1. Dynamic Business Law Chapter 45 Consumer Law Fourth Edition
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2. Overview
45-1 What is the purpose of the Federal Trade Commission Act? 45-2 How does the Federal Trade Commission determine what constitutes deceptive advertising? 45-3 What is the purpose of labeling and packaging laws? 45-4 What are the different methods of sales? 45-5 What are the different acts that provide credit protection? 45-6 What are the different acts that help ensure consumer health and safety?

3. Hypothetical Case 1 (1 of 2)
Sheldon Elgin Jernigan III was intrigued by a commercial he saw on television for a new shower gel produced by Bilever Global, Inc. called Thor's Hammer. The advertisement depicted a bespectacled, pale, short and skinny male (i.e., a nerd) lamenting the absence of female interest in him. Later in the ad, while surfing the Internet, the nerd read about the alluring power of Thor's Hammer to attract the fairer sex. The nerd rushed to his local retailer and purchased the shower gel, returned home and showered with it, and then went out on the town. The end of the commercial portrayed the former nerd with newfound confidence, surrounded by a host of beautiful women at a dance club.
Chapter 45 Hypothetical Case 1: Sheldon Elgin Jernigan III was intrigued by a commercial he saw on television for a new shower gel produced by Bilever Global, Inc. called Thor's Hammer. The advertisement depicted a bespectacled, pale, short and skinny male (i.e., a nerd) lamenting the absence of female interest in him. Later in the ad, while surfing the Internet, the nerd read about the alluring power of Thor's Hammer to attract the fairer sex. The nerd rushed to his local retailer and purchased the shower gel, returned home and showered with it, and then went out on the town. The end of the commercial portrayed the former nerd with newfound confidence, surrounded by a host of beautiful women at a dance club.
Reality immediately mimicked fiction, at least to a certain point. Jernigan rushed out to the drugstore and purchased the shower gel, returned home and showered with it, and then, like the nerd in the ad, went out on the town. The similarities ended there—Jernigan wandered dejectedly from club to club, with not a single female even giving him the time of day.
Jernigan believes Bilever Global, Inc. has violated Section 5 of the Federal Trade Commission Act. More specifically, he believes the company's Thor's Hammer advertisement is unfair and deceptive. Do you agree?
[Instructor: See Deceptive Advertising in Chapter 45]

4. Hypothetical Case 1 (2 of 2)
Reality immediately mimicked fiction, at least to a certain point. Jernigan rushed out to the drugstore and purchased the shower gel, returned home and showered with it, and then, like the nerd in the ad, went out on the town. The similarities ended there—Jernigan wandered dejectedly from club to club, with not a single female even giving him the time of day.
Jernigan believes Bilever Global, Inc. has violated Section 5 of the Federal Trade Commission Act. More specifically, he believes the company's Thor's Hammer advertisement is unfair and deceptive. Do you agree?

5. Hypothetical Case 2 (1 of 2)
Last year, Juan Ramirez purchased a washer-dryer combination from I. I. Gregory Appliances, Inc. Ramirez satisfied the monthly obligations on his I. I. Gregory credit card until he lost his job at D. Funk Steel Industries, Inc. He is now four months behind on his I. I. Gregory credit card payments.
I. I. Gregory has turned the matter over to a collection agency, Shady Way Collections, Inc. Since Shady Way only gets paid if it recovers on delinquent accounts, the company is very aggressive about collecting overdue sums.
Chapter 45 Hypothetical Case 2: Last year, Juan Ramirez purchased a washer-dryer combination from I. I. Gregory Appliances, Inc. Ramirez satisfied the monthly obligations on his I. I. Gregory credit card until he lost his job at D. Funk Steel Industries, Inc. He is now four months behind on his I. I. Gregory credit card payments.
I. I. Gregory has turned the matter over to a collection agency, Shady Way Collections, Inc. Since Shady Way only gets paid if it recovers on delinquent accounts, the company is very aggressive about collecting overdue sums.
A representative of Shady Way has called Juan as early as 3:30 a.m., and as late as 11:45 p.m., often using foul language when lecturing him about his debt repayment obligations. Despite Ramirez's repeated proclamations that he will only deal with I. I. Gregory, Shady Way continues to contact him. The agency has even called Ramirez's brother and sister, telling them how dishonorable their sibling is, how they should be ashamed of him, and that they need to tell Ramirez that real men pay their debts.
In its communications with Ramirez and his family, has Shady Way Collections, Inc. violated the Fair Debt Collection Practices Act? If so, why should the law protect Ramirez? Has Ramirez violated his legal and ethical obligations by not repaying his credit card debt?
[Instructor: See Credit Protection in Chapter 45]

6. Hypothetical Case 2 (2 of 2)
A representative of Shady Way has called Juan as early as 3:30 a.m. and as late as 11:45 p.m., often using foul language when lecturing him about his debt repayment obligations. Despite Ramirez's repeated proclamations that he will only deal with I. I. Gregory, Shady Way continues to contact him. The agency has even called Ramirez's brother and sister, telling them how dishonorable their sibling is, how they should be ashamed of him, and that they need to tell Ramirez that real men pay their debts.
In its communications with Ramirez and his family, has Shady Way Collections, Inc. violated the Fair Debt Collection Practices Act? If so, why should the law protect Ramirez? Has Ramirez violated his legal and ethical obligations by not repaying his credit card debt?

7. Consumer Law
Definition: A statute or administrative rule serving to protect consumer interests
Consumer law is a statute or administrative rule serving to protect consumer interests.

8. Federal Trade Commission (FTC)
Created by Congress through Federal Trade Commission Act (FTCA) of 1914
Purpose of FTCA: Prevent fraud, deception, and unfair business practices
Purpose of FTC: Enforce provisions of FTCA
FTC methods to protect consumers:
Consumer education
Legal action
The Federal Trade Commission, or FTC, was created by Congress through the Federal Trade Commission Act, or FTCA. The purpose of the FTCA is to prevent fraud, deception, and unfair business practices, while the purpose of the FTC is to enforce the provisions of the Federal Trade Commission Act. Federal Trade Commission methods to protect consumers include consumer education and legal action.

9. How the FTC Brings an Action
FTC conducts an investigation
FTC sends a complaint to the violator
FTC and violator settle complaint through consent agreement
If company refuses to enter consent agreement, FTC may issue formal administrative complaint, which leads to administrative hearing
If company has violated the law, FTC issues a cease-and-desist order
In terms of bringing an action based on fraud, deception, or unfair business practices, the Federal Trade Commission first conducts an investigation. If the investigation reveals evidence of fraud, deception, or unfair business practices, the FTC then sends a complaint to the violator. The FTC and the violator may settle the complaint through a consent agreement, but if the company refuses to enter into a consent agreement, the FTC may issue a formal administrative complaint, which leads to an administrative hearing. If the company has violated the law, the FTC issues a cease-and-desist order.

10. Remedies for Violation of Cease-and-Desist Order
FTC can:
Seek injunction against company
Fine company up to $10,000 per violation
Upon violation of a cease-and-desist order, the Federal Trade Commission can seek an injunction against the offending company, and/or fine the company up to $10,000 per violation.

11. Elements of Deceptive Advertising
Material misrepresentation, omission, or practice that is likely to mislead a reasonable consumer
Bait-and-switch advertising: A form of deceptive advertising; advertising low price to bait consumer into store so that salesperson can switch consumer to a higher-priced item
Deceptive advertising is defined as a material misrepresentation, omission, or practice that is likely to mislead a reasonable consumer.
Bait-and-switch advertising is a specific form of deceptive advertising where a low price is advertised to bait the consumer into the store so that a salesperson can switch the consumer to a higher-priced item.

12. FTC Actions against Deceptive Advertising
Cease-and-desist actions: Court orders requiring that firms stop their current advertising behavior
Multiple-product orders: Court orders requiring that firms stop current advertisements on numerous products (as opposed to one specified product)
Corrective advertising: Advertisements in which company explicitly states that formerly advertised claims were untrue
FTC actions against deceptive advertising include cease-and-desist actions, multiple-product orders, and corrective advertising. Cease-and-desist actions are court orders requiring firms to stop their current advertising behavior. Multiple-product orders are court orders requiring that firms stop current advertisements on numerous products, as opposed to one specified product. By way of corrective advertising, a company explicitly states that formerly advertised claims were untrue.

13. Telemarketing and Electronic Advertising (1 of 3)
1991 Telephone Consumer Protection Act: Telemarketers cannot use an automatic telephone dialing or prerecorded voice system
In terms of telemarketing and electronic advertising, the 1991 Telephone Consumer Protection Act prohibits telemarketers from using an automatic telephone dialing or prerecorded voice system. In the Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994, Congress asked the FTC to define deceptive and abusive telemarketing practices and requested that the FTC create and enforce rules governing telemarketing that would prohibit such practices. According to the FTC-created Telemarketing Sales Rule of 1995, telemarketers must: identify a telemarketing call as a sales call, identify the product name and seller, state the total cost of the goods being sold, notify the listener whether the sale is nonrefundable, and remove the consumer's name from a contact list if the consumer so requests. In recognition of the federal "Do Not Call" registry, telemarketers cannot call consumers who have voluntarily placed their phone numbers on the federal Do Not Call list.

14. Telemarketing and Electronic Advertising (2 of 3)
Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994: Congress asked FTC to define deceptive and abusive telemarketing practices and requested that FTC create and enforce rules governing telemarketing that would prohibit such practices
According to FTC-created Telemarketing Sales Rule of 1995, telemarketers must:
Identify call as sales call
Identify product name and seller
Tell total cost of goods being sold
Notify listener/reader whether sale nonrefundable
Remove consumer's name from contact list if consumer so requests

15. Telemarketing and Electronic Advertising (3 of 3)
Federal "Do Not Call" registry: Telemarketers cannot call consumers who have voluntarily placed their phone numbers on the federal Do Not Call list

16. Regulation of Tobacco Advertising
Public Health Cigarette Smoking Act of 1970: Prohibits radio and television cigarette advertisements
Smokeless Tobacco Health Education Act of 1986: Also prohibits radio and television advertisements for smokeless tobacco
In terms of the regulation of tobacco advertising, the Public Health Cigarette Smoking Act of 1970 prohibits radio and television cigarette advertisements. The Smokeless Tobacco Health Education Act of 1986 also prohibits radio and television advertisements for smokeless tobacco.

17. Labeling and Packaging Laws
Federal and state governments have passed laws requiring that manufacturers provide accurate, understandable labeling information
If product is potentially harmful, manufacturer must make consumer aware of harm
Federal and state governments have passed laws requiring that manufacturers provide accurate, understandable labeling information. If a product is potentially harmful, a manufacturer must make the consumer aware of the harm.

18. Sales
Door-to-door sales: The Cooling-Off Rule gives consumers three days to cancel purchases they make from salespeople who come to their homes
Telephone and mail-order sales: The Mail or Telephone Order Merchandise Rule of 1993 extends protections to those who purchase over the phone or by fax
Unsolicited merchandise: Consumer allowed to treat any unsolicited merchandise as a gift; consumer free to keep/return unsolicited merchandise as he/she wishes
With regard to door-to-door sales, the Cooling-Off Rule gives consumers three days to cancel purchases they make from salespeople who come to their homes. With respect to telephone and mail-order sales, the Mail or Telephone Order Merchandise Rule extends protections to those who purchase via phone or fax. A consumer is allowed to treat any unsolicited merchandise received by mail as a gift; the consumer is free to keep or return the unsolicited merchandise as he or she wishes.

19. FTC Regulation of Specific Industries
Used-car sales
Funeral home sales
Real estate sales
Online sales
The Federal Trade Commission regulates used-car, funeral, real estate, and online sales.

20. Credit Protection (1 of 2)
Truth In Lending Act (TILA): Requires that sellers disclose terms of credit/loan to facilitate consumer's comparison of a variety of credit lines/loans
Fair Credit Reporting Act (FCRA): Ensures accurate credit reporting
Fair Debt Collection Practices Act (FDCPA): Regulates actions of debt collectors that regularly attempt to collect debts on behalf of others
Credit Card Fraud Act: Closes loopholes in federal laws to further punish people who commit credit card fraud
Credit protection legislation includes the Truth In Lending Act, which requires that sellers disclose the terms of credit or a loan to facilitate the consumer's comparison of a variety of credit lines or loans; the Fair Credit Reporting Act, which ensures accurate credit reporting; the Fair Debt Collection Practices Act, which regulates the actions of debt collectors who regularly attempt to collect debts on behalf of others; the Credit Card Fraud Act, which closes loopholes in federal laws to further punish people who commit credit card fraud; the Fair Credit Billing Act, which seeks to remedy problems and abuses associated with billing errors; the Fair and Accurate Credit Transactions Act, which seeks to control and prosecute identity theft; and the Credit Cardholders' Bill of Rights Act, which targets unfair credit card practices.

21. Credit Protection (2 of 2)
Fair Credit Billing Act (FCBA): Seeks to remedy problems and abuses associated with billing errors
Fair and Accurate Credit Transactions Act (FACTA): Takes affirmative actions to control and prosecute identity theft
Credit Cardholders' Bill of Rights Act : Targets unfair credit card practices

22. Collection Practices Expressly Prohibited by the FDCPA
Contacting debtor at work (if debtor's employer objects)
Contacting debtor who has notified collection agency that he/she wants no contact with agency
Contacting debtor before 8 a.m. or after 9 p.m.
Contacting third parties about the debt (exceptions: contacting debtor's parents, spouse, or financial adviser)
Using obscene/threatening language when communicating with debtor
Misrepresenting collection agency as a lawyer/police officer
Note: These restrictions apply to all debt collectors
Collection practices expressly prohibited by the Fair Debt Collection Practices Act (and applicable to all debt collectors) include contacting a debtor at work (especially if the debtor's employer objects), contacting a debtor who has notified the collection agency that he or she wants no contact with the agency, contacting a debtor before 8 a.m. or after 9 p.m., contacting third parties about the debt, using obscene or threatening language when communicating with the debtor, and misrepresenting the collection agency as a lawyer or police officer.

23. Consumer Health and Safety
Federal Food, Drug, and Cosmetic Act (FFDCA): Protects consumers against misbranded or adulterated food, drugs, medical devices, or cosmetics
Consumer Product Safety Act: Created the Consumer Product Safety Commission (CPSC) to protect the public against unreasonable risks of injuries and deaths associated with consumer products
In terms of consumer health and safety, the Federal Food, Drug, and Cosmetic Act protects consumers against misbranded or adulterated food, drugs, medical devices, or cosmetics. The Consumer Product Safety Act created the Consumer Product Safety Commission to protect the public against unreasonable risks of injuries and deaths associated with consumer products.

24. Hypothetical Case 3 (1 of 2)
Tancredo's Television and Appliance is preparing for its annual Labor Day sale. The store's sales manager, Chase Randleman, has arranged for an ad to run in Sunday's edition of the local newspaper. The full-page advertisement features a 60" Sanyoshiba TV with a price of $495. The average competitor price for a similar Sanyoshiba TV is $1,299.
By 5:00 a.m. on Labor Day, 300 eager customers wind around the store. There is a mad rush to the door when the store opens at 8:00 a.m., and Bailey Simmons is the third customer through the door. Simmons's principal goal is to head to the TV section and buy the Sanyoshiba, but he does stop for a few minutes to check out some other appliances.
Chapter 45 Hypothetical Case 3: Tancredo's Television and Appliance is preparing for its annual Labor Day sale. The store's sales manager, Chase Randleman, has arranged for an ad to run in Sunday's edition of the local newspaper. The full-page advertisement features a 60" Sanyoshiba TV with a price of $495. The average competitor price for a similar Sanyoshiba TV is $1,299.
By 5:00 a.m. on Labor Day, 300 eager customers wind around the store. There is a mad rush to the door when the store opens at 8:00 a.m., and Bailey Simmons is the third customer through the door. Simmons's principal goal is to head to the TV section and buy the Sanyoshiba, but he does stop for a few minutes to check out some other appliances.
At 8:15 a.m., Simmons informs a sales representative, Mike Petty, that he would like to purchase the $495 Sanyoshiba television, but Petty tells him he doesn't have another one like that to sell because the store already sold through the five they had in stock, and that the store has made a marketing decision to discontinue carrying the Sanyoshiba brand. Petty tells Simmons, however, that he has an Toshamaha of the same size and options for $995, which is $200 less than its manufacturer's suggested retail price.
Is Tancredo's Television and Appliance legally obligated to either find and sell Simmons the featured television for the advertised price or sell him another brand of like dimensions and features for the $495 price?
[Instructor: See Deceptive Advertising in Chapter 45]

25. Hypothetical Case 3 (2 of 2)
At 8:15 a.m., Simmons informs a sales representative, Mike Petty, that he would like to purchase the $495 Sanyoshiba television, but Petty tells him he doesn't have another one like that to sell because the store already sold through the five they had in stock, and that the store has made a marketing decision to discontinue carrying the Sanyoshiba brand. Petty tells Simmons, however, that he has an Toshamaha of the same size and options for $995, which is $200 less than its manufacturer's suggested retail price.
Is Tancredo's Television and Appliance legally obligated to either find and sell Simmons the featured television for the advertised price or sell him another brand of like dimensions and features for the $495 price?

26. Hypothetical Case 4 (1 of 2)
Baby Love Toys has a problem. A stuffed animal it manufactures, the Squeezy Teddy, has been a popular seller, but the mechanism inside it that makes a noise when a child squeezes it has been found to be a choking hazard. Two toddlers, one in Arizona and one in Connecticut, have extracted the mechanism from the stuffed toy, swallowed it, and have nearly choked on it.
Chapter 45 Hypothetical Case 4: Baby Love Toys has a problem. A stuffed animal it manufactures, the Squeezy Teddy, has been a popular seller, but the mechanism inside it that makes a noise when a child squeezes it has been found to be a choking hazard. Two toddlers, one in Arizona and one in Connecticut, have extracted the mechanism from the stuffed toy, swallowed it, and have nearly choked on it.
Baby Love Toys has received a notification from the Consumer Product Safety Commission (CPSC) about the issue. The notification requests that the company conduct a voluntary recall of the product. Baby Love Toys' management is very concerned about the financial repercussions of a recall of its most popular toy and does not want to do it.
What will the CPSC likely do if Baby Love Toys does not issue a voluntary recall of the product? Does Baby Love Toys have the right to ignore the CPSC's request?
[Instructor: See Consumer Health and Safety in Chapter 45]

27. Hypothetical Case 4 (2 of 2)
Baby Love Toys has received a notification from the Consumer Product Safety Commission (CPSC) about the issue. The notification requests that the company conduct a voluntary recall of the product. Baby Love Toys' management is very concerned about the financial repercussions of a recall of its most popular toy and does not want to do it.
What will the CPSC likely do if Baby Love Toys does not issue a voluntary recall of the product? Does Baby Love Toys have the right to ignore the CPSC's request?