Bài giảng Business Law (13th edition) - Chapter 48: The federal trade commission act and consumer protection laws

The FTC General rule is caveat emptor – let the buyer beware – but Federal Trade Commission Act of 1914 created the Federal Trade Commission (FTC) as independent agency to keep U.S. economy both free and fair FTC enforcement devices: issuing trade regulation rules, facilitating voluntary compliance, and adjudicative proceedings

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Regulation of BusinessAdministrative AgenciesThe Federal Trade Commission Actand Consumer Protection LawsAntitrust: The Sherman Act11McGraw-Hill/Irwin Business Law, 13/e© 2007 The McGraw-Hill Companies, Inc. All rights reserved.Regulation of BusinessThe Clayton Act,The Robinson-Patman Act, andAntitrust Exemptions and ImmunitiesEmployment LawEnvironmental Regulation11McGraw-Hill/Irwin Business Law, 13/e© 2007 The McGraw-Hill Companies, Inc. All rights reserved.THE FEDERAL TRADE COMMISSION ACT AND CONSUMER PROTECTION LAWSPAETRHC48“The most exciting thing happening in business is the rise of vigilante consumers.”Anita Roddick, The Body Shop founder,Marketing Week (Feb. 24, 2000)Learning ObjectivesThe Federal Trade CommissionAnticompetitive behavior and deceptive practicesConsumer protection laws48 - *General rule is caveat emptor – let the buyer beware – but Federal Trade Commission Act of 1914 created the Federal Trade Commission (FTC) as independent agency to keep U.S. economy both free and fairFTC enforcement devices: issuing trade regulation rules, facilitating voluntary compliance, and adjudicative proceedingsThe FTC48 - *FTC trade regulation rules have force of law and FTC can proceed directly against those who engage in prohibited practicesFTC promotes voluntary compliance with best practices and regulations by issuing advisory opinions and industry guidesFTC may take internal administrative action against those who violate regulationsAdjudicative proceeding or orderFTC Enforcement Devices48 - *Authorizes commission to prevent unfair methods of competition under the Sherman Act, Clayton Act, and Robinson-Patman Act, and anticompetitive behavior not covered by antitrust statutesAlso prohibits unfair or deceptive acts or practices in commercial settingsCommission must prove the activity is deceptive or unfairFTC Act Section 548 - *To be deceptive and violate § 5 of FTC Act, an activity must involve a material omission, misrepresentation, or practice that is likely to mislead a consumer who acts reasonably under the circumstancesDeceptive Acts or Practices48 - *Actual deception not requiredStatements of opinion, sales talk, or puffery are not deceptiveCompanies may sue another alleging the other is making false claims:Pizza Hut sued Papa John’s alleging that the “Better Pizza. Better Ingredients.” claim was false and misleadingStorage bag manufacturer S.C. Johnson sued The Clorox Co. alleging that Clorox claims that Clorox-manufactured storage bags would not leak like other storage bagsFalse Claims as Anticompetitive Behavior48 - *Section 5 prohibits unfair acts or practicesFTC focuses on harm to consumers, which must be: substantial, not outweighed by any offsetting consumer or competitive benefits produced by the challenged practice, and a harm that consumers could not reasonably have avoidedSee FTC Consumer Information webpageUnfair Acts or Practices48 - *FTC’s Telemarketing Sales Rule prohibits deceptive or abusive telemarketing practicesTelemarketing: sales or marketing using one or more telephones and more than one interstate telephone callTelemarketer or seller engages in a deceptive practice if it fails to disclose certain information to customers before he pays for telemarketed goods or servicesTelemarketing and Consumer Fraud and Abuse Prevention Act48 - *If seller provides a written warranty for a consumer product costing > $15, Act requires simple, clear, and conspicuous presentation of certain informationMagnuson-Moss Warranty Act48 - *Requires disclosure of limitations Warranty must be available to consumer to review prior to saleTruth In Lending Act48 - *Applies to creditors who extend credit to consumers for amounts $15, the warranty must have simple, clear, and conspicuous presentation of warranty details.48 - *Test Your KnowledgeMultiple ChoiceDeceptive practices under Sec. 5 must: (a) involve a material misrepresentation(b) the representation must be likely to mislead a consumer (c) the consumer must act reasonable under the circumstances (d) all of the above(e) all of the above plus result in a sale48 - *Test Your KnowledgeMultiple ChoiceJordan is late on paying a store charge card. Jordan received a call claiming that the store would have Jordan arrested for fraud unless payment was made in five days. Which of the following is true? (a) Jordan must pay the bill or be arrested(b) The store violated the Fair Debt Collection Practices Act (c) Jordan must file a lawsuit against the store48 - *Test Your KnowledgeMultiple ChoiceWhich of the following is not a consumer protection law? (a) Fair Credit Reporting Act(b) Federal Registration Act(c) Truth in Lending Act(d) Fair Debt Collection Practices Act(e) Equal Credit Opportunity Act48 - *Thought QuestionsA 2003 FTC survey showed that over a one-year period nearly 10 million people (4.6 % of adult population) were victims of some form of identity theft.Are you concerned about your privacy? 48 - *