Chapter 15

Consumer Protection

Governmental Protection

Consumer – individual who acquires goods that are intended for personal use.

Caveat Emptor Let the buyer beware

Caveat Venditor ???

Why the change in philosophy?

Class Actions

Class Actions – Allows one or several people to sue on behalf of themselves, and others. Is this necessary? Why?

http://www.consumer-action.org/lawsuits/

Governmental Procedure

Cease-and-desist order: an order requiring a company to stop the specified conduct.

Consent order: voluntary, court-enforceable, agreement to stop a practice.

Restitution: Permits a party to a contract to recover money or property given to the other party.

http://www.memphisdailynews.com/news/2014/jul/17/uber-lyft-operating-despite-city-notices/

http://files.consumerfinance.gov/f/201309_cfpb_jpmc_consent-order.pdf

Protection Against Inferior Services and Goods

Licensing Who needs a license to operate? Who would you rather go to?

Unsafe Products

1972 Consumer Product Safety Act Created the Consumer Product Safety

Commission (CPSC)

Toys!!

http://www.cbsnews.com/pictures/10-most-dangerous-toys-of-2014/2/

http://www.cpsc.gov/en/Recalls/Violations/

Food, Drugs and Cosmetics

Food and Drug Administration (FDA) Requires Food, Drugs and Cosmetics be

clean Adulterated = does not meet standards Requires labeling Very cautious (praise and criticism)

http://www.fda.gov/Food/GuidanceRegulation/GuidanceDocumentsRegulatoryInformation/SanitationTransportation/ucm056174.htm

Weights and Measures

Weights and Measures Division Nat’l Institute of Standards and

Technology Uniformity

Pound is a Pound, Gallon is a Gallon, etc. How big is a 2 x 4?

Seals certify accuracy

Protection Against Unfair Trade Practices

Unfair Trade Practice: any method of business that is dishonest or fraudulent or that illegally limits fair competition.

Unfair Trade Practices

Price Fixing False / Misleading Advertising

Bait and Switch Federal Trade Commission

Corrective Advertising Cease and desist

http://www.arentfox.com/newsroom/alerts/costcos-alleged-bait-and-switch-advertisement-could-cost-them#.VIEJc9LF-So

http://mentalfloss.com/article/19217/6-cases-shamelessly-false-advertising

Unfair Trade Practices

Illegal Lotteries Punishable by fine and or imprisonment

What about Bingo?

Confidence Games Pyramid scheme (Madoff)

Unfair Trade Practices

Unfair Pricing Free, artificial two for one, low estimates

Mislabeled Goods

Product Liability

Product Liability: Affixing of responsibility to compensate for injuries caused by a defective product. Product Liability suit

Based on Breach of Warranty: an assurance the seller makes about quality

Expansion of Product Liability

Warranty = Contract Parties involved

Privity of Contract : relationship that exists between buyer and seller

Product Liability Now……Extends to…..

1. The Retailer (Walmart)

2. The Wholesaler (Middle Man-U.S. Company)

3. The Manufacturer (Toy Company – China?)

Chapter 15 Slide 15

Recovery for Tortious Conduct

Product Liability suit can be based on Breach of warranty Fraud Negligence Strict Liability

Has been expanded due to high burden of proof

Defenses to Liability

Used for non-intended purpose Used for non-foreseeable purpose Altered Product Improper conduct Misusing Product

Warranties

Express Warranty: An assurance of quality explicitly made by the seller.

Can be made by Oral or written Conduct – show a sample

Breach of Warranty = Breach of Contract

Opinions vs. Warranties

Puffing: Exaggerated Seller’s talk. Expert Opinions

May create warranties Jeweler says a diamond is flawless

Requirements of Express Warranties

Magnuson Moss Warranty Act of 1975 Not REQUIRED to give an express

warranty IF Express Warranty must identify as

FULL – free repair / replacement of any defective part for reasonable time

LIMITED – fails to meet one or more requirements of a full warranty

Must be in readily understood language Samsung Warranty

Implied Warranties

Implied Warranty: An implicit warranty obligation imposed by law. Warranty of title

You own what you’re selling Free against encumbrances Warranty of Fitness for a Particular

Purpose

Implied Warranties Given Only by Merchants

Warranty against infringement Free of third party’s claims

Trademark, copyright, patent, etc.

Warranty of merchantability Fit for ordinary purposes

Quality and safety May be disclaimed

Exclusion of Warranties

Disclaimer: a notice of exclusion Conspicuous and in writing

Ex: “With All Faults”, “As Is”, “There are no warranties of merchantability or fitness that extend beyond the description on the label.”

• Usually tied to vehicles, but may extend to other products

• New product

• Major defect within warranty period

• Same repair made with no improvement

• Replace product

Warranties

Full Warranty: An express warranty that obligates the seller to repair or to replace a defective product without cost to the buyer, in a reasonable amount of time.

Limited Warranty: Any warranty that provides less protection than a full warranty.

Debate

Hot Debate What protection does Edison have? How should this case be resolved?

What’s Your Verdict Pg 259 How should this case be resolved?