Consumer Protection
Product Liability
Consumer Protection
Product Liability Law states that a person who is injured from an unsafe or defective product may be compensated for damages.
Caveat emptor is Latin for ____“Let the buyer beware_______” and means that the buyer is the responsible party in a sales agreement.
Caveat veditor is Latin for ___”Let the seller beware______” and means that the seller is the responsible party in a sales agreement.
When consumers were injured by dangerous products, they typically had no recourse because they were not in privity of contract (people who contract directly with each other) with manufacturers.
Today, manufacturers, sellers, and suppliers of goods can all be held responsible under product liability laws.
Federal and State Consumer Protection Laws
These laws are passed to protect consumers (someone who buys or leases goods, real estate, or services for personal, family, or household purposes) from harmful or defective products, foods, drugs, cosmetics and unethical businesses.
CONSUMER PROTECTION LAWS apply to transactions between consumers and people conducting business.
- These laws will not protect you if you are buying the same things from another consumer or if you are buying a product to use in a business.
FEDERAL CONSUMER PROTECTION LAWS apply only to businesses that sell real estate, goods, or services in interstate commerce (business activity that touches more than one state).
The Bureau of Consumer Protection protects consumers against unfair, deceptive, or fraudulent practices
- both investigate violations of federal consumer protection laws
Consumer Product Safety Act
Protects consumers from unreasonable risk of injury while using consumer products that are sold in interstate commerce.
- Manufacturers/sellers must prove that the product has been tested and is safe.
Three categories of product defects:
1. Manufacturing defects
Example: ladder with missing rivets
2. Poor Design
Example: toy with small parts that are easily removable/swallowed
3. Inadequate instructions and warnings about the safe use of the product
Example: chain saw that doesn’t include instructions about safety
Food, Drug, and Cosmetic Act
Prohibits the manufacture and shipment of faulty products in interstate commerce.
A food or drug said to be injurious when it contains any substance that may make it harmful to health.
A food or drug said to adulterated when it contains any substance that will reduce its quality or strength below minimum standards.
A food or drug said to be misbranded when its labeling or packaging is false or misleading.
- The federal government has the right to remove a food or food additive from the market when it is shown or believed to cause cancer in humans or animals.
Methods to discourage sales of harmful goods:
There are 3 other methods can the government use to discourage the sale of goods considered harmful to the public health:
- unusually high taxes
- labeling and packaging
- outright prohibition
UNFAIR AND DECEPTIVE PRACTICES
An unfair and deceptive practice is an act that misleads consumers.
Fraudulent misrepresentation is any statement that deceives the buyer…usually occurs when a seller misstates the facts about something that is important to the consumer.
Other deceptive practices include:
- making false statements about the construction, durability, reliability, safety , strength, condition, or life expectancy of a product….AND….not disclosing any fact that would cause a buyer to avoid entering into a contract.
Work-at-Home Schemes
- One of the oldest kinds of classified advertising fraud because they appear to bring in a large income easily.
- Many fail to say that you may have to invest in newspaper ads or job supplies and that you may have to work many hours without pay
Unordered Merchandise
- Under federal and state laws, unordered merchandise may be considered a gift.
- You can keep unordered merchandise without paying anything.
FALSE ADVERTISING
Cease and desist orders are legally binding orders issued by the FTC to stop a practice that would mislead the public.
Bait and switch occurs when a store advertises bargains that do not really exist to lure customers in hopes that they will buy more expensive merchandise.
- illegal because the advertiser is trying to sell a different product than the one advertised
- Violation of FTC regulations and many state laws
A business advertises a bargain to lure (bait) customers into the store. The switch occurs when the salespersons try to convince customers to buy other, more expensive items.
Examples of bait and switch:
- Refusing to show, demonstrate, or sell the advertised product
- Attempting to discourage customers by criticizing the advertised product
- Claiming the advertised products are out of stock
- Refusing to promise delivery within a reasonable time period
- Demonstrating products that are more expensive than the advertised items
FTC TRADE REGULATION RULES:
Federal Trade Commission (FTC)
The Federal Trade Commission (FTC) is the U.S. government agency that promotes fair trade competition in the American economy.
The Federal Trade Commission Act does not define what is an “unfair or deceptive act or practice.” It allows the FTC and the courts to determine what is unfair or deceptive,
Negative Option Rule
Subscriptions
When you subscribe to a plan that sends products regularly, the seller sends you announcements describing the current selection and you decide whether to accept the product or not. If you don’t want it, you must tell the seller not to send it by the deadline given.
Telemarketing Sales Rule
This rule gives consumers the power to stop telemarketing calls and gives state law enforcement the authority to prosecute fraudulent telemarketers.
Unwanted Calls/Robocalls
FTC regulations say that when you receive a robocall you should hang up, then report them to the Federal Trade Commission. Go to complaints.donotcall.gov or call 1-888-382-1222.
Shopping by Mail, Telephone, Fax, or Internet
The FTC requires that mail, telephone, fax, and Internet sellers inform customers of any delay in shipping because the customer has the right to know when to expect the shipment. He or she may want to purchase elsewhere if the delay will be extensive.
The Cooling-Off Rule
This rule does not apply to mail or telephone sales or to contracts for real estate, insurance, securities, or emergency home repairs.
- Applies to purchases of $25 or more made at the buyer’s home, workplace, or dormitory.
- Salesperson must inform you of your right to cancel at the time that the sale takes place.
This rule gives you 3 business days to cancel contracts for most purchases made away from the seller’s regular place of business.
PRODUCT LIABILITY
Product Liability Law states that a person who is injured from an unsafe or defective product may be compensated for damages.
Strict Liability makes manufacturers or suppliers responsible for selling goods that are unreasonably dangerous.
How to prove Strict Liability
There are 5 conditions you would have to prove to recover damages from the manufacturer or seller of a defective product:
- manufacturer/seller engaged in business of selling the product
- product was unreasonably dangerous to user
- defective condition was cause of injury or damage
- defective condition existed when product left hands of manufacturer or seller
- consumer suffered physical harm or property damage as a result of using the product
State and Local Laws
State consumer protection agencies can assist individual consumers with specific complaints.
You can find consumer protection assistance through state and local consumer protection agencies like the Consumer Product Safety Commission (CPSC) and the Better Business Bureau (BBB).