45 - 1 consumer protection. 45 - 2 caveat emptor “let the buyer beware” – the traditional...
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45 - 1
Consumer Protection
45 - 2
Caveat Emptor
“Let the buyer beware” – the traditional guideline of sales transactions.
45 - 3
Consumer Protection Laws• Federal and state statutes
and regulations that
promote product safety
and prohibit abusive,
unfair, and deceptive
practices.
45 - 4
Federal Food, Drug, and Cosmetic Act
• 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.
45 - 5
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.
45 - 6
Food Labeling• Nutrition Labeling and Education
Act– Requires food manufacturers
to place labels on foods that discloses nutritional information about the food.• Number of calories• Amount of fat• Dietary fiber• Cholesterol
45 - 7
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.
45 - 8
Regulation of Drugs (continued)
• The law requires all users of prescription and nonprescription drugs to receive:– Proper directions for use– Including method and
duration of use– Adequate warnings about any
related side effects
45 - 9
Regulation of Cosmetics• The FDA has issued regulations
that require cosmetics:– To be labeled– To disclose ingredients– To contain warnings if they are
carcinogenic or otherwise dangerous to a person’s health
• The manufacture, distribution, or sale of adulterated or misbranded cosmetics is prohibited.
• The FDA may remove from commerce cosmetics that contain unsubstantiated claims.– Preserving youth– Growing hair
45 - 10
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.
45 - 11© 2007 Prentice Hall, Business Law, sixth edition, Henry R.
Cheeseman
Other Acts Administered by FDA
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.
45 - 12© 2007 Prentice Hall, Business Law, sixth edition, Henry R.
Cheeseman
Other Acts Administered by FDABiologies 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.
45 - 13
Consumer Product Safety Act
• Federal statute that regulates potentially dangerous consumer products.
• Created the Consumer Product Safety Commission (CPSC).
45 - 14
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.
45 - 15
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.
45 - 16
Unfair and Deceptive Practices
• Prohibits unfair and deceptive practices including:– False and deceptive
advertising– Bait and switch– Abusive sales tactics– Consumer fraud
45 - 17
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
– Makes an unsubstantiated claim.
– Proof of actual deception not required.
45 - 18
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.
45 - 19
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 set
period after signing the contract.
• Must send required notice of
cancellation to seller.
45 - 20© 2007 Prentice Hall, Business Law, sixth edition, Henry R.
Cheeseman
Federal Federal Consumer-Consumer-
Debtor Debtor Protection Protection
LawsLaws
Truth-in-Lending Act Truth-in-Lending Act (TILA)(TILA)
Consumer Leasing Consumer Leasing ActAct
Fair Credit & Charge Fair Credit & Charge Card Disclosure ActCard Disclosure Act
Equal Credit Equal Credit Opportunity ActOpportunity Act
Fair Debt Collection Fair Debt Collection Practices ActPractices Act
Fair Credit Fair Credit Reporting ActReporting Act
45 - 21© 2007 Prentice Hall, Business Law, sixth edition, Henry R.
Cheeseman
Federal Consumer LawsTruth-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.
45 - 22© 2007 Prentice Hall, Business Law, sixth edition, Henry R.
Cheeseman
Federal Consumer Laws (continued)
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.
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