About Consumer Protection
The history of consumer protection in the United States is the story of specific formal legal responses to crises and emergencies that generated great public outrage and required a public response from government. Consumer protection emphasizes freedom of contract and the legal concept of caveat emptor (let the buyer beware).
The modern consumer protection movement began in the 1960s with reference to a Consumer Bill of Rights by President Kennedy, the growth of the “Great Society” program of the Johnson Administration, and the efforts of Ralph Nader and other consumer rights activists who highlighted the existence of unsafe products and the need for greater government regulation.
American consumers are protected from unsafe products, fraud, deceptive advertising, and unfair business practices through a mixture of national, state, and local governmental laws and the existence of many private rights of actions.
These public and private rights both protect consumers and, at a formal level, equip them with the knowledge they need to protect themselves.
Examples & Definitions Of US Consumer Protection Law
Proof of Consumer Status
A consumer claiming that there has been a violation of the consumer protection statute has the burden of proving that the statutory definition of consumer has been satisfied. The word consumer normally refers to individuals or households that use goods and services generated within the economy.
Legal Action by Consumer
Some consumer protection statutes provide that a consumer who is harmed by a violation of the statutes may sue the business or organization that acted improperly. The consumer may sue to recover a specified penalty or may bring an action on behalf of consumers as a class. Consumer protection statutes are often designed to rely on private litigation as an aid to enforcement of the statutory provisions. In such an action, a consumer must show that the defendant engaged in misconduct of the kind prohibited by the applicable consumer protection statute. At times, legal fees may be awarded to the consumer who prevails in such an action.
Advertising, Representations and Consumer Protection
The Federal Trade Commission (FTC) works to ensure that US markets are efficient and free of practices which might harm consumers. The FTC enforces federal consumer protection laws that prevent fraud, deception, and unfair business practices. The FTC Act’s prohibition on unfair or deceptive acts or practices broadly covers advertising claims, marketing and promotional activities, and sales practices in general. The Act is not limited to any particular medium and the Commission’s role in protecting consumers from unfair or deceptive acts or practices encompasses advertising, marketing, and sales online, as well as the same activities in print, television, telephone and radio.
The FTC’s Bureau of Consumer Protection also protects consumers against unfair, deceptive, or fraudulent practices. Its actions include individual company and industry-wide investigations, administrative and federal court litigation, rule-making proceedings, and consumer and business education.
The Bureau of Consumer Protection is divided into six divisions and programs, each with its own areas of expertise. One of the divisions is the Division of Advertising Practices. This division is the nation’s enforcer of federal truth-in-advertising laws. The FTC Act prohibits unfair or deceptive advertising in any medium. Third parties such as advertising agencies or website designers and catalog marketers also may be liable for making or disseminating deceptive representations if they participate in the preparation or distribution of the advertising or know about the deceptive claims.
The Division of Advertising Practices focuses its enforcement activities on claims for foods, drugs, dietary supplements, and other products promising health benefits; health fraud on the Internet; weight-loss advertising and marketing directed to children; performance claims for computers, ISPs and other high-tech products and services; tobacco and alcohol advertising; protecting children’s privacy online; claims about product performance made in national or regional newspapers and magazines; in radio and TV commercials, including infomercials; through direct mail to consumers; or on the Internet.
The Division of Enforcement conducts a wide variety of law enforcement activities to protect consumers, including deceptive marketing practices. This division monitors compliance with Commission cease and desist orders and federal court injunctive orders, investigates violations of consumer protection laws, and enforces a number of trade laws, rules, and guides. A consumer with a complaint should consider approaching the FTC assuming the product is sold in interstate commerce which, if found on the internet, is almost certainly true.
The FTC’s Telemarketing Sales Rule requires certain disclosures and prohibits misrepresentations. The Rule covers most types of telemarketing calls to consumers, including calls to pitch goods, services, sweepstakes, and prize promotion and investment opportunities. It also applies to calls consumers make in response to postcards or other materials received in the mail.
Advertising, Labelling, Franchising, & Auto
“Green Product” Advertising Claims:
A product which purports to offer an environmental benefit must be backed with factual information. Green Guides govern claims that consumer products are environmentally safe, recycled, recyclable, ozone-friendly, or biodegradable. These guides apply to environmental claims included in labeling, advertising, promotional materials, and all other forms of marketing. The guides apply to any claim about the environmental attributes of a product, package, or service in connection with the sale, offering for sale, or marketing of such product, package, or service for personal, family, or household use, or for commercial, institutional, or industrial use.
According to the guidelines, a product or package should not be marketed as recyclable unless it can be collected, separated, or otherwise recovered from the solid waste stream for reuse or in the manufacture or assembly of another package or product through an established recycling program.
The Textile, Wool, Fur, and Care Labeling Rules require proper origin and fiber content labeling of textile, wool and fur products, and care label instructions attached to clothing and fabrics.
For a product to bear the label “Made in USA,” the product must be “all or virtually all” made in the United States. The term “United States,” as referred to in the Enforcement Policy Statement, includes the 50 states, the District of Columbia, and the U.S. territories and possessions. “
A product that includes foreign components may be called “Assembled in USA” without qualification when its principal assembly takes place in the United States and the assembly is substantial. For the assembly claim to be valid, the product’s last substantial transformation should have occurred in the United States.
The Franchise and Business Opportunity Rule requires franchise and business opportunity sellers to give consumers a detailed disclosure document at least 10 days before the consumer pays any money or legally commits to a purchase of a franchise. The document must include:
- the names, addresses, and telephone numbers of other purchasers
- a fully-audited financial statement of the seller
- the background and experience of the business’s key executives
- the cost of starting and maintaining the business
- the responsibilities of the seller and purchaser once the purchase is made
In addition, companies that make earnings representations must give consumers the written basis for their claims, including the number and percentage of owners who have done at least as well as claimed.
The Motor Vehicle Information and Cost Savings Act requires a dealer to disclose to the buyer various elements in the cost of an automobile. The act prohibits selling an automobile without informing the buyer that the odometer has been reset below the true mileage. Although the statute imposes liability only when the seller knowingly violates the statute, it is not necessary to prove actual knowledge. For example, an experienced auto dealer cannot claim lack of knowledge that the odometer was false when that conclusion was reasonably apparent from the condition of the car.
Protecting Your Rights With The Help Of The FTC & Courts
FTC investigations are non-public to protect both the investigation and the companies involved. If the FTC believes that a person or company has violated the law, the agency may attempt to obtain voluntary compliance by entering into a consent order with the company. The FTC’s administrative complaints initiate a formal proceeding that is much like a federal court trial but before an administrative law judge; evidence is submitted, testimony is heard, and witnesses are examined and cross-examined. If a law violation is found, a cease and desist order may be issued. Initial decisions by administrative law judges may be appealed to the full Commission. Final decisions issued by the Commission may be appealed to the U.S. Court of Appeals and, ultimately, to the U.S. Supreme Court.
In some circumstances, the FTC can go directly to civil court to obtain an injunction, civil penalties, or consumer redress. The injunction seeks to preserve the market’s competitive status quo. The FTC seeks federal court injunctions in consumer protection matters typically in cases of ongoing consumer fraud.
Each state also has a consumer affairs department and most have the same authority for intra state enforcement of the consumer protection laws
License bureaus can also be a source of relief if the provider of the product or service was licensed. That is typical for contractors; beauty shop owners; doctors and lawyers. Most license bureaus have their own enforcement division which will investigate claims.
Consumer Protection Case Law
JUSTICE BRENNAN delivered the opinion of the Court.The Racketeer Influenced and Corrupt Organizations Act (RICO or Act), Pub. L. 91-452, Title IX, 84 Stat. 941, as amended, 18 U.S.C. §§ 1961-1968 (1982 ed. and Supp. V), imposes criminal and civil liability upon those who engage in certain “prohibited activities.” Each prohibited activity is defined in 18 U.S.C. § 1962 to include, as one necessary element, proof either of “a pattern of racketeering activity” or of “collection of an unlawful debt.” … click to see more
Continental Illinois Bank’s financial distress during the 1980s left many victims, from taxpayers (who injected some $2 billion to keep the bank afloat) to equity investors (who lost most of the value of their stock) to some of its officers (now spending time in prison) to bonding companies and insurers (which must compensate the firm for injuries caused by employees’ delicts). … click to see more
MR. JUSTICE STEWART delivered the opinion of the Court.This case presents the question whether a party who has had issues of fact adjudicated adversely to it in an equitable action may be collaterally estopped from relitigating the same issues before a jury in a subsequent legal action brought against it by a new party.The respondent brought this stockholder’s class action against the petitioners in a Federal District Court. The complaint alleged that the petitioners, Parklane Hosiery Co., Inc. (Parklane), and 13 of its officers, directors, and stockholders, … click to see more
MR. JUSTICE REHNQUIST delivered the opinion of the Court.The question presented is whether § 6 (b)(1) of the Consumer Product Safety Act, 15 U. S. C. § 2055 (b)(1), governs the disclosure of records by the Consumer Product Safety Commission pursuant to a request under the Freedom of Information Act. We granted certiorari to review a judgment of the Court of Appeals for the Third Circuit because of the importance of the question and because of a conflict in the Circuits…. click to see more
JUSTICE POWELL delivered the opinion of the Court.
In these cases, involving alleged damage to fishing grounds caused by discharges and ocean dumping of sewage and other waste, we are faced with questions concerning the availability of a damages remedy, based either on federal common law or on the provisions of two Acts — the Federal Water Pollution Control Act (FWPCA), 86 Stat. 816, as amended, 33 U. S. C. § 1251 et seq. (1976 ed. and Supp. III), and the Marine Protection, Research, and Sanctuaries Act of 1972… click to see more
Lawyer Reviewed Cases
Consumer Protection Stories
Attorneys General Seek Additional Consumer Protection Authority From Congress To Address Concerns About The Airline Industry
AUTHOR Jeffrey A. Greenbaum Frankfurt Kurnit Klein & Selz The National Association of Attorneys General sent a letter to Congressional leadership, asking Congress to pass legislation that
AUTHOR Gonzalo E. Mon The FTC and six states just announced that they had filed a lawsuit against Roomster – a platform through which people
AUTHORS Leonard Gordon (Venable LLP) and Christopher Boone (Venable LLP) Global Advertising Lawyers Alliance (GALA) In June, New York enacted a ticket transparency law seeking to make sweeping changes
AUTHORS Jeffrey Neuburger & Jonathan Mollod On August 29, 2022, the Federal Trade Commission (FTC) announced that it had filed a complaint against Kochava, Inc. (“Kochava”), a digital marketing and analytics
AUTHOR Paul Fling The Children’s Advertising Review Unit (“CARU”), a BBB National Programs unit that monitors child targeted advertising, issued a compliance warning making clear
By Hunton Andrews Kurth LLP & vchiu On August 10, 2022, the Consumer Financial Protection Bureau (“CFPB”) issued a new interpretive rule clarifying when digital marketing providers must comply with
Jill Mahoney On August 23, an Illinois federal judge dismissed a putative class action lawsuit against Walmart over its fudge mint cookies (subscription to Law360 required). The plaintiff Eugene
AUTHORS Moorari Shah, A.J. Dhaliwal & Pouneh Almasi On August 10, the CFPB issued a consent order against a FinTech company for a faulty algorithm utilized in its personal finance management app
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