Objective 6.01 - Understand
Sales and Consumer Laws
BB30 Business Law 6.01
Summer 2013
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
• to provide remedies for injured parties
BB30 Business Law 6.01
Summer 2013
Consumer Product Safety Act
• 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
BB30 Business Law 6.01
Summer 2013
Food, Drug and Cosmetic Act
• Created by 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)
BB30 Business Law 6.01
Summer 2013
Food, Drug and Cosmetic Act
• 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
BB30 Business Law 6.01
Summer 2013
Food, Drug and Cosmetic Act
• 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.
BB30 Business Law 6.01
Summer 2013
NC Weights and Measures
• Promotes uniformity in weights and
measures laws, regulations, and
standards
• Allows consumers to make comparison
shopping decisions such as unit pricing
• Regulates scales in grocery stores,
produce stands, gas pumps, etc.
BB30 Business Law 6.01
Summer 2013
FTC TRADE REGULATION RULES
Cooling-Off Rule
• 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.
BB30 Business Law 6.01
Summer 2013
FTC TRADE REGULATION RULES
Pre-notification Negative Option Rule
How "Prenotification” Plans Work
• Buying plans
• Joining a plan means you agree to the plan's sales
method as long as you're a member.
• Company sends member information on merchandise
they can buy, and the merchandise is sent to member
automatically unless they return the form rejecting the
offer within the specified time.
• Example: Book clubs, Music clubs, Movie clubs
BB30 Business Law 6.01
Summer 2013
FTC TRADE REGULATION RULES
How Negative Option Rule Works
• Requires companies give you information about their
plans, clearly and conspicuously, in any promotional
materials that consumers can use to enroll.
• If the sales presentation for a plan is made orally, say on
the phone, the terms and conditions still must be
disclosed clearly and conspicuously during the
presentation.
BB30 Business Law 6.01
Summer 2013
TELEMARKETING SALES RULE
• Gives the FTC and state attorneys general law
enforcement tools to combat telemarketing fraud
• Gives consumers added privacy protections and
defenses against unscrupulous telemarketers
• Helps consumers tell the difference between fraudulent
and legitimate telemarketing.
• Prohibits calling consumers who have put their phone
numbers on the National Do Not Call Registry
• Limits when telemarketers may call consumers
• Requires transmission of Caller ID information
BB30 Business Law 6.01
Summer 2013
UNFAIR AND DECEPTIVE ACTS
AND PRACTICES
Fraudulent Misrepresentation
• (any practice that misleads (or has the
potential to mislead) a consumer)
• Some examples includes
– Work at home schemes
– Illegal Lotteries and Scams
BB30 Business Law 6.01
Summer 2013
UNFAIR AND DECEPTIVE ACTS
AND PRACTICES
Bait and Switch Advertising
• Advertising a non-existent bargain to lure
customers so they can be sold a more
expensive item.
BB30 Business Law 6.01
Summer 2013
REMEDIES
• Contact Company
– Give notice of the problem and allow time to resolve
conflict with involved parties.
• Better Business Bureau
– A private, non-government agency available at local
and state levels that 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
BB30 Business Law 6.01
Summer 2013
REMEDIES
• Government Regulation Agency
– Contact the government regulatory agency
related to your complaint.
– Examples:
•
•
•
•
Consumer Product Safety Commission
Federal Communication Commission
Federal Trade Commission
US Postal Service
• Attorney General
– Contact State Attorney General’s office for
assistance
REMEDIES
• File Lawsuit
– Cease and desist
• An order or request to halt an activity (cease) and
not to take it up again later (desist) or else face
legal action
• Can be issued by a judge or government agency
– Class action
• form of lawsuit in which a large group of people
collectively bring a claim to court
– NC Small claims court
• Local civil court that handles cases involving
$5,000 or less