the public.

False Advertising Listerine used to have

ads that stated that by using Listerine, you could minimize colds or lessen their severity.

None of this was true, and the FTC ordered the company to stop airing them, and ordered corrective advertising.

Bait and Switch 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. 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.

Bait and Switch Techniques Bait and Switch may be

evidenced when the store: Refuses to show,

demonstrate or sell the advertised product.

Criticize the advertised product to discourage the prospective buyer

Claiming the advertised item is out of stock

Refusing to promise delivery of the advertised item within a reasonable period of time

Demonstrating products that are more expensive than the advertised items

Negative Option Rule 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.

Negative Option Rule The seller must tell you:

How many selections you must buy, if any

How to notify if you do not want the selection

When to return the ‘negative option’ form to cancel the selection

When you can get credit for a returned item

How postage and handling costs are handled

How often you will receive announcements and forms

Cooling Off Rule 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.

This is the cooling off rule.

Cooling Off Rule 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….

Cooling Off Rule Under the FTC rule, the salesperson must tell

you your right to cancel at the time of purchase.

The salesperson must also give you two copies of the cancellation form. You will send one back before the third day ends.

Send by registered mail for proof of delivery.

Cooling Off Rule Once you have stated your intent to cancel,

the seller must: Cancel and return any papers you signed Refund your money Inform you when any merchandise left with you

will be picked up Return to you anything you traded in

Cooling Off Rule The cooling off rule

does not apply to contracts for real estate, insurance, securities or emergency home repairs.

Telemarketers Telemarketers are individuals who try to sell

people items over the phone. Companies often run scams on unsuspecting

consumers to entice them to buy items they normally would not.

Recent legislation has created the ‘Do Not Call’ Registry that bans these companies from calling people who do not want to be contacted.

Telemarketers It is illegal for telemarketers to

contact you if you have asked not to be called.

Calling times are restricted to 8 am – 9 pm

It is illegal to make false statements about their products

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. If you are asked to pay for a

prize, hang up.

900 Numbers A 900 series number

costs the dialer per minute

Some scams entice people to call, but people do not realize that they may be paying excessive amounts for the call.

Shopping By Mail, Phone, Fax or Internet The FTC has

established rules to protect customers who buy goods from home.

These rules cover shipping, cancellation, delays, etc.

Under law, shipping must take place within 30 days

Product Liability 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.

Strict Liability Strict liability makes

manufacturers or suppliers responsible for selling goods that are unreasonably dangerous.

The defective condition may be found through faulty product design or faulty manufacturing. Inadequate warning of

danger or improper instructions for the product’s use are also considered defects.

Strict Liability 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: Manufacturer/seller was engaged in the business of

selling the product Product was unreasonably dangerous to the user Defective condition was the cause of the injury or damage Defective condition existed when the product left the

manufacturer Consumer suffered physical harm or property damage as a

result of using the product.

Consumer Product Safety Act This law, written in

1972, states that manufacturers must test the quality and reliability before placing a product on the market.

The product may be recalled if there are valid complaints about a product.

Consumer Product Safety Act Defects are divided into

three categories: Manufacturing defects

(missing key bolt on a ladder)

Poor design (toy with small parts that can lead to choking)

Inadequate instructions and warnings about the safe use of the product. (chain saws)

Food, Drug and Cosmetic Act The Food, Drug and

Cosmetic Act prohibits the manufacture and shipment of faulty products in interstate commerce.

Faulty products include any item that is injurious, adulterated or mislabeled.

Adulterated Products An adulterated product

is one that contains any substance that will reduce its quality or strength below minimum standards.

Often referred to as watered down.

Misbranded Items Any food or drug item

with false or misleading labeling or packaging are prohibited. Certain items are

required to have warning labels and tamper proof packaging.