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Consumer-Law-Greenman-Fall05 - 1 Federal Trade Commission...

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Federal Trade Commission Act "unfair or deceptive act or practice" Illegal if tendency or capacity to deceive Traditionally to protect the ignorant and unwary ( Charles of the Ritz ) New Standard ( Cliffdale Assoc. ) (less protective than before): 1) Representation, omission or practice that 2) Is likely to mislead consumers acting reasonably in circumstance 3) And it is material (likely to affect choice of product). Advertisements Deceptive claim doesn't have to be verbal ( Standard Oil ) Substantiate claims made (at least amount & type of proof claimed in ad) a) if say/imply scientifically proven superior, prob. need RCT b) if say product is superior, must have reasonable basis to support c) puffing=vague, very subjective, no proof needed ( Sterling Drug ) Unfair Practice Actual substantial consumer injury AND Hard to avoid AND not outweighed by benefits = Basically cost-benefit analysis of disclosure ( In re Harvester Int'l ) Remedies : by FTC * Cease and Desist: On appeal, fact finding by FTC if supported by evidence = conclusive * Civil Penalties: § 19 for violations of rules or cease & desist orders (if have actual or implied knowledge that act is prohibited) Max $10,000 per violation Amount determined by culpability, history of prior violations, ability to pay, effect on ability to do business, etc.. (NOT consumer restitution) If no cease & desist order first, facts are determined de novo * Rule Making: Must do rule-making if changing law to give notice ( Ford v. FTC ) Can't do rule-making if not rationally related to "problem" (rule to refund tuition if no proper screening: Katherine Gibbs ) Must cause substantial injury to consumers AND not be outweighed by benefits to consumers & competition * Corrective Remedies: corrective future advertising ( Warner Lambert ) * Consumer Restitution: § 19: can include refund $, damages, etc.. ONLY IF EITHER 1) violate FTC rule OR 2) violate cease & desist order by an act that reasonable person would have known was dishonest or fraudulent NO punitive damages Not used much (only one case: Glenn Turner ) 1
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* Court Injunctions & Freezing Assets: Problems w/ court involvement: Judicial precedent trumps FTC interpretation of Act TROs: if weighing equities and chance of success in public interest Normally for false advertising Not required to also have admin proceedings (§ 19- Singer ) NO PRIVATE RIGHT OF ACTION ( Holloway ) 1) Would burden defendants will multiple, frivolous suits 2) Private parties don't have FTC expertise 3) Wouldn't always serve public interest Exception: Guernsey : Class action to enforce FTC cease & desist **Always look at State Little FTCs!! SALES PRACTICES Federal Regulations Door-to-Door Sales : 16 CFR § 429.1 Covered: >$25 & not at seller's place of business Except if buyer initiates (and emergency or asks for home visit) or done all by phone or mailer if insurance/stocks/real property Receipt/contract in same language negotiated **Notice that it may be cancelled within 3 days Must also tell consumer orally of that right Co. must comply with cancellation w/in 10 days Can't sell debt or tell finance co. of debt until 5 days later
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Consumer-Law-Greenman-Fall05 - 1 Federal Trade Commission...

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