Section 15.1
Consumer Protection
Consumer
Protection
Section
15.1
Consumer
Protection
Chapter 15
and Product Liability
Section 15.1
Consumer Protection
Section 15.2
Product Liability
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
What You’ll 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)
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
What You’ll Learn
How to recognize bait and switch
advertising (p. 321)
How to identify four Federal Trade
Commission rules that protect
consumers (p. 321)
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Why It’s Important
Knowledge of consumer protection laws will
prevent you from falling victim to fraud and
deception.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Legal Terms
caveat emptor (p. 316)
caveat venditor (p. 316)
consumer (p. 316)
unfair and deceptive practice (p. 317)
fraudulent misrepresentation (p. 318)
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Legal Terms
cease and desist orders (p. 320)
bait and switch (p. 321)
cooling-off rule (p. 322)
telemarketers (p. 323)
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section Outline
The Development of Consumer
Protection Law
Federal and State Consumer
Protection Laws
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section Outline
Unfair and Deceptive Practices
Fraudulent Misrepresentation
Work-at-Home Schemes
Unordered Merchandise
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section Outline
False Advertising
Bait and Switch Advertising
FTC Trade Regulation Rules
Negative Option Rule
The Cooling-Off Rule
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section Outline
FTC Trade Regulation Rules,
continued
Telemarketing Sales Rule
900-Telephone-Number Rules
Shopping by Mail, Telephone, Fax, or
Internet
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Pre-Learning Question
How did consumer protection laws
develop?
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
The Development of Consumer
Protection Law
Years ago, caveat emptor, which
means “let the buyer beware,”
reflected society’s attitude toward
consumers.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
The Development of Consumer
Protection Law
There were few ways to seek
compensation for damages and those
injured had no recourse due to privity
of contract.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
The Development of Consumer
Protection Law
Today, however, society demands that
manufacturers be held responsible for
foreseeable injuries to people who use
their products.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
The Development of Consumer
Protection Law
Caveat venditor, which means “let
the seller beware,” now guides
consumer transactions.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Pre-Learning Question
To whom do consumer protection laws
apply?
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Federal and State Consumer
Protection Laws
Consumer protection laws apply to
transactions between consumers and
people conducting business.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Federal and State Consumer
Protection Laws
A consumer is someone who buys or
leases goods, real estate, or services
for personal, family, or household
purposes.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
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
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
What is the difference between caveat
emptor and caveat venditor?
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
ANSWER
Caveat emptor is Latin for “let the
buyer beware” and means that the
buyer is the responsible party. Caveat
venditor is Latin for ”let the seller
beware” and means that the seller is
responsible.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
State Consumer Protection
State consumer protection offices
provide information and help
enforce state consumer protection
laws.
Offices may assist consumers with
individual problems.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
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.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Federal Consumer Protection
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.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Federal Consumer Protection
Both organizations investigate
violations of federal consumer
protection law.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Pre-Learning Question
What do you think are unfair and
deceptive practices?
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
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.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Unfair and Deceptive Practices
Examples include:
Work-at-home schemes
Unordered merchandise
False advertising
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
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.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
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
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Elements of a Complaint Letter
Copies of documents
Your address and work and home
phone numbers
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
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 the consumer.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Work-at-Home Schemes
Home employment schemes are
among the oldest kind of advertising
fraud.
They often promise big incomes
without explaining the costs.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
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.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
What does FTC stand for and what
does it do?
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
ANSWER
The Federal Trade Commission is the
agency of the U.S. government that
promotes free and fair trade
competition in the U.S. economy.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Pre-Learning Question
What is an example of false
advertising?
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
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.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
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.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Pre-Learning Question
What are some FTC trade regulation
rules?
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
FTC Trade Regulation Rules
The FTC has established trade
regulation rules for interstate
commerce to correct wrongdoing in
the marketplace.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
FTC Trade Regulation Rules
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
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Negative Option Rule
When you subscribe to a magazine 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.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Negative Option Rule
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.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
The Cooling-Off Rule
The cooling-off rule gives you three
days to cancel contracts for most
purchases made away from the
seller’s regular place of business.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
The Cooling-Off Rule
The rule applies to purchases of
$25 or more made at the buyer’s
home, workplace, or dormitory.
It does not apply to contracts for
real estate, insurance, securities, or
emergency home repairs.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Telemarketing Sales Rule
The Telemarketing Sales Rule
protects you from abusive
telemarketers, the people who try to
sell you products by telephone.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
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.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Protect Yourself Against
900-Number Scams
Deal only with reputable companies.
Think twice before calling a 900number for a “free gift.”
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Protect Yourself Against
900-Number Scams
Know precisely what the 900-call
will cost—before you make the call.
Don’t confuse 900-numbers with
toll-free 800-numbers.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
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.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
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.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Shopping by Mail, Telephone,
Fax, or Internet
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.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section 15.1 Assessment
Reviewing What You Learned
1. What are the main differences
between state and federal
consumer law?
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section 15.1 Assessment
Reviewing What You Learned
Answer
State consumer law provides information
and helps protect consumers in the state in
which they live. They sometimes assist
consumers with individual problems.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section 15.1 Assessment
Reviewing What You Learned
Answer
Federal consumer protection law applies to
businesses that sell real estate, goods, or
services in interstate commerce.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section 15.1 Assessment
Reviewing What You Learned
2. Describe two unfair and deceptive
practices.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section 15.1 Assessment
Reviewing What You Learned
Answer
False advertising and work-at-home
schemes.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section 15.1 Assessment
Reviewing What You Learned
3. What is bait and switch advertising?
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section 15.1 Assessment
Reviewing What You Learned
Answer
Bait and switch advertising is an illegal
practice in which nonexistent bargains are
advertised to lure customers to more
expensive merchandise.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section 15.1 Assessment
Reviewing What You Learned
4. What are four FTC rules designed
to protect consumers?
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section 15.1 Assessment
Reviewing What You Learned
Answer
Answers include the negative option rule,
the cooling-off rule, the telemarketing sales
rule, 900-telephone-number rules, and
rules for shopping by mail, telephone, fax,
or Internet.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section 15.1 Assessment
Critical Thinking Activity
Bait and Switch
How do you think bait and switch
advertising got its name? What is the bait?
What is the switch?
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section 15.1 Assessment
Critical Thinking Activity Answer
Bait and Switch
Answers will vary. Bait is what one uses to
lure or catch something, as a worm is bait
for catching fish. A business advertises a
bargain to lure customers into the store.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section 15.1 Assessment
Critical Thinking Activity Answer
Bait and Switch
The switch occurs when the salesperson
tries to convince the customer to buy other,
more expensive items.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section 15.1 Assessment
Legal Skills in Action
The Federal Trade Commission
Merta has been a member of a CD club for
two years. She has made several
unsuccessful attempts to cancel her
membership.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section 15.1 Assessment
Legal Skills in Action
The Federal Trade Commission
Roberto suggested she file a complaint
with the Federal Trade Commission.
Merta needs to know more information.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section 15.1 Assessment
Legal Skills in Action
The Federal Trade Commission
Help Merta research the history of the FTC.
Next, help her to find out how to file a
complaint with the FTC.
Understanding Business and Personal Law
Consumer Protection and Product Liability
Section 15.1 Consumer Protection
Section 15.1 Assessment
Legal Skills in Action Answer
The Federal Trade Commission
Answers will vary, but research could
include the FTC Web site at www.ftc.gov.
Understanding Business and Personal Law
Consumer Protection and Product Liability
End of Section 15.1
Consumer Protection