Chapter 15 Consumer Protection

Governmental Protection Consumer – individual who acquires goods that are intended for personal use. Consumer – individual who acquires goods that are intended for personal use. Caveat Emptor Caveat Emptor Let the buyer beware Let the buyer beware Caveat Venditor Caveat Venditor ??? ??? Why the change in philosophy? Why the change in philosophy?

Class Actions Class Actions – Allows one or several people to sue on behalf of themselves, and others. Class Actions – Allows one or several people to sue on behalf of themselves, and others. Is this necessary? Why? Is this necessary? Why?

Governmental Procedure Cease-and-desist order: an order requiring a company to stop the specified conduct. Cease-and-desist order: an order requiring a company to stop the specified conduct. Consent order: voluntary, court- enforceable, agreement to stop a practice. Consent order: voluntary, court- enforceable, agreement to stop a practice. Restitution: Permits a party to a contract to recover money or property given to the other party. Restitution: Permits a party to a contract to recover money or property given to the other party /jul/17/uber-lyft-operating-despite- city-notices/ _cfpb_jpmc_consent-order.pdf

Protection Against Inferior Services and Goods Licensing Licensing Who needs a license to operate? Who needs a license to operate? Who would you rather go to? Who would you rather go to?

Unsafe Products 1972 Consumer Product Safety Act 1972 Consumer Product Safety Act Created the Consumer Product Safety Commission (CPSC) Created the Consumer Product Safety Commission (CPSC) Toys!! Toys!! most-dangerous-toys-of-2014/2/ most-dangerous-toys-of-2014/2

Food, Drugs and Cosmetics Food and Drug Administration (FDA) Food and Drug Administration (FDA) Requires Food, Drugs and Cosmetics be clean Requires Food, Drugs and Cosmetics be clean Adulterated = does not meet standards Adulterated = does not meet standards Requires labeling Requires labeling Very cautious (praise and criticism) Very cautious (praise and criticism) ion/GuidanceDocumentsRegulatoryInforma tion/SanitationTransportation/ucm h tmwww.fda.gov/Food/GuidanceRegulat ion/GuidanceDocumentsRegulatoryInforma tion/SanitationTransportation/ucm h tm

Weights and Measures Weights and Measures Division Weights and Measures Division Nat’l Institute of Standards and Technology Nat’l Institute of Standards and Technology Uniformity Uniformity Pound is a Pound, Gallon is a Gallon, etc. Pound is a Pound, Gallon is a Gallon, etc. How big is a 2 x 4? How big is a 2 x 4? Seals certify accuracy 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 Practice: any method of business that is dishonest or fraudulent or that illegally limits fair competition.

Unfair Trade Practices Price Fixing Price Fixing False / Misleading Advertising False / Misleading Advertising Bait and Switch Bait and Switch Federal Trade Commission Federal Trade Commission Corrective Advertising Corrective Advertising Cease and desist Cease and desist /costcos-alleged-bait-and-switch- advertisement-could-cost-them#.VIEJc9LF- So cases-shamelessly-false-advertising

Unfair Trade Practices Illegal Lotteries Illegal Lotteries Punishable by fine and or imprisonment Punishable by fine and or imprisonment What about Bingo? What about Bingo? Confidence Games Confidence Games Pyramid scheme (Madoff) Pyramid scheme (Madoff)

Unfair Trade Practices Unfair Pricing Unfair Pricing Free, artificial two for one, low estimates Free, artificial two for one, low estimates Mislabeled Goods Mislabeled Goods

Product Liability Product Liability: Affixing of responsibility to compensate for injuries caused by a defective product. Product Liability: Affixing of responsibility to compensate for injuries caused by a defective product. Product Liability suit Product Liability suit Based on Breach of Warranty: an assurance the seller makes about quality Based on Breach of Warranty: an assurance the seller makes about quality

Expansion of Product Liability Warranty = Contract Warranty = Contract Parties involved Parties involved Privity of Contract : relationship that exists between buyer and seller Privity of Contract : relationship that exists between buyer and seller

Product Liability Now……Extends to….. Now……Extends to….. 1. The Retailer (Walmart) 2. The Wholesaler (Middle Man-U.S. Company) 3. The Manufacturer (Toy Company – China?) Chapter 15Slide 15

Recovery for Tortious Conduct Product Liability suit can be based on Product Liability suit can be based on Breach of warranty Breach of warranty Fraud Fraud Negligence Negligence Strict Liability Strict Liability Has been expanded due to high burden of proof Has been expanded due to high burden of proof

Defenses to Liability Used for non-intended purpose Used for non-intended purpose Used for non-foreseeable purpose Used for non-foreseeable purpose Altered Product Altered Product Improper conduct Improper conduct Misusing Product Misusing Product

Warranties Express Warranty: An assurance of quality explicitly made by the seller. Express Warranty: An assurance of quality explicitly made by the seller. Can be made by Can be made by Oral or written Oral or written Conduct – show a sample Conduct – show a sample Breach of Warranty = Breach of Contract Breach of Warranty = Breach of Contract

Opinions vs. Warranties Puffing: Exaggerated Seller’s talk. Puffing: Exaggerated Seller’s talk. Expert Opinions Expert Opinions May create warranties May create warranties Jeweler says a diamond is flawless Jeweler says a diamond is flawless

Requirements of Express Warranties Magnuson Moss Warranty Act of 1975 Magnuson Moss Warranty Act of 1975 Not REQUIRED to give an express warranty Not REQUIRED to give an express warranty IF Express Warranty must identify as IF Express Warranty must identify as FULL – free repair / replacement of any defective part for reasonable time FULL – free repair / replacement of any defective part for reasonable time LIMITED – fails to meet one or more requirements of a full warranty LIMITED – fails to meet one or more requirements of a full warranty Must be in readily understood language Must be in readily understood language Samsung Warranty Samsung Warranty Samsung Warranty Samsung Warranty

Implied Warranties Implied Warranty: An implicit warranty obligation imposed by law. Implied Warranty: An implicit warranty obligation imposed by law. Warranty of title Warranty of title You own what you’re selling You own what you’re selling Free against encumbrances Free against encumbrances Warranty of Fitness for a Particular Purpose Warranty of Fitness for a Particular Purpose

Implied Warranties Given Only by Merchants Warranty against infringement Warranty against infringement Free of third party’s claims Free of third party’s claims Trademark, copyright, patent, etc. Trademark, copyright, patent, etc. Warranty of merchantability Warranty of merchantability Fit for ordinary purposes Fit for ordinary purposes Quality and safety Quality and safety May be disclaimed May be disclaimed

Exclusion of Warranties Disclaimer: a notice of exclusion Disclaimer: a notice of exclusion Conspicuous and in writing 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.” 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. 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. Limited Warranty: Any warranty that provides less protection than a full warranty.

Debate Hot Debate Hot Debate What protection does Edison have? What protection does Edison have? How should this case be resolved? How should this case be resolved? What’s Your Verdict What’s Your Verdict Pg 259 Pg 259 How should this case be resolved? How should this case be resolved?