Consumer Protection and Product Liability

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Consumer ProtectionandProduct Liability

• Mr. Sherpinsky
• Council Rock School District

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What Youll Learn

• How to explain the main differences between state
  and federal consumer protection law (p. 316)
• How to describe two unfair and deceptive
  practices (p. 317)
• How to recognize bait and switch advertising (p.
  321)
• How to identify four Federal Trade Commission
  rules that protect consumers (p. 321)

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Why Its Important

• Knowledge of consumer protection laws will
  prevent you from falling victim to fraud and
  deception.

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Legal Terms

• caveat emptor (p. 316)
• caveat venditor (p. 316)
• consumer (p. 316)
• unfair and deceptive practice (p. 317)
• fraudulent misrepresentation (p. 318)
• cease and desist orders (p. 320)
• bait and switch (p. 321)
• cooling-off rule (p. 322)
• telemarketers (p. 323)
• product liability (p. 327)
• strict liability (p. 327)
• adulterated (p. 329)
• intrastate sales (p. 330)

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Pre-Learning Question

• How did consumer protection laws develop?

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A pair of Chinese made flip-flops on sale in the
USA
Advanced reaction to the highly toxic material
used to make the flip-flops
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CPSC has ordered recalls of millions of baby
cribs, including cribs with detachable drop sides
that can possibly trap and suffocate a child. New
federal crib safety standards were adopted in
June 2011
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Fat substitute Lays Light Chips, Pringles Light
chips. Olestra is Procter Gambles synthetic
fat that is not absorbed as it passes through the
digestive system, so it has no calories. Procter
Gamble suggests that replacing regular fat with
olestra will help people lose weight and lower
the risk of heart disease.
Olestra can cause diarrhea and loose stools,
abdominal cramps, flatulence, and other adverse
effects. Those symptoms are sometimes severe.
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The Development of Consumer Protection Law

• Years ago, caveat emptor, which means let the
  buyer beware, reflected societys attitude
  toward consumers.
• There were few ways to seek compensation for
  damages and those injured had no recourse due to
  not being in privity of contract.
• There was no course of action that could be taken
  if customer was injured by products purchased.
• Today, however, society demands that
  manufacturers be held responsible for foreseeable
  injuries to people who use their products.

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The Development of Consumer Protection Law

• Caveat venditor, which means let the seller
  beware, now guides consumer transactions.
• Today, however, society demands that
  manufacturers be held responsible for foreseeable
  injuries to people who use their products.

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Pre-Learning Question

• To whom do consumer protection laws apply?
• Consumer protection laws apply to transactions
  between consumers and people conducting business

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Federal and State Consumer Protection Laws

• Consumer protection laws apply to transactions
  between consumers and people conducting business
• A consumer is someone who buys or leases goods,
  real estate, or services for personal, family, or
  household purposes.

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Federal and State Consumer Protection Laws
Consumer protection laws do not protect you if

• you acquire a product from another consumer
• you buy a product to use in a business

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• What is the difference between caveat emptor and
  caveat venditor?
• Caveat emptor is Latin for let the buyer beware
  and means the buyer is the responsible party.
  Caveat venditor is Latin for let the seller
  beware and means that the seller is responsible.

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State Consumer Protection

• State consumer protection offices provide
  information and help enforce state consumer
  protection laws.
• Offices may assist consumers with individual
  problems.

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Federal Consumer Protection

• Federal consumer protection law applies to
  businesses that sell real estate, goods, or
  services in interstate commerce, or business
  activity that touches more than one state.
• The Federal Trade Commission (FTC) is the U.S.
  government agency that promotes free and fair
  trade competition in the American economy.
• The Bureau of Consumer Protection safeguards
  consumers against unfair, deceptive, or
  fraudulent practices.
• Both organizations investigate violations of
  federal consumer protection law.

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Classwork

• Complete Chapter 15 Packet
• Complete Chapter 15 Vocabulary Handout

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Pre-Learning Question

• What do you think are unfair and deceptive
  practices?

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Unfair and Deceptive Practices

• An unfair and deceptive practice is an act that
  misleads consumers. Most states have enacted some
  kind of unfair and deceptive trade practice law.
• Examples include
• work-at-home schemes
• unordered merchandise
• false advertising

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Unfair and Deceptive Practices

• If you feel you are the victim of an unfair or
  deceptive practice
• Speak to the business owner or manager about the
  problem
• Write a complaint letter to the company.

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Elements of a Complaint Letter

• description of purchase
• product name and serial and model number or
  service
• statement and history of problem
• ask for specific action, state reasonable time
  for action
• copies of documents
• your address and work and home phone numbers

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Fraudulent Misrepresentation

• A fraudulent misrepresentation is any statement
  that deceives the buyer.
• A fraudulent misrepresentation usually occurs
  when a seller misstates the facts about something
  that is important to consumer.

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Fradualent Misrepresentations

• Making false statements about the construction,
  durability, reliability, safety, strength,
  condition, or life expectancy of a product is
  another deceptive practice.

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Work-at-Home Schemes

• Home employment Work at Home schemes are among
  the oldest kind of advertising fraud.
• Often these offers sound attractive
• They often promise big incomes without explaining
  the costs.
• Work many hours without pay

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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.

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Unordered Merchandise

• Only two kinds of goods can be sent legally
  through the mail without the consumers consent
• Manufacturers free samples
• Merchandise mailed by charities

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• What does FTC stand for and what does it do?
• The Federal Trade Commission is the agency of the
  U.S. government that promotes free and fair trade
  competition in the U.S economy.

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Write a Letter of Complaint!

• Think back to a problem you had with a specific
  company of product.
• Research the name, address, and issue thoroughly
  on the Internet
• Write a letter of complaint to the business
• description of purchase
• product name and serial and model number or
  service
• statement and history of problem
• ask for specific action, state reasonable time
  for action
• copies of documents
• your address and work and home phone numbers

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Letter Re-Writes

• Try this approach
• I was disappointed
• I am a regular customer
• I intend to continue to be a regular customer
• All I want is
• To get what I wanted
• Meet my expectations
• Refund or credit for my purchase
• By or Before my next visit

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Pre-Learning Question

• What is an example of false advertising?

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False Advertising

• The FTC regulates false advertising on the
  national level and has the power to issue cease
  and desist orders.
• These orders are legally binding orders to stop a
  practice that would mislead the public.

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Bait and Switch

• One example of false advertising is bait and
  switch advertising.
• This happens when a store advertises bargains
  that do not really exist to lure customers in
  hopes that they will buy more expensive
  merchandise.

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Bait and Switch

• Signs of such practices
• Refusing to show, demonstrate, or sell advertised
  product.
• Criticizing advertised product to discourage
  purchases.
• Claiming advertised product is out of stock
• Refusing to promise delivery within a reasonable
  time.
• Demonstrating products that are more expensive
  that the advertised items

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Classwork

• Complete Chapter 15 Packet
• Complete Chapter 15 Vocabulary Handout

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Pre-Learning Question

• What are some FTC trade regulation rules?
• The FTC has established trade regulation rules
  for interstate commerce to correct wrongdoing in
  the marketplace.
• They Include
• the negative option rule
• the cooling-off rule
• the telemarketing sales rule
• 900-telephone-number rules
• rules for shopping by mail, telephone, fax or
  Internet

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Negative Option Rule

• When you subscribe to magazines or CD club or
  other plan that sends products regularly, the
  negative option rule applies.
• Under such plans, the seller sends you
  announcements describing the current selection.
• If you want the selection, you do nothing the
  seller will ship it automatically.
• If you do not want it, you must tell the seller
  not to send it, and there is a deadline for
  notification.

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Negative Option Rule

• Under Negative Option Rule, Sellers MUST tell
  you
• How many selections you must buy
• How and when you can cancel membership
• How to notify the seller when you do not want
  selection
• When to return negative option to cancel
  shipment
• When youll get credit for return of selection
• How postage and handling costs are charged
• How often you will receive announcements and
  forms

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The Cooling-Off Rule

• The cooling-off rule gives you three days to
  cancel contracts for most purchases made away
  from the sellers regular place of business.
• The rule applies to purchases of 25 or more made
  at the buyers home, workplace, or dormitory.
• It does not apply for contracts of real estate,
  insurance, securities, or emergency home repairs.

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Telemarketing Sales Rule

• The Telemarketing Sales Rule protects you from
  abusive telemarketers, the people who try to sell
  you products by telephone
• Illegal for them to call
• If you have asked them not to contact you again.
  (No Call List)
• Unless it is between 8A.M. and 9P.M.
• Unless they identify the company that they
  represent
• If they make false statements
• Unless they tell you the total cost of the
  products offered and any restrictions that apply
  (Odds of winning, no purchase necessary)
• If they withdraw money from your checking account
  without permission
• If they make you pay for credit repair, recovery
  room, or advance-fee loans

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Telemarketing Sales Rule
900-Telephone-Number Rules

• Unlike 800 telephone numbers, if you dial a
  900-area-code telephone number, you are charged
  for the call. Sometimes consumers are charged
  excessively for 900-number calls.
• 900 area code calls are free
• When encouraged to call 900 numbers you must be
• Warned of the cost of the call
• Given a chance to hang up before being charged
• Able to block the number with telephone company

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Protect Yourself Against 900-Number Scams

• Deal only with reputable companies.
• Think twice before calling a 900 number for a
  free gift.
• Know precisely what the 900 call will costbefore
  you make the call.
• Dont confuse 900 numbers with toll-free 800
  numbers.

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Shopping by Mail, Telephone, Fax, or Internet

• The FTC has established rules to protect you when
  ordering goods by mail, telephone, fax, and the
  Internet.

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Shopping by Mail, Telephone, Fax, or Internet

• Sellers must ship goods within the time they
  promise in the advertising.
• If shipping time is not stated, they must ship
  within 30 days after receiving an order.
• You have the right to cancel and get your money
  back if time limits are not met.
• Sellers must notify you of any delay in shipment.

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Work packets

• Time to complete work packets.
• NO COMPUTERS!

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Product Liability

• How to
• Differentiate between product liability and
  strict liability (p. 327)
• Describe the purpose of the Consumer Product
  Safety Act (p. 329)
• Identify the prohibitions contained in the Food,
  Drug, and Cosmetic Act (p. 329)
• Determine where to get consumer protection
  assistance (p. 330)

What Youll Learn
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Product Liability
Discussion Question

• What do you think
• product liability is?

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Product Liability

• What Is Product Liability?
• Under product liability law, someone who is
  injured from a products unsafe or defective
  condition may recover damages
• Often times the products are recalled at NO COST
  to consumers
• Manufacturers, sellers, and suppliers of goods
  can all be held responsible.

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Product Liability

• What Is Strict Liability ?
• You do not have to prove a negligent act on the
  part of the manufacturer or seller if you are
  hurt using a defective product.
• Strict liability makes manufacturers or suppliers
  responsible for selling goods that are
  unreasonably dangerous.

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Product Liability

• Strict Liability
• People who are injured or who suffer property
  damage from a defective product may recover from
  the manufacturer or seller if they can prove that
  certain factors must be present
• The manufacturer or seller was engaged in the
  business of selling the product.
• The product was unreasonably dangerous to the
  user or consumer.
• The defective condition was the cause of the
  injury or damage.
• The defective condition existed when the product
  left the hands of the manufacturer or seller.
• The consumer suffered physical harm or property
  damage as a result of using the product.
• Inadequate warning of danger and improper
  instructions for the products use are also
  considered defects

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Product Liability
Pre-Learning Question

• What are some federal and state consumer
  protection laws?

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Federal and State Consumer Protection Laws

• Both the federal and state governments pass laws
  to protect consumers in the marketplace.
• Laws can only apply to items produced and
  purchased within that state

Two federal laws are the

• Consumer Product Safety Act
• Food, Drug, and Cosmetic Act

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Consumer Product Safety Act

• This Act protects you from unreasonable risk of
  injury while using consumer products that are
  sold in interstate commerce.

Defects in products are divided into three
categories

1. Manufacturing defects
2. Poor design
3. Inadequate instructions and warnings about the
   safe use of the product

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Consumer Product Safety Act

• Manufacturers must test the quality and
  reliability (fitness) of all products
• Must prove they are safe
• They can recall the product if need be

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Food, Drug, and Cosmetic Act

• This law prohibits the manufacture and shipment
  of faulty products in interstate commerce.
• Faulty products include any food, drug,
  cosmetic, or health-related device that is
  injurious, adulterated, or misbranded.
• A food or drug is said to be injurious if it
  contains any substance that may make it harmful
  to health.

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Food, Drug, and Cosmetic Act

• An adulterated food or drug is one that contains
  any substance that will reduce its quality or
  strength below minimum standards.
• A food or drug is misbranded if its labeling or
  packaging is false or misleading.

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Food, Drug, and Cosmetic Act

• Drugs must
• Bear name and address of the manufacturer
• Statement of the quantity or weight of contents
• Non Prescription Drugs must
• Give the common name of drug
• Detail directions for use
• Have caution for any unsafe use
• Indicate if the drug is addictive

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Food, Drug, and Cosmetic Act
The government uses removal and other methods to
discourage the sale of goods considered harmful
to the public health. They include

• unusually high taxes
• labeling and packaging
• outright prohibition

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Warning Labels
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Pop Quiz Review
True or False A food or drug is said to be
injurious if it contains any substance that may
make it harmful.
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Product Liability

• State and Local Laws
• If goods are manufactured and sold only within
  the boundaries of a state, the federal government
  has no control over the goods.
• For this reason, many states have enacted their
  own product liability laws.
• These laws apply to intrastate sales (sales
  within a state).
• Nearly all states and localities license and
  regulate establishments that sell food.

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Pop Quiz Review
True or False The federal government applies
unusually high taxes on harmful products in order
to raise enough money to warn consumers of its
dangers.
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Product Liability
Pre-Learning Question

• Where can you go to get consumer protection
  assistance?

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Consumer ProtectionAssistance

• Many state and local governments have offices of
  consumer affairs to educate the consumers and
  help protect them against fraud.
• The federal Consumer Product Safety Commission
  establishes safety standards for consumer
  products.
• Has the power to recall unsafe products and to
  impose fines on violators

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Consumer ProtectionAssistance

• Better Business Bureau
• The Better Business Bureau (BBB) is an example of
  a nongovernment agency that hears consumer
  complaints at the local and state levels.
• Its mission is to promote high ethical
  relationships between businesses and the public
• while steering the public to reputable
  businesses.

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EXAM NEXT CLASS

• Chapter 15 Exam Next Class
• 45 Questions
• True/False
• Drop Down
• Multiple Choice
• Essay