Consumer Protection

1. ConsumerProtection Chapter 14

2. The United States Government Protection of the Consumer • As civilized society has developed, the dangers we face are increasingly of our own making poisonous chemicals, polluted air, automobile accidents, defective products. • We have increasingly looked to government to protect us from man-made dangers that we feel incapable of protecting ourselves from. • Deaths, injuries, and property damage from consumer product incidents cost the nation more than $900 billion annually.

3. GOVERNMENT REGULATORY AGENCIES in Court the Most • Federal Trade Commission (FTC)- 1913 - Interstate Trade • Food and Drug Administration (FDA) - 1931 - Food, drugs, cosmetics • Equal Employment Opportunity Commission - (EEOC) - 1964 Hiring practices • Environmental Protection Agency (EPA) - 1970 - Pollution of the environment • Occupational Safety and Health Administration (OSHA) - 1971 - Conditions in workplaces • Consumer Product Safety Commission (CPSC) - 1972 - Design and labeling of goods

4. The Consumer Product Safety Act • enacted in 1972 by Congress • an independent agency of the federal government • The act gives CPSC the power to develop safety standards and pursue recalls for products that present unreasonable or substantial risks of injury or death to consumers. • CPSC has jurisdiction over more than 15,000 different products.

5. Videos • http://www.cpsc.gov/ • http://www.youtube.com/watch?v=ApIX-7WXvyg&feature=fvst • http://www.youtube.com/watch?v=l5vxFE_DJko • http://www.youtube.com/user/USCPSC?ob=0&feature=results_main

6. International Car Theft Ring • http://www.phillyburbs.com/news/local/courier_times_news/video-pa-state-police-bust-international-car-theft-ring/youtube_be4345d7-7873-514d-8ad1-1b3164a8e192.html

7. Consumers • Individuals who acquire goods that are intended primarily for personal use Caveat Emptor - “let the buyer beware” Caveat Venditor – “let the seller beware”

8. The Attorney General Office • is dedicated to ensuring that their State’s consumers are treated fairly and properly. • guarding against: • telemarketing scams or identity theft • monitoring charitable organizations • protecting consumers from deceptive advertising or other unfair business practices. • Each year, the Attorney General's Bureau of Consumer Protection receives more than 50,000 complaints from consumers - ranging from shoddy home remodeling work to violations of Pennsylvania's Do Not Call law.

9. Attorney General in each State • PHILLY: • http://www.attorneygeneral.gov/press.aspx?id=5969 • BOSTON: • http://www.boston.com/Boston/metrodesk/2012/03/assets-frozen-for-oxford-oil-company-accused-scamming-least-customers/f3nr21qFQUfSAADnV0vw5L/index.html

10. Class Actions (Class Action Suits) • allows one or several persons to sue not only on behalf of themselves, but also on behalf of many others similarly wronged

11. Governmental Procedure • Cease-and-desist order – order requiring the company to stop specific conduct • Consent order – voluntary, court-enforceable agreement to stop an illegal or questionable practice • Restitution – return of money wrongfully obtained from a customer

12. Licensing • Certain businesses and institutions must acquire proper licensing before providing products or services • ie. Doctors, nurses, teachers, lawyers, realtors, beauticians • May also be required to pass inspections

13. 1. Agreements to Fix Prices • No company/companies may work together to eliminate competition and set (fix) prices

14. DOJ Suit against Apple • http://cnettv.cnet.com/doj-announces-suit-against-apple-publishers-over-e/9742-1_53-50123006.html?tag=mncol;txt

15. 2. False and Misleading Advertising • Intentionally deceives, makes untrue claims, or fails to reveal critical facts http://www.businessinsider.com/false-advertising-scandals-2011-9?op=1

16. Activia – Dannon Yogurt • lured consumers into paying more for its purported nutritional benefits -- when it was actually pretty much the same as every other kind of yogurt. • Falsely touting the "clinically" and "scientifically" proven nutritional benefits of the product, Dannon even got a famous spokesperson, Jamie Lee Curtis, for the supposed digestion-regulator. But after a while, some customers didn't buy it. • A class action settlement last year forced Dannon to pay up to $45 million in damages to the consumers that filed the lawsuit and others who said they'd been bamboozled. The company also had to limit its health claims on its products strictly to factual ones.

17. Hyundai and KIA vehicles' horsepower • Hundreds of car owners were extremely disappointed to find out that Hyundai and Kia overstated the horsepower in some of their vehicles. • In 2001, the Korean Ministry of Construction and Transportation uncovered the misrepresentation, which for some models was as much as 9.6 percent more horsepower than the cars actually had. • A class action lawsuit in southern California claimed the companies were able to sell more cars and charge more per vehicle because of the false claims. In the end, the auto powerhouses had to pay customers -- the settlement was estimated to be between $75 million and $125 million.

18. Airborne • Herbal supplement Airborne was a national hit throughout the 1990s. Marketing of the product claimed that it helped ward off harmful bacteria and germs, preventing everyday ailments like the flu and common cold. But did Airborne actually have these benefits? • Apparently not, which sparked a huge false advertising scandal. There were no studies to support Airborne's effectiveness that met scientific standards -- so the Center for Science in the Public Interest (CSPI) got involved. • The high-profile scandal ended with a huge settlement, with Airborne having to pay $23.3 million in the class-action lawsuit, and an additional $7 million settlement later. The exact benefits to users of Airborne remain unestablished.

19. The one probably most familiar to consumers is false advertising. • Examples of false advertising practices that would violate the FTCA include: • false advertising of food, drugs, devices, services or cosmetics;  • inaccuracy of prices, falsehoods as to "free gifts," • distortions as to credit or payment terms; • misleading representations as to the type, content, origin, or test/surveys relating to a product; • or deceptive T.V. commercials

20. Bait and Switch – using an understocked, low-priced “hook” to lure consumers into a store • Advertised item is out of stock and customers are redirected to a more expensive product

21. Advertisement is not considered deceptive if it states “limited quantity” or specifies # of items available • FTC (Federal Trade Commission) regulates false and misleading advertising

22. Corrective advertising requires the advertiser to publicly admit wrongdoing and state the truth in a prescribed number of future ads

23. 3. Illegal Lotteries • To be an illegal lottery, a gambling scheme or game must have 3 elements • Required payment of money or something of value to participate • Winner to be determined by chance, not skill • Prize to be won

24. Holding or participating in illegal lotteries are subject to fines and imprisonment • Some statues exempt religious and charity groups from lottery prohibition – to produce revenue for non-profit organizations

25. Confidence Games • The victim is persuaded to trust the swindler with the victim’s money in hopes of a quick gain Ex. Pyramid schemes

26. 4. Unfair Pricing and Service • Misrepresenting… • Goods being sold at a considerable discount • Good being sold at wholesale price • Goods as being free when purchased with another at an inflated price

27. 5. Mislabeled Goods • Size and shape of container may not be misleading • Certain products must carry warning labels • Selling used articles as new or in better condition than they actually are

28. Other Unfair Trade Practices • Using a brand name/trademark so similar to a competitor’s that it confuses the public • Sending unordered merchandise and demanding payment or return • Recipient is under no legal obligation to return or pay!

29. ACTIVITY BREAK!

30. Each group will receive one type of unfair trade practice • As a group, make an ANIMOTO that portrays your unfair trade practice • Make sure the class can understand that what your portraying is wrong!

31. Consumer Sentinel • Consumer Sentinel is the unique investigative cyber tool that provides members of the Consumer Sentinel Network with access to millions of consumer complaints. To learn more visit: http://www.ftc.gov/sentinel/ • http://www.youtube.com/watch?v=WcW0vngJZEM

32. Cases: FTC v. Countrywide • Lucy Morris, Senior Attorney - Bureau of Consumer Protection • http://www.ftc.gov/multimedia/video/cases/countrywide/morris_q1.shtm

33. What is Operation Bottom Dollar? • Monica Vaca, Bureau of Consumer Protection • http://www.ftc.gov/multimedia/video/scam-watch/bottom-dollar/job-scams_vaca-q1.shtm

34. Unsafe Products • 1972 – Consumer Product Safety Act • CPSC (Consumer Product Safety Commission) was created to issue and enforce safety standards/regulations

35. Also regulates… • Construction • Accessibility • Occupancy rates • Parking • Fire escapes • Sanitary facilities • Etc. Consumers who think the CPSC is not taking proper action may bring suit in federal district court for enforcement

36. Food and Drug Administration (FDA) • Requires that the production facilities for cosmetics, food and drugs be clean • Requires labels on regulated products • Regulates new drugs entering the market (and whether they are prescription or OTC)

37. Tough Decisions that the FDA is faced with • Pharma Drugs: • http://www.youtube.com/watch?v=C6w4s5gwaLI • Cigarettes: • http://www.youtube.com/watch?v=layWZLdSXSw&feature=relmfu • Supplements: • http://www.youtube.com/watch?v=KTAlVA8gKPo

38. Food and Drug Administration • Products that do not meet FDA standards are deemed adulterated and may be confiscated or seized by the government

39. The U.S. Department of Agriculture inspects canners, packers, and processors of poultry and meat entering the market • Helps ensure that products are free of disease and are processed under sanitary conditions

40. Improper Weights and Measures • The U.S. Constitution gives Congress the power to set standards for weights and measures • Gallon of gasoline • Pound of bananas • Foot of rope

41. Unfair Trade Practice • any method of business that is dishonest or fraudulent or that illegally limits free competition

42. FTC • If you’re in the debt collection business, it’s up to you to comply with the Fair Debt Collection Practices Act. • http://business.ftc.gov/multimedia/videos/debt-collection • If you market your products or services by phone – or if someone has hired you to handle their telemarketing for them – it’s a good idea to know about the Do Not Call provisions of the Telemarketing Sales Rule and how to comply. • http://business.ftc.gov/multimedia/videos/complying-do-not-call

43. How to File a Complaint with the FTC… • http://business.ftc.gov/multimedia/videos/how-file-complaint

44. Protection Through Action by the Consumer Chapter 14 – section 2

45. Product Liability The responsibility to compensate buyers, users and even bystanders for injuries caused by a defective product

46. Product Liability May be based on • fraud • negligence • breach of warranty or • strict liability: http://www.youtube.com/watch?v=4wiazLYrl7E&feature=related

47. Product Liability Case • http://www.youtube.com/watch?v=aVfxlygcyvI • http://www.youtube.com/watch?v=Y9qUJQ9ys_U&feature=related • Strict Liability • http://www.youtube.com/watch?v=xJ_BkFU94Rk

48. Strict Liability is a liability that exists even if the defendant is not negligent

49. Warranty An assurance that the seller makes about the product’s quality or performance

50. Express Warranty – An assurance of quality or promise of performance explicitly made (plainly stated) by the seller • Implied Warranty – An obligation imposed by law on all sellers (assumed by the buyer at time of sale)