Chapter 45 Business Law Powerpoint

Consumer Law
Copyright © 2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
• LO45-1: Recall the function of the Federal Trade
Commission
• LO45-2: Explain how the Federal Trade
Commission determines what constitutes
deceptive advertising
• LO45-3: Recall the purpose of the federal laws that
regulate product labeling and packaging
• LO45-4: Outline how different methods of sales
are regulated
• LO45-5: Describe the different acts that provide
credit protection
• LO45-6: Describe the different acts that help 45-2
ensure consumer health and safety
• Sheldon Elgin Jernigan III was intrigued by a commercial he saw on television for a
new shower gel produced by Bilever Global, Inc., called Thor's Hammer. In the
advertisement, a bespectacled, pale, short, skinny male lamented the absence of
female interest in him. Later in the ad, while surfing the Internet, the nerd read about
the alluring power of Thor's Hammer to attract the fairer sex. The nerd rushed to his
local retailer, purchased the shower gel, returned home, showered with it, and then
went out on the town. The end of the commercial portrayed the man with newfound
confidence, surrounded by a host of beautiful women at a dance club.
Reality immediately mimicked fiction, at least to a certain point. Jernigan rushed out
to the drugstore, purchased the shower gel, returned home, showered with it, and
then, like the man in the ad, went out on the town. The similarities ended there—
Jernigan wandered dejectedly from club to club, with not a single female even giving
him the time of day.
• Jernigan believes Bilever Global, Inc., has violated Section 5 of the Federal Trade
Commission Act. More specifically, he believes the company's Thor's Hammer 45-3
advertisement is unfair and deceptive. Do you agree?
Chapter 45 Hypothetical Case 2
• Last year, Juan Ramirez purchased a washer-dryer combination from I. I. Gregory
Appliances, Inc. Ramirez satisfied the monthly obligations on his I. I. Gregory credit card
until he lost his job at D. Funk Steel Industries, Inc. He is now four months behind on his I. I.
Gregory credit card payments.
I. I. Gregory has turned the matter over to a collection agency, Shady Way Collections, Inc.
Since Shady Way only gets paid if it recovers on delinquent accounts, the company is very
aggressive about collecting overdue sums.
A representative of Shady Way has called Juan as early as 3:30 a.m. and as late as 11:45
p.m., often using foul language when lecturing him about his debt repayment obligations.
Despite Ramirez's repeated proclamations that he will only deal with I. I. Gregory, Shady
Way continues to contact him. The agency has even called Ramirez's brother and sister,
telling them how dishonorable their sibling is, how they should be ashamed of him, and
that they need to tell Ramirez that real men pay their debts.
• In its communications with Ramirez and his family, has Shady Way Collections, Inc., violated 45-4
the Fair Debt Collection Practices Act? If so, why should the law protect Ramirez? Has
Ramirez violated his legal and ethical obligations by not repaying his credit card debt?
Consumer Law
• Definition: A statute or administrative rule
serving to protect consumer interests
45-5
Federal Trade Commission (FTC)
• Created by Congress through Federal Trade
Commission Act (FTCA) of 1914
• Purpose of FTCA: Prevent fraud, deception, and
unfair business practices
• Purpose of FTC: Enforce provisions of FTCA
• FTC methods to protect consumers
• Consumer education
• Legal action
45-6
How the FTC Brings an Action
• FTC conducts an investigation
• FTC sends a complaint to the violator
• FTC and violator settle complaint through consent
agreement
• If company refuses to enter consent agreement, FTC
may issue formal administrative complaint, which
leads to administrative hearing
• If company has violated the law, FTC issues a cease-
and-desist order
45-7
Remedies for Violation of
Cease-and-Desist Order
• FTC can:
• Seek injunction against company
• Fine company up to $10,000 per violation
45-8
Elements of Deceptive Advertising
• Material misrepresentation, omission, or
practice that is likely to mislead a
reasonable consumer
• Bait-and-switch advertising: A form of
deceptive advertising; advertising low
price to bait consumer into store so that
salesperson can switch consumer to a
higher-priced item
45-9
FTC Actions against
Deceptive Advertising
• Cease-and-desist actions: Court orders requiring
that firms stop their current advertising behavior
• Multiple-product orders: Court orders requiring
that firms stop current advertisements on
numerous products (as opposed to one specified
product)
• Corrective advertising: Advertisements in which
company explicitly states that formerly
advertised claims were untrue
45-10
Telemarketing and
Electronic Advertising
• 1991 Telephone Consumer Protection Act: Telemarketers cannot use
an automatic telephone dialing or prerecorded voice system
• Telemarketing and Consumer Fraud and Abuse Prevention Act of
1994: Congress asked FTC to define deceptive and abusive
telemarketing practices and requested that FTC create and enforce
rules governing telemarketing that would prohibit such practices
• According to FTC-created Telemarketing Sales Rule of 1995,
telemarketers must:
• Identify call as sales call
• Identify product name and seller
• Tell total cost of goods being sold
• Notify listener/reader whether sale nonrefundable
• Remove consumer's name from contact list if consumer so requests
• Federal "Do Not Call" registry: Telemarketers cannot call consumers
who have voluntarily placed their phone numbers on the federal Do 45-11
Not Call list
Regulation of Tobacco Advertising
• Public Health Cigarette Smoking Act of
1970: Prohibits radio and television
cigarette advertisements
• Smokeless Tobacco Health Education Act
of 1986: Prohibits radio and television
advertisements for smokeless tobacco
45-12
Labeling and Packaging Laws
• Federal and state governments have
passed laws requiring that manufacturers
provide accurate, understandable labeling
information
• If product is potentially harmful,
manufacturer must make consumer aware
of harm
45-13
• Door-to-door sales: The Cooling-Off Rule gives
consumers three days to cancel purchases they
make from salespeople who come to their homes
• Telephone and mail-order sales: The Mail or
Telephone Order Merchandise Rule of 1993
extends protections to those who purchase over
the phone or by fax
• Unsolicited merchandise: Consumer allowed to
treat any unsolicited merchandise as a gift;
consumer free to keep/return unsolicited 45-14
merchandise as he/she wishes
FTC Regulation of Specific
Industries
• Used-car sales
• Funeral home sales
• Real estate sales
• Online sales
45-15
• Truth in Lending Act (TILA): Requires that sellers disclose terms of
credit/loan to facilitate consumer's comparison of a variety of credit
lines/loans
• Fair Credit Reporting Act (FCRA): Ensures accurate credit reporting
• Fair Debt Collection Practices Act (FDCPA): Regulates actions of debt
collectors that regularly attempt to collect debts on behalf of others
• Credit Card Fraud Act: Closes loopholes in federal laws to further
punish people who commit credit card fraud
• Fair Credit Billing Act (FCBA): Seeks to remedy problems and abuses
associated with billing errors
• Fair and Accurate Credit Transactions Act (FACTA): Takes affirmative
actions to control and prosecute identity theft
• Credit Cardholders' Bill of Rights Act: Targets unfair credit card 45-16
practices
Collection Practices Expressly
Prohibited by the FDCPA
• Contacting debtor at work (if debtor's employer objects)
• Contacting debtor who has notified collection agency
that he/she wants no contact with agency
• Contacting debtor before 8 a.m. or after 9 p.m.
• Contacting third parties about the debt (exceptions:
contacting debtor's parents, spouse, or financial adviser)
• Using obscene/threatening language when
communicating with debtor
• Misrepresenting collection agency as a lawyer/police
officer
• Note: These restrictions apply to all debt collectors 45-17
• Federal Food, Drug, and Cosmetic Act (FFDCA):
Protects consumers against misbranded or
adulterated food, drugs, medical devices, or
cosmetics
• Consumer Product Safety Act: Created the
Consumer Product Safety Commission (CPSC) to
protect the public against unreasonable risks of
injuries and deaths associated with consumer
products
45-18
• Tancredo's Television and Appliance is preparing for its annual Labor Day sale. The store's sales
manager, Chase Randleman, has arranged for an ad to run in the next Sunday's edition of the local
newspaper. The full-page advertisement features a 60" Sanyoshiba TV with a price of $495. The
average competitor price for a similar Sanyoshiba TV is $1,299.
By 5:00 a.m. on Labor Day, 300 eager customers wind around the store. There is a mad rush to the
door when the store opens at 8:00 a.m., and Bailey Simmons is the third customer through the
door. Simmons's principal goal is to head to the TV section and buy the Sanyoshiba, but he does
stop for a few minutes to check out some other appliances.
At 8:15 a.m., Simmons informs a sales representative, Mike Petty, that he would like to purchase
the $495 Sanyoshiba television, but Petty tells him he doesn't have another one like that to sell
because the store already sold the five they had in stock and that the store has made a marketing
decision to discontinue carrying the Sanyoshiba brand. Petty tells Simmons, however, that he has
a Toshamaha of the same size and options for $995, which is $200 less than its manufacturer's
suggested retail price.
• Is Tancredo's Television and Appliance legally obligated to either find and sell Simmons the
featured television for the advertised price or sell him another brand of like dimensions and 45-19
features for the $495 price?
• Baby Love Toys has a problem. A stuffed animal it manufactures, the
Squeezy Teddy, has been a popular seller, but the mechanism inside it that
makes a noise when a child squeezes it has been found to be a choking
hazard. Two toddlers, one in Arizona and one in Connecticut, have extracted
the mechanism from the stuffed toy, swallowed it, and have nearly choked
on it.
Baby Love Toys has received a notification from the Consumer Product
Safety Commission (CPSC) about the issue. The notification requests that
the company conduct a voluntary recall of the product. Baby Love Toys'
management is very concerned about the financial repercussions of a recall
of its most popular toy and does not want to do it.
• What will the CPSC likely do if Baby Love Toys does not issue a voluntary
recall of the product? Does Baby Love Toys have the right to ignore the 45-20
CPSC's request?

Chapter 45 Business Law Powerpoint

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chapter 45 Business Law Powerpoint

Uploaded by

Copyright:

Available Formats

Consumer Law

You might also like