Consumer and Environmental Protection

Consumer Protection Overview

Basics of Consumer Protection

The Federal Trade Commission has primary responsibility to prevent false and misleading advertisements, while states' attorneys general and Better Business Bureaus also help protect consumers.
Congress has empowered the Federal Trade Commission (FTC) and the Bureau of Consumer Financial Protection (BCFP) to enforce consumer protection laws. The Federal Trade Commission (FTC) is an independent federal agency created by the Federal Trade Commission (FTC) Act in 1914; the organization's mission is to protect consumers, prevent business activities that restrict competition, and advance organizational performance. An advertisement is considered deceptive and in violation of the FTC Act if it contains a material misrepresentation or omission that is likely to mislead a reasonable consumer. In this case, material means "related or relevant."

FTC Competition Oversight

Aside from directly overseeing consumer protection, the Federal Trade Commission (FTC) takes numerous actions to prevent anticompetitive practices across all industries. For fiscal years 2013 to 2017, the FTC took 30% of its actions against the healthcare industry (pharmaceuticals and medical devices).
The FTC has also established a number of rules for types of sales. For example, sellers must ship an item within the advertised time or within 30 days after they received the order if no time was provided. Also, anyone who receives unordered merchandise by mail can treat the merchandise as a gift.

The FTC prohibits telemarketers from calling or texting any telephone number that is listed on its do-not-call registry. The Telephone Consumer Protection Act, passed by Congress in 1991, prohibits telemarketers from making autodialed or prerecorded messages unless the consumer agreed to this in writing.

The FTC also regulates door-to-door sales. For example, a sales representative is required to inform buyers that they have the right to cancel the sale at any time before midnight of the third business day following the sale.

The Bureau of Consumer Financial Protection (BCFP) is an independent federal agency that enforces federal consumer financial laws and protects consumers in the financial marketplace. The BCFP was created to promote fairness and transparency for financial products and services in the marketplace. It is a powerful resource for consumers because it provides educational materials and accepts complaints. The BCFP has jurisdiction over financial institutions, including credit-reporting agencies and debt-collection companies. It aims for consumers to understand their rights and responsibilities with credit cards, mortgages, and other loans, and it is empowered to take action against any organization that engages in deceptive practices or commits unfair or misleading acts.

At the state level, the attorney general—the legal officer who represents the state in legal proceedings—and the Better Business Bureau (BBB)—a nongovernmental, nonprofit organization designed to enhance marketplace trust—carry out functions similar to those of the FTC and BCFP.

FTC Consumer Protection Reports

FTC actions are taken against a variety of industries and criminal activities based on consumer reports. If these reports are found to be valid, the FTC takes action against violators though administrative procedures or federal court. Debt collection makes up the greatest number of FTC reports. In addition to these FTC reports, call reports also contribute to the overall percentage of reports.

Laws and Entities That Ensure Consumer Protection

Much of consumer protection is aimed at bringing about disclosure, which requires businesses to provide information that a consumer needs to make informed purchasing decisions.

Much of consumer protection focuses on disclosure, which means that advertisements should be straightforward instead of deceptive. There are three main types of deceptive advertising: pricing, quality and quantity, and testimonials.

An example of deceptive pricing is when a seller advertises a product as buy-one-get-one-free when really the cost of the first item is what the two items would normally cost separately. In bait-and-switch advertising, a seller advertises a product and makes that product unavailable in an attempt to sell a different or more expensive product.

Deceptive advertising in terms of the quality or quantity of a product must be different than mere puffery. Puffery is an exaggerated, subjective claim made by the seller during a sales pitch to promote the product. If the claim does not quality as puffery, then it may be deceptive advertising. A statement by a box manufacturer that "these are the best boxes ever made" is puffery. Saying the boxes are preferred by four out of five moving companies without any data to back this up would cross the line into deception.

Puffery versus False Advertising

The distinction between puffery and false advertising sometimes falls within a gray area. Puffery is not actionable under consumer protection, unlike false advertising.
The FTC Act also prohibits unfair advertising. An advertisement is unfair when consumers cannot evade injury within reason and the injury causes the consumer substantial harm. For example, if a sunscreen advertised—inaccurately—that it prevented all forms of skin cancer, then the FTC would likely consider it unfair. On the other hand, an advertisement that set a high price on a product or one that offended some viewers or listeners because of its images or language would not be unfair.

The Fair Packaging and Labeling Act, which took effect in 1966, requires product packaging to contain specific information in a visible location on the packaging. For example, the package must list the net quantity of the contents of the package and accurately describe its contents. Net quantity means the weight of the contents, not the weight of the contents and their packaging.

The FTC enforces the Magnuson-Moss Warranty Act, enacted in 1975; this is a federal statute that regulates producers and sellers that sell consumer products with an express written warranty. A consumer product is a good bought for personal or family use. An express warranty is a promise or guarantee that the goods in question meet the required standards. The Magnuson-Moss Warranty Act regulates these guarantees and tries to prevent sellers from deceiving consumers. The act requires that sellers clearly disclose all conditions of the warranty on any product costing more than $10 and being sold between states.

Warranties covered under the Magnuson-Moss Warranty Act must also state whether the warranty is full or limited. A full warranty is rare and guarantees free repair if the product is defective; if the seller is unable to repair the product, the seller will issue the consumer a refund or free replacement. A limited warranty is one that promises anything less than a full warranty.