Sales and Consumer Issues Objective 09.01

Interpret sales contracts and warranties within the rights and law

of consumers

CONSUMER PROTECTION ISSUES

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.

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

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.

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

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.

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 web resource: FBI and US Postal Service fraud website www.LooksTooGoodToBeTrue.com

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!!

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??

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.

Shopping by Mail

• When ordered, should ship within 30 days, 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.

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.

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

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.

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.

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

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

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 mislabeling of foods, drugs or cosmetics

• Creates standards for packaged foods, drugs and cosmetics

• Approves new pharmaceuticals (prescription drugs)

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

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.

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

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?

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

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?

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?

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

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.

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

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

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.