Consumer ProtectionConsumer Protection

Pressures to Promote Consumer Interests How Government Protects Consumers Consumer Privacy in the Internet Age Product Liability: A Special Problem Positive Business Responses to Consumerism Consumerism’s Achievements

ChapterChapter

16

The anatomy of consumerismThe anatomy of consumerism

In 1960, President John F. Kennedy told Congress that consumers were entitled to four kinds of protections:

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.

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.

Reasons for consumer movementReasons for consumer movement

Complex products have enormously complicated the choices consumers need to make when they go shopping.

Services, as well as products, have become more specialized and difficult to judge.

When business tries to sell both products and services through advertising, claims may be inflated or they may appeal to emotions having little to do with how the product is expected to perform.

Product safety has often been ignored.

Goals of consumer lawsGoals of consumer laws

To provide consumers with better information when making purchases.

To protect consumers against possible hazards from products they may purchase.

To promote competitive pricing and consumer choice. To protect privacy.

Figure 16.1aMajor 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 16.1bMajor consumer protections specified

by consumer laws

Direct hazard protections Hazardous toys and games for children are banned from sale. Safety standards for motor vehicles 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 the FTC and Justice Department and by states.

Liability protections When injured by a product, consumers can seek legal redress.

Privacy protections Limited collection of information online and about children is allowed.

Other protections No discrimination in the extension of credit is allowed.

Figure 16.2aMajor 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 DrugAdministration

Safety, effectiveness, and labeling of drugs, foods, food additives, cosmetics, and medical devices Standards for radiation exposureToxic chemicals research

Consumer ProductSafety Commission

Safety standards for consumer products Flammable fabrics, hazardous substances, poison prevention packaging

Major federal consumer protection agenciesand their main responsibilities

Figure 16.2b

National HighwayTraffic Safety Administration

Motor vehicle safety standardsAutomobile fuel economy standardsNational uniform speed limitConsumer safeguards for altered odometers

Department of Justice

Fair competition Consumer civil rights

National TransportationSafety Board

Airline safety

Protecting consumer privacy online

Consumer self-helpInternet users should use technologies that enable them to protect their

own privacy.

Industry self-regulationBusinesses should adopt voluntary policies and technical standards that

protect the privacy of individuals’ information.

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

Strict liabilityStrict liability

Strict liability

Manufacturers responsible for injuries resulting from use of their products, whether or not they were negligent or breached a warranty.

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

Quality managementThis approach emphasizes achieving high quality and customer satisfaction throughteamwork and continuous improvement of a company’s product or service.

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

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

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