Warm Up

1. Warm Up • What is a warranty of title? • Download 9.01 Notes Part E

2. Sales and Consumer IssuesObjective 09.01 Part E Interpret sales contracts and warranties within the rights and law of consumers CONSUMER PROTECTION ISSUES

3. Consumer Protection Laws • Purpose: • To assist consumers in judging the quality of a product and its advantages or disadvantages, and • To create an equal field with the sellers in an affluent and technology oriented marketplace.

4. Consumer Protection Laws • Legislation passed at local, state and federal levels. • Federal Trade Act is a broad consumer law enforced by the Federal Trade Commission (FTC). • Unfair and Deceptive Trade Practices is any practice that misleads (or has the potential to mislead) a consumer.

5. Why have consumer protection laws? • To ensure consumers get adequate decision-making information to compare products • to ensure fairness and competition in the marketplace • to protect consumers against unfair and deceptive practices or the sale of substandard or dangerous goods • to require licenses and inspections to ensure compliance with the law and • to provide remedies for injured parties

6. Unfair and Deceptive Trade Practices Includes: • Price fixing on goods • Deceptive prices on service contracts • Door-to-Door Sales • Fraudulent Misrepresentation • Telemarketing Fraud • Work at home schemes • Illegal Lotteries and Scams • Gambling

7. Door-to-Door Sales • The cooling-off rule was adopted by the FTC to give consumers three business days to cancel most contracts made with door to door salespersons. The rule relates to sales of $25 or more made outside the salesperson’s regular place of business.

8. Telemarketing Fraud • Buyer Beware… • When an unsolicited caller contacts you. • When the caller asks for personal information; social security #, credit card #, bank account #s, etc. • Telemarketing scams often charge for their services through 1-900 phone numbers. When the deals seems to good to be true … it probably is not true! • Good webresource:FBI and US Postal Service fraud website www.LooksTooGoodToBeTrue.com

9. Work at Home Schemes • An advertisement to make big money easily at home by calling a number or buying a book or video. • Frequently the scam includes payment up front for “lists”, other undisclosed charges, limited or non-existent training. • If it appears you can “GET RICH QUICK”, it is probably a scam. Be careful!!

10. Lottery Scams • A con artist contacts you by mail stating you have won a lottery drawing and to contact him immediately to claim your prize. • Upon contact the con states once you pay your “clearance fee” a certified check will come in the mail. • You pay the fee and your check never comes. “Gotcha”. • ?? How can you win a lottery you did not enter??

11. False Advertising • Bait and Switch is advertising a non-existent bargain to lure customers so they can be sold a more expensive item. • Cease and desist orders are a legally binding order issued by the court to stop a practice of using advertising that would mislead the public.

12. Shopping by Mail • When ordered, should ship within 30days, or • If order delayed, seller must provide notice of back order or out of stock. • Any unsolicited merchandise received is considered a gift or free sample and receiver has no obligation to pay.

13. Internet Shopping • Use reputable business sites. • When the buyer clicks “I accept” and online cyber contract is created and the parties are bound to the contract. • Protect private information when shopping online. • Do not respond to pop up emails when online.

14. Internet Scams • A potential buyer contacts you on a website where you are selling an item. • Payment is made by cashier’s check but buyer overpays the agreed upon price. • The buyer asks you to mail or wire the refund amount back to him. You comply. • A few weeks later the cashier’s check is returned “counterfeit”. • Good web resource: www.fraudaid.com

15. International Law - Internet Sales • Check out the company before doing business with internet company. • Company may be international and the laws of the US do not always apply. A consumer has little or no recourse for defective products or illegal schemes. • International fraud, identity theft, privacy, and sale of personal information are much harder to prosecute in the global legal environment.

16. Spam • Spamming is sending mass, unsolicited advertisements over the internet. • Spammers apply First Amendment freedom of speech rights to their right to send emails. • Spam grabs user’s attention and time. • Comparable to junk mail processed by United States Postal Service • Some states have laws pending or passed to regulate spamming. • New technology is constantly changing laws.

17. Licensing • For the protection of consumers, government agencies require licensing of suppliers of consumer services. • Examples: • Health services- doctors, nurses, pharmacists • Other professionals- teachers, realtors, insurance agents, lawyers, accountants, beauticians, and others

18. Product Liability • Consumer Product Safety Act of 1972 • Created the Consumer Product Safety Commission (CPSC) • Sets product standards for hazardous products • Requires manufacturer or seller to test quality and reliability before marketing product • Can require recall, repair, replacement or refunding of the purchase price, of unsafe products • Examples: • Children’s toys with dangerous parts • Defective vehicle tires that cause accidents

19. Food, Drug and Cosmetic Act • Created the Food and Drug Administration (FDA) • Passed in 1903 after President Teddy Roosevelt read “The Jungle” by Upton Sinclair • Prohibits adulteration or mislabelingof foods, drugs or cosmetics • Creates standards for packaged foods, drugs and cosmetics • Approves new pharmaceuticals (prescription drugs)

20. Food and Drug Administration • FDA regulates packaged Food, Drugs, Cosmetics including: • Inspecting production facilities for cleanliness • Setting standards of purity and quality • Approving ingredient lists as to fitness for human consumption or use • Requiring labeling with manufacturer, packager, distributor, weight & nutritional information to assist consumer in informed decision making

21. Food and Drug Administration • New drugs cannot be marketed in the US without FDA approval. • FDA is sometimes criticized for being too cautious in granting new drug approvals. • Some Americans go to other countries to get drugs the FDA has not approved that they feel may be life-saving. • FDA recalls drugs from the market when dangerous side effects are identified.

22. What kinds of problems does FDA regulate? • Adulterated products • A product that contains any substance that will reduce its quality or strength below the minimum standard • Misbranded products • A product with false or misleading labeling or packaging • Injurious products • A product that could injure consumers

23. Labeling and Packaging • Marketers may use puffery, but not fraud. • “new and improved” • Marketers may use facts. • package contains “x” % more free • Can you name other legal label information used by marketers? • Can you name promotional information that seems misleading?

24. United States Department of Agriculture (USDA) • Regulates preparation and sale of fresh produce, meats and dairy products • Inspects canners, packers and processors and distributors for sanitary conditions and handling • Inspects products to ensure freedom from disease and fit for human consumption

25. Delaney Amendment • 1958 Amendment to FDA • Removes products from the market which are carcinogenic (Cancer Causing) • Examples: • Saccharin – sugar substitute from 1960s • Red dye #3 • Can you name other items?

26. Food and Drug Administration • FDA discourages the sale of harmful products through: • Imposing high taxes. • Issuing label or package warning. • Prohibiting the sale of the product. • Examples: tobacco, alcohol, saccharin • Can you name other examples?

27. Weights and Measures Division of the National Institute of Standards • Promotes uniformity in weights and measures laws, regulations, and standards • Allows consumers to make comparison shopping decisions such as unit pricing

28. What if I have a complaint? • First, contact company customer service department to give notice of the problem and allow time to resolve conflict with involved parties. • Frequently, companies will resolve the problem with a consumer at this stage by replacement, repair, or restitution for the item. • The company desires to keep the customer satisfied to ensure future business and positive goodwill. • If complaint is unresolved, proceed to next contact.

29. Better Business Bureau (BBB) • A private, non-government agency available at local and state levels • Logs complaints from consumers • Passes complaint information to businesses that are members, frequently resolving issue • Makes complaints available for public viewing • Tries to steer consumers to reliable businesses that conduct business ethically

30. Consumer Contacts • If you do not get resolution, then • Contact the government regulatory agency related to your complaint. • Examples: • Consumer Product Safety Commission • Federal Communication Commission • Federal Trade Commission • US Postal Service

31. Consumer Contacts • Try the state of federal attorney general’s office for assistance. • Last option, if all else fails to resolve the conflict: • Go to small claims court or • Seek legal counsel to: • File individual litigation or • Join a class action lawsuit.