CHAPTER 21. Consumer Protection. INTRODUCTION. This chapter explores the major acts that focus on consumer protection and fairness. Issues of consumer health and safety are also covered. Additionally, which agencies handle consumer issues is addressed. COMMISSIONS AND AGENCIES.
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This chapter explores the major acts that focus on consumer protection and fairness. Issues of consumer health and safety are also covered. Additionally, which agencies handle consumer issues is addressed.
Federal, state, and local regulatory agencies protect consumers’ health and safety, e.g., FDA, the Consumer Product Safety Commission). FTC regulates labeling and packaging. States regulate the availability of alcohol, tobacco, and gambling, no-smoking areas, and licensing of professional workers through the granting of various occupational licenses.
USDA’s primary consumer protection activities all involve food and include inspecting facilities engaged in the slaughtering or processing of meat, poultry, and egg products; preventing the sale of mislabeled meat or poultry products; and offering producers a voluntary grading program for various agricultural products.
The National Highway Traffic Safety Administration (NHTSA), an agency of the U.S. Department of Transportation, has the power to establish motor vehicle safety standards, engage in testing and development of motor vehicle safety, prohibit manufacture or importation of substandard vehicles, and develop tire safety. States refusing to comply with established federal standards are denied federal highway funds.
Technological developments, especially the Internet, have made it possible to amass large amounts of detailed personal information.
State departments of consumer affairs protect the public by examining and licensing firms and individuals who possess the necessary education and demonstrated skills to perform their services competently. Among the occupations generally regulated are accountants, architects, barbers, contractors, cosmetologists, dentists, dry cleaners, marriage counselors, nurses, pharmacists, physical therapists, physicians, and social workers. Attorneys are regulated by state bar associations and the courts. State departments of consumer affairs also investigate and resolve consumer complaints and hold public hearings involving consumer matters.
Regulatory agencies, such as the FTC, the FDA, the FCC and the SEC, are involved in the area of unfair and deceptive trade practices and consumer fraud. These federal agencies regulate advertising, packaging and labeling, pricing, warranties, and numerous sales practices.
Case 21.1 Synopsis. Mead Johnson & Co. v. Abbott Laboratories.
Abbott manufactures the infant formula Similac and advertises it as the “1st Choice of Doctors.” Mead Formula, which manufactures a competing infant formula (Enfamil), sued Abbott, alleging that its claim that Similac was the first choice of doctors was misleading and violated the Lanham Act. In support of its claims, Mead Johnson introduced evidence from a survey of women who had recently purchased or contemplated purchasing formula to determine how consumers interpreted the claim “1st Choice of Doctors.” The court ruled that Abbott could not claim that its product was the first choice because a majority of doctors did not prefer it. Accordingly, the court held that “1st Choice of Doctors” violated the Lanham Act. Abbott appealed. ISSUE: Did Abbott’s claim that its infant formula was the first choice of doctors violate the Lanham Act? HELD: REVERSED and DISMISSED. Abbott did not violate the Lanham Act so it could continue to advertise Similac as the first choice of doctors.
Case 21.2 Synopsis. L & F Products v. Proctor & Gamble Co.
L & F manufactures Lysol cleaning products. P & G manufactures Spic and Span cleaner. P & G began using comparative ads against an unnamed competitor, intended to be Lysol. Among the items in the ad, P & G added substances to the soap scum for better filming, and used laboratory-developed soil instead of ordinary soil. L & F claimed this was a deceptive trade practice. The district court dismissed the compliant. ISSUE: Is it a deceptive trade practice (1) to make cleaning residue more easily filmed by adding substances, or (2) to simulate without disclosure the wiping of ordinary soil with the actual wiping of laboratory-developed soil? HELD: Dismissal AFFIRMED. Court of appeals stated that the substances added for filming were in some cleaning products, and there was nothing deceptive about the soil used in the ad. Therefore, there was nothing false or misleading about the ad.
A full warranty:
State Lemon Laws - deal with warranties on new cars and new mobile homes. These lemon laws are designed to protect consumers from defective products that cannot be adequately fixed. For example, a new must conform to the warranty given by the manufacturer. If, after a reasonable number of attempts (usually four), the manufacturer or dealer is unable to remedy a defect that substantially impairs the value of the car, the car must be replaced or the purchase price refunded.
Laws designed to protect consumers from unfair and deceptive trade practices often impose disclosure requirements of specific forms of sales practices: UCC provides for unconscionability, door-to-door sales require notice of a 3 day “cooling off” period during which the consumer can rescind the contract, pyramid schemes (multi-level marketing) involve the recruitment of additional sellers (or even receives commissions on the sales of the recruits) and telemarketing’s use of auto dialers and “900” numbers regulated by the Telephone Consumer Protection Act (TCPA) regulated by the FCC, requiring warranty labels on new and used cars, disclosures in real estate transactions.
Case 21.4 Synopsis. Bartlett v. Heibel
Heibel is an attorney hired by Micard Services, a credit card company, to collect a debt from Bartlett. Heibel sent Bartlett a “dunning” letter that stated what Bartlett needed to do to avoid litigation. The letter also contained close paraphrasing of the FDCPA language on the subject; Heibel then added additional language that was confusing or contradictory. Bartlett never read the letter. Bartlett sued Heibel claiming the confusing letter violated the FDCPA. Heibel’s defense was that Bartlett never read the letter. The trial court ruled for Heibel. ISSUE: Does a dunning letter violated the FDCPA by describing the debtor’s and collector’s respective rights in a way that confuses the debtor about his rights? HELD: REVERSED. The court of appeals ordered damages for Bartlett. The writing of the confusing letter violated the FDCPA.
Complying with Consumer Protection Laws
Complying with Consumer Protection Laws
1. Why does the TILA provide for a right of recission for home equity loans?
2. What can you, as a consumer, request under the Fair Credit Reporting Act?
3. What is “bait and switch” advertising?