Chapter 15
Consumer Protection
Governmental Protection


Consumer – individual who acquires goods
that are intended for personal use.
Caveat Emptor


Caveat Venditor


Let the buyer beware
???
Why the change in philosophy?
Class Actions

Class Actions – Allows one or several
people to sue on behalf of themselves,
and others.

Is this necessary? Why?
http://www.consumer-action.org/lawsuits/
Governmental Procedure



Cease-and-desist order: an order requiring
a company to stop the specified conduct.
Consent order: voluntary, courtenforceable, agreement to stop a practice.
Restitution: Permits a party to a contract
to recover money or property given to the
other party.
http://www.memphisdailynews.com/news/
2014/jul/17/uber-lyft-operating-despitecity-notices/
http://files.consumerfinance.gov/f/201309
_cfpb_jpmc_consent-order.pdf
Protection Against Inferior
Services and Goods

Licensing


Who needs a license to operate?
Who would you rather go to?
Unsafe Products

1972 Consumer Product Safety Act


Created the Consumer Product Safety
Commission (CPSC)
Toys!!
http://www.cpsc.gov/en/Recalls/Violations/
http://www.cbsnews.com/pictures/10most-dangerous-toys-of-2014/2/
Food, Drugs and Cosmetics

Food and Drug Administration (FDA)




Requires Food, Drugs and Cosmetics be clean
Adulterated = does not meet standards
Requires labeling
Very cautious (praise and criticism)
http://www.fda.gov/Food/GuidanceRegulat
ion/GuidanceDocumentsRegulatoryInforma
tion/SanitationTransportation/ucm056174.h
tm
Weights and Measures

Weights and Measures Division


Uniformity



Nat’l Institute of Standards and Technology
Pound is a Pound, Gallon is a Gallon, etc.
How big is a 2 x 4?
Seals certify accuracy
Protection Against Unfair Trade
Practices

Unfair Trade Practice: any method of
business that is dishonest or fraudulent or
that illegally limits fair competition.
Unfair Trade Practices


Price Fixing
False / Misleading Advertising


Bait and Switch
Federal Trade Commission


Corrective Advertising
Cease and desist
http://mentalfloss.com/article/19217/6cases-shamelessly-false-advertising
http://www.arentfox.com/newsroom/alerts
/costcos-alleged-bait-and-switchadvertisement-could-cost-them#.VIEJc9LFSo
Unfair Trade Practices

Illegal Lotteries

Punishable by fine and or imprisonment

What about Bingo?

Confidence Games

Pyramid scheme (Madoff)
Unfair Trade Practices

Unfair Pricing


Free, artificial two for one, low estimates
Mislabeled Goods
Product Liability

Product Liability: Affixing of responsibility
to compensate for injuries caused by a
defective product.

Product Liability suit

Based on Breach of Warranty: an assurance the
seller makes about quality
Expansion of Product Liability

Warranty = Contract


Parties involved
Privity of Contract : relationship that exists
between buyer and seller
Product Liability

Now……Extends to…..
1. The Retailer (Walmart)
2. The Wholesaler (Middle
Man-U.S. Company)
3. The Manufacturer (Toy
Company – China?)
Chapter 15
Slide 15
Recovery for Tortious Conduct

Product Liability suit can be based on



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Breach of warranty
Fraud
Negligence
Strict Liability

Has been expanded due to high burden of proof
Defenses to Liability




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Used for non-intended purpose
Used for non-foreseeable purpose
Altered Product
Improper conduct
Misusing Product
Warranties


Express Warranty: An assurance of quality
explicitly made by the seller.
Can be made by



Oral or written
Conduct – show a sample
Breach of Warranty = Breach of Contract
Opinions vs. Warranties


Puffing: Exaggerated Seller’s talk.
Expert Opinions

May create warranties

Jeweler says a diamond is flawless
Requirements of Express Warranties

Magnuson Moss Warranty Act of 1975


Not REQUIRED to give an express warranty
IF Express Warranty must identify as
FULL – free repair / replacement of any defective
part for reasonable time
 LIMITED – fails to meet one or more
requirements of a full warranty



Must be in readily understood language
Samsung Warranty
Implied Warranties

Implied Warranty: An implicit warranty
obligation imposed by law.

Warranty of title



You own what you’re selling
Free against encumbrances
Warranty of Fitness for a Particular Purpose
Implied Warranties Given Only
by Merchants

Warranty against infringement

Free of third party’s claims


Trademark, copyright, patent, etc.
Warranty of merchantability

Fit for ordinary purposes


Quality and safety
May be disclaimed
Exclusion of Warranties

Disclaimer: a notice of exclusion

Conspicuous and in writing

Ex: “With All Faults”, “As Is”, “There are no
warranties of merchantability or fitness that extend
beyond the description on the label.”
•Usually tied to
vehicles, but may
extend to other
products
•New product
•Major defect within
warranty period
•Same repair made with
no improvement
•Replace product
Warranties


Full Warranty: An express warranty that
obligates the seller to repair or to replace
a defective product without cost to the
buyer, in a reasonable amount of time.
Limited Warranty: Any warranty that
provides less protection than a full
warranty.
Debate

Hot Debate



What protection does Edison have?
How should this case be resolved?
What’s Your Verdict


Pg 259
How should this case be resolved?