Bài giảng Business Law - Chapter 48: The Federal Trade Commission Act and Consumer Protection Laws

Learning Objectives Describe the powers granted to the FTC and the key features of an adjudicative hearing Identify and explain the elements of the deception and unfairness tests employed by the FTC Explain the FTC’s implementation of many consumer protection laws

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Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin11Administrative LawThe Federal Trade Commission Act and Consumer Protection LawsAntitrust: The Sherman ActThe Clayton Act, The Robinson-Patman Act, and Antitrust Exemptions and ImmunitiesEmployment LawEnvironmental RegulationRegulation of BusinessPARTThe Federal Trade Commission Act and Consumer Protection LawsPAETRHC48The most exciting thing happening in business is the rise of vigilante consumers.Anita Roddick, Founder, The Body ShopMarketing Week (Feb. 24, 2000)Learning ObjectivesDescribe the powers granted to the FTC and the key features of an adjudicative hearingIdentify and explain the elements of the deception and unfairness tests employed by the FTCExplain the FTC’s implementation of many consumer protection lawsFederal Trade Commission Act of 1914 enabled creation of the Federal Trade Commission (FTC) as an independent agency FTC’s principal missions are to keep the U.S. economy both free and fairFTC enforcement devices: issuing trade regulation rules, facilitating voluntary compliance, and adjudicative proceedingsThe FTCFTC trade regulation rules have the force of law and FTC can proceed directly against those who engage in prohibited practicesFTC gathers evidence about possible violations from private parties, government entities, and FTC investigations FTC promotes voluntary compliance with best practices and regulations by issuing advisory opinions and industry guidesFTC Trade Regulation RulesIf FTC proceeds against alleged offender (respondent), it files a formal complaint and the case is heard in a public administrative hearing called an adjudicative proceedingMost common penalty resulting from a final decision is an FTC cease-and-desist order A consent order approves a negotiated settlement in which respondent promises to cease certain activities and/or pay feesFTC Adjudicative ProceedingsFTC Act Sec. 5 authorizes commission to prevent unfair methods of competition and prohibits unfair or deceptive acts or practices in commercial settingsA deceptive or unfair act involves a material misrepresentation, omission, or practice; that is likely to mislead a consumer; who acts reasonably under the circumstancesReasonable consumer testFTC Act Section 5FTC issued 1995 Telemarketing Sales Rule (TSR) prohibiting deceptive and abusive telemarketing acts or practicesA telemarketer or seller engages in a deceptive practice if it fails to disclose certain information to customers before he pays for telemarketed goods or servicesAbusive practice: telemarketer threatens or intimidates a customer, or calls repeatedly Telemarketing and Consumer Fraud and Abuse Prevention ActIf the seller provides a written warranty for a consumer product costing > $15, Act requires simple, clear, and conspicuous presentation of certain information:Persons protectedProducts, parts, characteristics coveredWhat warrantor will do in case of product defectWarranty durationConsumer procedures in event of defect or failureMagnuson-Moss Warranty ActApplies to creditors who extend credit to consumers for amounts < $25,000Truth In Lending ActConsumer credit enables the purchase of goods, services, or real estate used primarily for personal, family, or household purposes Applies to creditors who extend credit to consumers for amounts < $25,000Provisions deal with home equity loans and consumer credit advertisingRequired disclosures include finance charge, billing statement, annual percentage rate, due date, late charge, billing rights, etc.Truth In Lending ActApplies to consumer reporting agencies that regularly compile credit-related information on individuals for the purpose of furnishing consumer credit reports to usersAgency must adopt procedures to: Ensure users of information employ information only for certain limited business purposesEnsure maximum possible accuracy Avoid including obsolete information in a reportFair Credit Reporting ActAlso imposes disclosure duties on users of credit reports (e.g., lenders, employers)If user obtains an investigative consumer report, user must inform person under investigation about report request and the possible sensitive information in the reportPerson disputing accuracy or completeness of credit report’s information may compel a reinvestigation by credit reporting agencyFair Credit Reporting ActA series of amendments to the Fair Credit Reporting Act, FACT permits victims of identity theft to file theft reports with consumer reporting agenciesRequires agencies to include “fraud alerts” in credit reports about consumers who believe they are victims of the fraudulent use of their financial informationSee FTC ID Theft information Fair and Accurate CreditTransactions Act (FACT)Prohibits credit discrimination on the bases of sex, marital status, age, race, color, national origin, religion, and obtaining public assistanceApplies to all entities that regularly arrange, extend, renew, or continue creditFTC Equal Credit Opportunity webpage Equal Credit Opportunity ActProvisions cover credit card billing disputesCardholder must give issuer written notice of alleged error in billing statement within 60 days of time the statement is sent to cardholderCard issuer must either (1) correct cardholder’s account, or (2) send cardholder written statement justifying billing statement’s accuracy See FTC Fair Credit Billing webpage Fair Credit Billing ActCreated the Consumer Financial Protection Bureau (CPFB), charged with authority to mandate clear, accurate disclosures of information that consumers need in shopping for mortgages, credit cards, and other financial productsLaw also prohibits hidden fees and deceptive practices by financial institutions, and otherwise protects consumers in their financial transactionsThe Dodd-Frank ActApplies to debts that involve money, property, insurance, or services obtained by a consumer for consumer purposes Prohibits debt collectors from contacting third parties such as debtor’s employer, relatives, or friends, and limits a collector’s contacts with debtor See FTC Fair Debt Collection webpageFair Debt Collection Practices ActConsumer Product Safety Commission : issues consumer product safety standards,issues bans of certain hazardous products; may bring civil suits in federal district court to eliminate dangers presented by imminently hazardous consumer products, and after receiving notice of hazards, may issue orders to private parties to address “substantial product hazards” Consumer Product Safety ActThought QuestionsA customer is the most important visitor on our premises, he is not dependent on us. We are dependent on him. He is not an interruption in our work. He is the purpose of it. He is not an outsider in our business. He is part of it. We are not doing him a favor by serving him. He is doing us a favor by giving us an opportunity to do so. Attributed to Mahatma GandhiWhat has been your experience as a customer?