Dynamic business law 4e kubasek 4e CH45 ADA final

45-2 How does the Federal Trade Commission determine what constitutes deceptive advertising?. Hypothetical Case 1 1 of 2• Sheldon Elgin Jernigan III was intrigued by a commercial he sa

Dynamic Business Law

Fourth Edition

Chapter 45

Consumer Law

45-1 What is the purpose of the Federal Trade

Commission Act?

45-2 How does the Federal Trade Commission

determine what constitutes deceptive advertising?

45-3 What is the purpose of labeling and

packaging laws?

45-4 What are the different methods of sales?

45-5 What are the different acts that provide

credit protection?

45-6 What are the different acts that help

ensure consumer health and safety?

Hypothetical Case 1 (1 of 2)

• 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 The advertisement depicted a

bespectacled, pale, short and skinny male (i.e., a

nerd) lamenting 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 and purchased the shower gel,

returned home and showered with it, and then

went out on the town The end of the commercial

portrayed the former nerd with newfound

Hypothetical Case 1 (2 of 2)

• Reality immediately mimicked fiction, at least to a

certain point Jernigan rushed out to the drugstore

and purchased the shower gel, returned home and

showered with it, and then, like the nerd 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 advertisement is unfair and deceptive Do

you agree?

Hypothetical Case 2 (1 of 2)

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.

collection agency, Shady Way Collections, Inc

Since Shady Way only gets paid if it recovers

on delinquent accounts, the company is very

Hypothetical Case 2 (2 of 2)

• 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 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

serving to protect consumer interests

Federal Trade Commission (FTC)

Commission Act (FTCA) of 1914

and unfair business practices

How the FTC Brings an Action

consent agreement

agreement, FTC may issue formal

administrative complaint, which leads to

administrative hearing

a cease-and-desist order

Remedies for Violation of

Cease-and-Desist Order

Elements of Deceptive Advertising

practice that is likely to mislead a

reasonable consumer

deceptive advertising; advertising low price

to bait consumer into store so that

salesperson can switch consumer to a

higher-priced item

FTC Actions against Deceptive

Advertising

requiring that firms stop their current

advertising behavior

requiring that firms stop current

advertisements on numerous products (as

opposed to one specified product)

which company explicitly states that

formerly advertised claims were untrue

Telemarketing and Electronic

Advertising (1 of 3)

Telemarketers cannot use an automatic

telephone dialing or prerecorded voice

system

Telemarketing and Electronic

Advertising (2 of 3)

• 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

Telemarketing and Electronic

Advertising (3 of 3)

• Federal "Do Not Call" registry:

Telemarketers cannot call consumers who

have voluntarily placed their phone

numbers on the federal Do Not Call list

Regulation of Tobacco Advertising

1970: Prohibits radio and television

cigarette advertisements

1986: Also prohibits radio and television

advertisements for smokeless tobacco

Labeling and Packaging Laws

passed laws requiring that manufacturers

provide accurate, understandable labeling

information

manufacturer must make consumer aware

of harm

consumers three days to cancel purchases

they make from salespeople who come to their

homes

Telephone Order Merchandise Rule of 1993

extends protections to those who purchase

over the phone or by fax

treat any unsolicited merchandise as a gift;

consumer free to keep/return unsolicited

merchandise as he/she wishes

FTC Regulation of Specific

Industries

Credit Protection (1 of 2)

sellers disclose terms of credit/loan to

facilitate consumer's comparison of a variety

of credit lines/loans

accurate credit reporting

Regulates actions of debt collectors that

regularly attempt to collect debts on behalf of

others

federal laws to further punish people who

Credit Protection (2 of 2)

problems and abuses associated with billing

errors

(FACTA): Takes affirmative actions to control

and prosecute identity theft

unfair credit card 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

Consumer Health and Safety

(FFDCA): Protects consumers against

misbranded or adulterated food, drugs,

medical devices, or cosmetics

Consumer Product Safety Commission

(CPSC) to protect the public against

unreasonable risks of injuries and deaths

associated with consumer products

Hypothetical Case 3 (1 of 2)

• 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

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.

Hypothetical Case 3 (2 of 2)

• 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 through 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 an 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 features for the $495 price?

Hypothetical Case 4 (1 of 2)

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.

Hypothetical Case 4 (2 of 2)

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.

does not issue a voluntary recall of the

product? Does Baby Love Toys have the right