1. Copyright © 2004 by Prentice-Hall. All rights reserved. PowerPoint Slides to Accompany BUSINESS LAW E-Commerce and Digital Law International Law and Ethics 5 th Edition by Henry R. Cheeseman Slides developed by Les Wiletzky Wiletzky and Associates, Puyallup, WA Chapter 45 Consumer Protection Chapter 45 Consumer Protection

2. 45 - 2Copyright © 2004 by Prentice-Hall. All rights reserved. Caveat Emptor “Let the buyer beware” – the traditional guideline of sales transactions.

3. 45 - 3Copyright © 2004 by Prentice-Hall. All rights reserved. Consumer Protection Laws  Federal and state statutes and regulations that promote product safety and prohibit abusive, unfair, and deceptive practices.

4. 45 - 4Copyright © 2004 by Prentice-Hall. All rights reserved. Landmark Law: Federal Food, Drug, and Cosmetic Act (FDCA) of 1938 (as amended)  Provides the basis for the regulation of much of the testing, manufacture, distribution, and sale of foods, drugs, cosmetics, and medicinal products and devices in the United States.  Administered by the Food and Drug Administration (FDA).  The FDA is empowered to regulate food, food additives, drugs, cosmetics, and medicinal devices.

5. 45 - 5Copyright © 2004 by Prentice-Hall. All rights reserved. Regulation of Food  The FDCA prohibits the shipment, distribution, or sale of adulterated food.  The FDCA prohibits false and misleading labeling of food products.  It mandates affirmative disclosure of information on food labels.  A manufacturer may be held liable for deceptive labeling or packaging.

6. 45 - 6Copyright © 2004 by Prentice-Hall. All rights reserved. Regulation of Drugs  The FDCA gives the FDA the authority to regulate the testing, manufacture, distribution, and sale of drugs.  The Drug Amendment to the FDCA gives the FDA broad powers to license new drugs in the United States.  The manufacture, distribution, or sale of adulterated or misbranded drugs is prohibited.

7. 45 - 7Copyright © 2004 by Prentice-Hall. All rights reserved. Regulation of Drugs (continued)  The law requires all users of prescription and nonprescription drugs to receive: Proper directions for use Proper directions for use  Including method and duration of use Adequate warnings about any related side effects Adequate warnings about any related side effects

8. 45 - 8Copyright © 2004 by Prentice-Hall. All rights reserved. Regulation of Cosmetics  The FDA has issued regulations that require cosmetics: To be labeled To be labeled To disclose ingredients To disclose ingredients To contain warnings if they are carcinogenic or otherwise dangerous to a person’s health To contain warnings if they are carcinogenic or otherwise dangerous to a person’s health

9. 45 - 9Copyright © 2004 by Prentice-Hall. All rights reserved. Regulation of Cosmetics (continued)  The manufacture, distribution, or sale of adulterated or misbranded cosmetics is prohibited.  The FDA may remove from commerce cosmetics that contain unsubstantiated claims. e.g., preserving youth e.g., preserving youth e.g., growing hair e.g., growing hair

10. 45 - 10Copyright © 2004 by Prentice-Hall. All rights reserved. Regulation of Medicinal Devices  The Medicinal Device Amendment to the FDCA gives the FDA authority to regulate medicinal devices and equipment.  The mislabeling of medicinal devices is prohibited.  The FDA is empowered to remove “quack” devices from the market.

11. 45 - 11Copyright © 2004 by Prentice-Hall. All rights reserved. Other Acts Administered by the FDA (1 of 2) Pesticide Amendment of 1954 Authorizes the FDA to establish tolerances for pesticides used on agricultural products. Food Additives Amendment of 1958 Requires FDA approval of new food ingredi- ents or articles that come in contact with food (e.g., wrapping and packaging materials) Color Additives Amendment of 1960 Requires FDA approval of color additives used in food, drugs, and cosmetics. Animal Drug Amendment of 1968 Requires FDA approval of any new animal drug or additive to animal food.

12. 45 - 12Copyright © 2004 by Prentice-Hall. All rights reserved. Other Acts Administered by the FDA (2 of 2) Biologies Act of 1902 Gives the FDA power to regulate biological products. This includes: vaccines, blood, blood components and derivatives, and allergenic products. Section 361 of the Public Health Service Act Gives the FDA power to regulate and set standards for sanitation at food service establishments and on interstate carriers. Section 354 of the Public Health Service Act and the Radiation for Health and Safety Act of 1968 Empowers the FDA to regulate the manufac- ture, distribution, and use of X-ray machines, microwave ovens, ultrasound equipment, and other products that are capable of emitting radiation.

13. 45 - 13Copyright © 2004 by Prentice-Hall. All rights reserved. Regulation of Product Safety: Consumer Product Safety Act (1972)  Federal statute that regulates potentially dangerous consumer products.  Created the Consumer Product Safety Commission (CPSC).

14. 45 - 14Copyright © 2004 by Prentice-Hall. All rights reserved. Regulation of Product Safety: Consumer Product Safety Commission Independent federal regulatory agency empowered to: 1.Adopt rules and regulations to interpret and enforce the Consumer Product Safety Act. 2.Conduct research on safety. 3.Collect data regarding injuries.

15. 45 - 15Copyright © 2004 by Prentice-Hall. All rights reserved. Regulation of Product Safety: Fair Packaging and Labeling Act  Federal statute that requires the labels on consumer goods to identify: The product The product The manufacturer, processor, or packager of the product and its address The manufacturer, processor, or packager of the product and its address The net quantity of the contents of the package The net quantity of the contents of the package The quantity of each serving The quantity of each serving  Administered by the Federal Trade Commission and the Department of Health & Human Services

16. 45 - 16Copyright © 2004 by Prentice-Hall. All rights reserved. Regulation of Product Safety: Poison Prevention Packaging Act  Federal act requiring manufacturers to provide “childproof” containers and packages for all household products.

17. 45 - 17Copyright © 2004 by Prentice-Hall. All rights reserved. Lemon Laws  Provide a procedure for consumers to follow to correct recurring problems in vehicles.  Establish an administrative procedure that is less formal than a court proceeding.  Require that an arbitrator decide the dispute between a consumer and car dealer.

18. 45 - 18Copyright © 2004 by Prentice-Hall. All rights reserved. Unfair and Deceptive Practices: Section 5 of the Federal Trade Commission Act  Prohibits unfair and deceptive practices including: False and deceptive advertising False and deceptive advertising Bait and switch Bait and switch Abusive sales tactics Abusive sales tactics Consumer fraud Consumer fraud

19. 45 - 19Copyright © 2004 by Prentice-Hall. All rights reserved. Door-to-Door Sales  Many states have enacted statutes that permit consumers to rescind contracts made at home with door-to-door sales representatives within a three-day period after signing the contract.

20. 45 - 20Copyright © 2004 by Prentice-Hall. All rights reserved. Unsolicited Merchandise  Postal Reorganization Act – makes the mailing of unsolicited merchandise an unfair trade practice.  Persons who receive unsolicited merchandise through the mail may retain, use, discard, or otherwise dispose of the merchandise without incurring any obligation to pay for it or return it.

21. 45 - 21Copyright © 2004 by Prentice-Hall. All rights reserved. Federal Consumer-Debtor Protection Laws Truth-in-Lending Act (TILA) Consumer Leasing Act Fair Credit & Charge Card Disclosure Act Equal Credit Opportunity Act Fair Debt Collection Practices Act Fair Credit Reporting Act

22. 45 - 22Copyright © 2004 by Prentice-Hall. All rights reserved. Federal Consumer-Debtor Protection Laws (1 of 2) Truth-in-Lending Act (TILA) of 1968 (as amended) Requires creditors to make certain disclosures to debtors in consumer transactions that do not exceed $25,000 and real estate loans of any amount on the debtor’s principal dwelling. Consumer Leasing Act An amendment to the TILA. Extends the TILA’s coverage to lease terms in consumer leases. Fair Credit and Charge Card Disclosure Act of 1988 Amendment to the TILA. Requires disclosure of certain credit card terms on credit- and charge-card solicitations and applications. Provides the following protections: (1) Un- solicited credit cards, (2) Faulty products purchased with credit cards, (3) Lost or stolen credit cards.

23. 45 - 23Copyright © 2004 by Prentice-Hall. All rights reserved. Federal Consumer-Debtor Protection Laws (2 of 2) Equal Credit Opportunity Act (ECOA) of 1975 Prohibits discrimination in the extension of credit based on: sex, marital status, race, color, national origin, religion, age, or receipt of income from public assistance programs. Fair Credit Reporting Act of 1970 An amendment to the TILA. Protects customers who are subjects of a credit report by setting out guidelines for credit bureaus. Fair Debt Collection Practices Act (FDCPA) of 1977 Protects consumer-debtors from abusive, deceptive, and unfair practices used by debt collectors. Prohibits certain contact by the creditor with third parties and the debtor.