1. © 2010 Pearson Education, Inc., publishing as Prentice-Hall 1 CONSUMER PROTECTION AND PRODUCT SAFETY © 2010 Pearson Education, Inc., publishing as Prentice-Hall CHAPTER 44

2. © 2010 Pearson Education, Inc., publishing as Prentice-Hall 2 Principle of caveat emptor (“Let the buyer beware”) replaced by significant, statutory protections for consumers.

3. © 2010 Pearson Education, Inc., publishing as Prentice-Hall 3 Consumer Protection Laws Federal and state statutes and regulations that promote product safety and prohibit abusive, unfair, and deceptive practices.

4. © 2010 Pearson Education, Inc., publishing as Prentice-Hall 4 Agencies Regulating Food Safety U.S. Department of Agriculture. U.S. Food and Drug Administration.

5. © 2010 Pearson Education, Inc., publishing as Prentice-Hall 5 Federal Food, Drug, and Cosmetic Act Regulates testing, manufacture, distribution, and sale of foods, drugs, cosmetics, and medicinal products and devices in the U.S. Administered by the Food and Drug Administration (FDA). –Before products and devices can be sold, they must receive FDA approval. –FDA can conduct inspections, recall products, etc.

6. © 2010 Pearson Education, Inc., publishing as Prentice-Hall 6 Regulation of Food Shipment, distribution, or sale of adulterated food prohibited under FDCA. False and misleading labeling of food products prohibited under FDCA. Nutrition Labeling and Education Act mandates nutrition information on food labels. –E.g., amount of calories, fiber, trans fat. –Also establishes standard definitions for terms such as “low fat.”

7. © 2010 Pearson Education, Inc., publishing as Prentice-Hall 7 United Nations Biosafety Protocol for Genetically Altered Foods Signed in 2000 by 138 countries, including U.S. Requires that genetically engineered foods must be labeled with “may contain living modified organisms.”

8. © 2010 Pearson Education, Inc., publishing as Prentice-Hall 8 Regulation of Drugs FDA regulates testing, manufacture, distribution, and sale of drugs. –Licenses new drugs. After application filed, agency conducts investigation and hearings. Approval process can take many years. Manufacturer must provide adequate warnings, directions for use. –May revoke approval of previously licensed drugs. –Prohibits adulterated, misbranded drugs.

9. © 2010 Pearson Education, Inc., publishing as Prentice-Hall 9 Regulation of Cosmetics Must be safe and properly labeled. –E.g., must contain warnings if carcinogenic or otherwise dangerous. –Animal testing may be used to establish product safety. Adulterated or misbranded cosmetics prohibited. FDA may remove from commerce cosmetics that contain unsubstantiated claims. –E.g., preserving youth or virility, growing hair.

10. © 2010 Pearson Education, Inc., publishing as Prentice-Hall 10 Regulation of Medicinal Devices FDA regulates devices; e.g., heart pacemakers, kidney dialysis machines, other diagnostic, therapeutic, and health devices. Mislabeling of medicinal devices is prohibited. FDA is empowered to remove “quack” devices from the market.

11. © 2010 Pearson Education, Inc., publishing as Prentice-Hall 11 Consumer Product Safety Act Federal statute that regulates potentially dangerous consumer products. Created the Consumer Product Safety Commission (CPSC).

12. © 2010 Pearson Education, Inc., publishing as Prentice-Hall 12 Consumer Product Safety Commission Adopts rules and regulations to interpret and enforce the Consumer Product Safety Act. E.g., product safety standards. May seize or recall dangerous products. May seek civil or criminal penalties for violations. Conducts research on safety of consumer products, collects data regarding injuries.

13. © 2010 Pearson Education, Inc., publishing as Prentice-Hall 13 State Lemon Laws Provide a procedure for consumers to follow to correct recurring problems in vehicles. Car dealer must be notified of problem and be given a certain number of opportunities to fix the defects. If defect not corrected, consumer files claim with appropriate state agency. Arbitrator then decides the dispute between the consumer and car dealer.

14. © 2010 Pearson Education, Inc., publishing as Prentice-Hall 14 Unfair and Deceptive Practices Federal Trade Commission Act (FTC Act) prohibits unfair and deceptive practices including: –False and deceptive advertising –Bait and switch –Abusive sales tactics –Consumer fraud

15. © 2010 Pearson Education, Inc., publishing as Prentice-Hall 15 False and Deceptive Advertising Section 5 of the FTC Act describes false and deceptive advertising as: –Containing misinformation or omitting information that is likely to mislead a reasonable consumer, or –Making an unsubstantiated claim. –Proof of actual deception not required.

16. © 2010 Pearson Education, Inc., publishing as Prentice-Hall 16 Bait and Switch Seller advertises low-cost item to attract customers. Seller pressures buyers to upgrade. –Often refuses to show advertised merchandise. –Discourages employees from selling advertised merchandise. –Fails to have adequate quantities on hand.

17. © 2010 Pearson Education, Inc., publishing as Prentice-Hall 17 Door-to-Door Sales Many state statutes permit consumers to rescind contracts made at home with door-to-door sales representatives within a set period after signing the contract. –FTC requires salesperson to permit cancellation as specified. Consumer must send required notice of cancellation to seller.

18. © 2010 Pearson Education, Inc., publishing as Prentice-Hall 18 Do-Not-Call Registry Created by FTC and FCC in 2003. Consumer signs up for registry. Telemarketers must remove consumer’s telephone number from sales call list. –Charitable and political solicitations exempt. –“Established business relationship” exempt.