Chapter 25 Consumer Law

Chapter 25 Consumer Law

A complete answer is several sentences in length and contains (1) the correct legal rule(s), (2) an explaination of the legal rule(s), (3) application of the legal rule(s) to the facts in the question, and (4) a conclusion.  Number your answer the way the questions are numbered.

1. For the following three cases, explain why the FTC targeted that business, what was accomplished by the FTC, and what sanction, if any, was imposed personally against the officers of the companies involved in consumer fraud:
2. A judgment against POM Wonderful:

http://www.ftc.gov/opa/2013/01/pom.shtm

http://www.ftc.gov/opa/2010/09/pom.shtm,

1. A consent order with an Ohio car dealer:

http://www.ftc.gov/opa/2013/09/autoads.shtm

1. A settlement agreement with Lifelock, an identity theft protection service:

http://www.ftc.gov/opa/2010/03/lifelock.shtm

2. After obtaining his “Funeral and Embalmers” license, Derrick wants to bring his family funeral business into the future by offering the latest options for funerals, including an option to have the carbon extracted from your remains and have it made into jewelry. Or you can be planted in an eco-friendly coffin and fertilize a tree. Or you could have your ashes sent up in a weather balloon to help seed rain clouds!
3. After reviewing the FTC’s guide to advertising, identify at least 3 key points that Derrick needs to know before he begins advertising his new options:

http://business.ftc.gov/documents/bus35-advertising-faqs-guide-small-business

1. After reviewing the FTC guides for selected industries,http://business.ftc.gov/selected-industries, advise Derrick whether the FTC has rules for his business and why he should follow them.
2. Help Derrick decide whether to advertise his new services on the internet, by reviewing the FTC Guide for Internet Advertising, then identifying at least 3 additional requirements that he must follow:http://business.ftc.gov/documents/bus41-dot-com-disclosures-information-about-online-advertising
3. The Cruz family decided to expand its successful recreation business to a vacation spot in Florida, by duplicating the zipline that it operates in Costa Rica which propels you over a jungle forest, across a river and a wildlife habitat, and ends the ride by stopping on the dance floor of a popular bar. The Costa Rica zip line, gets 5 stars by all its guests who rate them on review sites like TripAdvisor. To expedite the ratings at its new location, Cruz decided to make up customer reviews, using fictitious names, and by giving a huge rebate to any new customer who agrees to submit a 5 star rating after their first zipline tour. After reviewing the FTC’s three basic truth-in-advertising principles as they relate to endorsements and testimonials, what advice can you give Cruz on the legality of his marketing plan? :http://business.ftc.gov/documents/bus71-ftcs-revised-endorsement-guideswhat-people-are-asking
4. David, always a math geek in school, decided to open his own small business as a math tutor to get young kids excited about math. To attract new customers he advertised his services with a promise to “ Turn your child into a math geek like me, Get straight A’s and Learn to Love Math, Satisfaction Guaranteed! ” After reviewing the FTC Guide to Advertising Warranties and Guarantees, what refund policy must David follow if any parent wants their money back when their child doesn’t get an A in math class after using his services! Should he continue using this promise?   Here is the rule: http://www.ecfr.gov/cgi-bin/text-idx?SID=1b5d02f9392516fa09dbd6b12c9f52a4&node=16:1.0.1.2.18.0.5.3&rgn=div8
5. The biggest misconception of consumer protection rights may be the assumption by many customers that they have a 3 day right to cancel any written contract. In reality, the right to cancel is limited to less than 10 types of contracts. Under federal law, a right to cancel exists for most types of door to door sales, for some types of telephone sales, and for some types of second mortgage or home equity loans. Under Ohio law, a right to cancel exists for some types of prepaid contracts (health spas, dance studios, dating services), home solicitation sales, business opportunity plans, sales for hearing aids, and contracts for credit repair services. Each of these laws have exemptions and detailed requirements, so all businesses who sell to consumers, should consult with a lawyer, with specialized knowledge of consumer law to assure compliance with the law. After reviewing the FTC Cooling Off Rule, http://www.consumer.ftc.gov/articles/0176-protections-home-purchases-cooling-rule, explain whether a small bakery business, specializing in cakes, would have to provide a three day right to cancel if they set up a booth as a bridal show at a local convention center, and signed up couples for providing their wedding cake. Be sure to discuss what type of businesses and transactions must comply with the FTC Cooling Off Rule, and whether or not this cake business would have to comply. Also discuss the purpose behind the law- why consumers need extra protection for these types of transactions.
6. Buck Prescott owns a Big Buck’s Home Goods and Furnishings, a one-stop shopping spot for all your home good and furnishing needs. With the economy in a bit of a downturn, sales have been slow. To combat this Buck decided that the store should begin offering one year, same as cash financing to customers making purchases over $1,000, which allows consumers to make minimum payments each month, with a lump sum due at the end of 12 months, or to pay the whole amount at the end of 12 months,
7. a) Buck knows he has to provide something in writing to his customers to give them the details of the same as cash deal because but he intends to add in interest at the rate of 29% if any payment is late. Identify what law he needs to follow and identify at least 2 key disclosures required by that Act.
8. b) Buck is concerned that the financing program could come back to bite the company if too many “dead beats” are given the loans. Before Buck advises his sales associates to only offer the same as cash financing to “clean cut individuals” who wear “nice shoes and clothing”, identify what law Buck should consider, and what legal consequences he could face if he violates this law.