15 Business and Society

Consumer Protection


The consumer bill of rights
1) The right to safety: • To be protected against the marketing of goods that are
hazardous to health or life.

2) The right to be informed • To be protected against fraudulent, deceitful, or grossly
misleading information, advertising, labeling, or other practices, and to be given the facts to make an informed choice.

3) The right to choose • To be assured, wherever possible, access to a variety of products and
services at competitive prices and in those industries in which competition is not workable and government regulation is substituted, to be assured satisfactory quality and service at fair prices.

4) The right to be heard • To be assured that consumer interests will receive full and sympathetic
consideration in the formulation of government policy, and fair and expeditious treatment in its administrative tribunals.

Figure 15-1a

Major consumer protections specified by consumer laws
Information protections
• Hazardous home appliances must carry a warning label. • Home products must carry a label detailing contents. • Autos must carry a label showing detailed breakdown of price and all related costs. • Tobacco advertisements and products must carry a health warning label. • Alcoholic beverages must carry a health warning label. • All costs related to real estate transactions must be disclosed. • Warranties must specify the terms of the guarantee and the buyer’s rights. • False and deceptive advertising can be prohibited. • Food and beverage labels must show complete information. • Food advertising must not make false claims about nutrition.

Figure 15-1b

Major consumer protections specified by consumer laws
Direct hazard protections • Hazardous toys and games for children are banned from sale.
• Safety standards for motor vehicles are required. • National and state speed limits are specified. • Hazardous, defective, and ineffective products can be recalled under pressure from EPA, CPSC, NHTSA, and FDA • Pesticide residue in food is allowed only if it poses a negligible risk.

Pricing protections

• Unfair pricing, monopolistic practices, and noncompetitive acts are regulated by FTC and Justice Department and by states.

Liability protections • When injured by a product, consumers can seek legal redress. Other protections • No discrimination in the extension of credit.

Goals of consumer laws
1) To provide customers with better information when making purchases. 2) To protect consumers against possible hazards from products they may purchase. 3) To promote competitive pricing and consumer choice. 4) To protect privacy.

Figure 15-2a

Major federal consumer protection agencies and their main responsibilities
Federal Trade Commission • Competitive pricing
• Deceptive trade practices • Packaging and labeling • Consumer credit disclosure and reporting • Online privacy

Food and Drug Administration
•Safety, effectiveness, and labeling of drugs, foods, food activities, cosmetics, and medical devices • Standards for radiation exposure • Toxic chemicals research

Consumer Product Safety Commission • Safety standards for
consumer products • Flammable fabrics, hazardous substances, poison prevention packaging

Figure 15-2b

Major federal consumer protection agencies and their main responsibilities
National Highway Traffic Safety Administration
• Motor vehicle safety standards • Automobile fuel economy standards • National uniform speed limit • Consumer safeguards for altered odometers

Department of Justice
• Fair competition • Consumer civil rights

National Transportation Safety Board
• Airline safety

Protecting consumer privacy
Consumer self-help
Internet users should use technologies that enable them to protect their own privacy.

Industry self-regulation
Businesses should adopt voluntary policies and technical standards that protect the privacy of their customers.

Privacy legislation
The government should pass laws that establish minimum privacy standards for collecting information online.

Product liability reform proposals
1) Set up uniform federal standards for determining liability. 2) Shift the burden of proving liability to consumers. 3) Eliminate some bases for liability claims. 4) Require the loser to pay the legal costs of the winner. 5) Limit punitive damages.

Business responses to consumerism
Total quality management
This approach emphasizes achieving high quality and customer satisfaction through teamwork and continuous improvement of a company’s product or service.

Voluntary industry codes of conduct
In some cases, businesses in an industry have banded together to agree on voluntary codes of conduct, spelling out how they will treat their customers.

Consumer affairs departments
These centralized departments normally handle consumer inquiries and complaints about a company’s products and services.

Product recalls
Occurs when a company, either voluntarily or under an agreement with a government agency, takes back all items found to be dangerously defective.