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Consumer Protection And Federal Trade Commission

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Because of the Facebook fiasco that happened recently, the protection and safety of our consumers and personal information is in the public spotlight once more. Facebook may not be the only big name brand that dropped the ball on the safety of consumers in the past years. A lot of brands that people know and trust created costly mistakes when it comes to making sure that their consumers are safe. However, it may not always hit the news. Another problem about this is that many people don’t even know the meaning of consumer protection.

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Because of this whenever people attempt to explain the scope of various consumer protection laws to any of their clients, it would be better to use everyday examples.

What is the meaning of consumer protection?

Consumer protection is related to a certain area of law that makes sure that the fair and ethical treatment of consumers of various services and products in the United States promotes a marketplace that can be competitive for the benefit of every consumer. As early as the 19th century, public crises that occurred forced the government to respond through the creation of a body of jurisdiction that will oversee any product or service that gets offered to the masses.

Since that happened, laws in consumer protection have evolved to cover subjects such as privacy and identity protection, advertising, anti-trust laws, ethical marketing as well as deceitful business activities.

Everything falls under the Federal Trade Commission or FTC’s jurisdiction. The FTC or Federal Trade Commission was established by past President Woodrow Wilson in the year 1914. It is a government body that aims to protect every consumer in the United States from the unfair or unethical treatment and practices that people may encounter with deceptive businesses.

The FTC or Federal Trade Commission has three important goals:

  • To aim for the protection of every consumer through the prevention of deception, fraud as well as unfair business practices in every marketplace.
  • To have advancements in collective organizational as well as individual performance.
  • To maintain competition through the prevention of business practices that are not good for competition.

For them to achieve these goals:

The FTC or Federal Trade Commission will work closely with individuals from every sector. It may include business owners, policy and lawmakers and the public. They will focus on these three main areas of activities:

Advisory Board

The FTC aims to provide advice and research to the important national as well as international governmental agencies so they can help in shaping and guiding rules that will assist in the maintenance of a fair and safe marketplace.

Law Enforcement

The FTC will also act as both an enforcer and an investigator. It will collect complaints from the masses, conduct the follow-up investigations and, if needed, file a lawsuit against the offending body.

Education

The FTC will provide educational materials and workshops for both business communities and the general public for the promotion of ethical, fair and free Global market. They will do this while they educate every one of the fraudulent activities as well as scams so that everyone will become aware of what is happening.

Times When Big Household Brands Violated The Consumer Protection Laws

Annually, the FTC processes more than a hundred lawsuits in Consumer Protection Act. Anyone may review that on FTC’s website. If you will check them out, you may not be aware of any of those companies so it might be more difficult to relate it to your daily endeavors. In order to make things easier, here are eleven consumer protection cases wherein the big brands violated the act for consumer protection:

The Misleading Marketing of AT & T

Have you wondered how the so-called unlimited phone plans work? The internet appears to slow down after you watch a specific number of videos on YouTube. The FTC reviewed this in 2014. This time, they discussed a formal complaint by an individual against AT&T. They misled customers through marketing so-called unlimited plans that had a lot of limitations. After consumers passed a certain level of usage in data, their service would slow down by up to ninety percent. This did not sound unlimited for anyone including the FTC and they considered it as deceitful advertising that also directly violates the Consumer’s Protection Act. However, until now, the case is still in the court and AT&T is doing everything they can so this case will get dismissed. However, there is no luck until now.

Lenovo Risked Everything With a 3rd Party Install

Every computer may come with a “bloatware”. It is a nickname that people use to describe the pre-installed programs and applications on every computer. It got this name because they tend to fill up and then slow down the should be empty machine that may cause a lot of discomfort for anyone. Many of this bloatware can be harmless. However, it is not the case when it comes to a specific program that Lenovo pre-installed on their devices. The popup ad delivery program called VisualDiscover became a part of the package whenever you purchase a Lenovo computer. This makes the company an accomplice in the violation of the Consumer Protection Act. The issue about this is that the third party program may access any sensitive information it wants to get from any user’s system. It includes their banking details, online logins as well as their social security number. Because of this, it is in serious breach of the Consumer Protection Act. As a remedy to the situation, the courts had an order for Lenovo to create and complete comprehensive audits in software security of every pre-installed software to make sure that all of their customers are safe. Aside from that, they will need to get the permission of every customer before they activate this software on any device.

Dish Network Never Stops Calling

It may be very annoying to get telemarketing calls. This may be so infuriating if you already had your name in the Do Not Call registry but still receive telemarketing calls. This is what lots of individuals felt when the Dish Network made millions of robocalls as part of their telemarketing efforts to the people who are in the “Do Not Call” list. Yet, regardless of the fact if someone is listed on the registry, it is still in the breach of the Consumer Protection Act to use automatic dialing systems to be able to call anyone using pre-recorded messages without their written consent. It is a rule that has basis on the TCPA or Telephone Consumers Protection Act which is an area of the Consumer Protection Law. Because of this, they held a class action suit against the Dish Network and they got forced to pay $341 million because of their violation of the Telephone Consumer Protection Act.

The Deception of DeVry

This deception is also about the promising of something to any consumer that you may not be able to deliver. For a long time a popular university advertised promises that their students will get a job within six months after they graduate and even get more money compared to their peers. However, in reality, only 90% of the students got a job within six months after their graduation and just 15% of them earned more than their peers. Yet, FTC’s formal investigation provided a different proof. Even if it was true that a huge percentage of the students got a job after graduation, most of the work they got were not in the person’s field of study. Business graduates worked in car sales and as restaurant servers. DeVry also did not acknowledge that a lot of the students who had jobs six months before they graduated already had them before they finished school. The promise of Devry has been very misleading. It made consumers believe that they will get a job in their chosen field after they study with DeVry. Because of this, the court agreed that the advertising of DeVry directly violated the Consumer Protection Act. DeVry eventually paid $100 million settlement and got refrained to make any promises in all of their public communications in the future.

Child’s play at Amazon

In the 90’s until early 00’s, every parent is afraid of getting a huge phone bill because of their children’s shenanigans. Now, it is still the fear of every parent. Because of the Play and App Stores, the hairs of every parent’s back may eventually stand on their ends. The good thing about this is that the hard work of FTC, it may not be that easy to purchase tokens on Plants vs. Zombies or Candy Crush anymore. However, recently, companies such as Amazon do not protect parents from the in-app purchases that their less financially astute children may make. Because of this, parents now have to pay for millions of dollars of in-app purchases that were not approved. As a remedy to this situation, the FTC stepped in and stated that Amazon would have to change their in-app purchase process as protection to account holders for paying any purchase they did not make willingly. Since then, Amazon created a refund policy and additional security measures so kids would not make any huge purchase on the accounts of their parents. Apple also went through the very same issue for in-app purchases without the consent of parents.

The Cheated Tests of Volkswagen

It is possible that you already heard about this in the news. Volkswagen had a monumental lawsuit that they had to pay more than $14 billion to fix the problems that happened because they deceived their customers. What did Volkswagen do? The company cheated their emissions tests and reported that their vehicles comply with the standards. They deceived their customers that their vehicles are “eco-friendly” in their marketing communications. Because of what they did, they violated both the Consumer Protection Act and the Environmental Protection Act. According to Deputy Attorney General Sally Q. Yates, through the duping of the regulators, Volkswagen turned almost half a million American drivers into accomplices in the destruction of the atmosphere. This is a great example of how violations in consumer protection can end in costly lawsuits as well as damages. These may even have an effect on the market’s view of the company in the coming years. The trust of any consumer may be difficult to win back after you break it.

The Support of Scammers by Western Union

In case you have been scammed online previously, it is highly likely that it happened through Western Union. In reality, a lot of overseas scammers depend on the international transfers of Western Union. One example is the Nigerian 419 scams or “advance fee” scams. It involves a scammer finding a way to manipulate a person to send the money. They usually use a story that can create an emotional connection with any person so they can build trust and ask for help or favors. Alternatively, it may involve the promise of a lot of money for just a small fee. There may be other countries where these scams come from but more than 51% of them originated from the country of Nigeria. They called this Nigerian scams and it has the criminal code 419.Since most of these scams became successful because of Western Union’s services in the completion of their transactions, the FTC filed a lawsuit against Western Union. They issued a $586 million dollar fine to the company so that the affected people from January 2014 to 2017 will get reimbursed. In case you got affected by this scam through Western Union during this time, you may still apply a claim for this case.

The Two Strikes of Uber Most of the time, Uber gets criticized for their disruptive actions and business model. However, they crossed the Consumer Protection line with two separate accounts in violation of the consumer protection act. The first time occurred in 2017.During this time, Uber created hyperbolic promises on how much drivers in Uber can make. They even explicitly quoted the high earnings of drivers from California and New York. However, when FTC made their independent research, they found that the average yearly earnings of every driver were $30 thousand lower that what Uber claimed. Because of this deceitful advertising, Uber had to pay $20 million in settlement.

7-Eleven is Eating Their Competition

Consumer protection may not always be about unethical behavior or deceit. It is also about the protection of customers through the promotion of competition. Companies that have competitors can motivate them to provide the best deals to their consumers to beat competition. Because of this, a lot of brands are doing their best to minimize the prices or improve the quality of their products. It is for this reason why Bill Gates bailed Steve Jobs out of bankruptcy. The absence of competition can make a business have less incentives for them to minimize their prices and strive to create higher quality products for their consumers. When there was an announcement from 7-Eleven that they will buy 1,000 of their competitor’s stores, the FTC took this into consideration. Doing this can radically minimize their competition in a lot of geographical marketplaces and minimize their incentives to provide their consumers the best prices. Here, the parent company of 7-Eleven agreed on the restructuring of their deal to maintain the fair level competition in the marketplace.

Herbalife is Paying for the Incorrect Reasons

Were you able to encounter a seminar that a Multi-level marketing company hosted? They usually tell grandiose stories of an individual who joined and quit their job after a few months then bought a mansion. They usually mislead new “recruits” that signing up for their company can solve all of their problems in life. Herbalife is a major international Multi-Level Marketing brand that has revenues of more than $4 billion. They actively promise their new registrants that they could quit their jobs and eventually become rich by joining them. After conducting a Consumer Protection Investigation, their claims were proven false. In real life, less than half of the salespeople of Herbalife earned less than $300 in a single period. Another issue about this that surfaces is about their structure in benefits. Herbalife incentivized the recruitment of new people and not the purchase of useful commodities. The incentive structure has basis on a pyramid scheme that is illegal. Because of these findings, the company went through a $200 million lawsuit as well as a court order for the restructuring of their payment structures and business model.

Lending Club’s Hidden Fees

Finally everyone hates hidden fees especially the Consumer Protection Act. A popular peer-to-peer lending platform called The Lending Club connects all of their investors, people who are interested in lending with an interest rate with borrowers. For a long time, the peer-to-peer lending platform was able to promote their services without any surprise or hidden fee but it was not true. According to investigations, the Lending Club issued hidden charges that cost their consumers hundreds or thousands more than what they expected to pay. Aside from that, a lot of potential borrower clients got congratulatory emails that they passed every criteria needed to get a loan before the final credit history checks of the Lending Club which eventually resulted in the rejection of the loan. Early in the year 2018, the Lending Club got sued for their unlawful hidden fees as well as their deceitful marketing activities.

Conclusion

These are just some examples that remind every consumer that we can never rely on any company to do the right thing. We need to stay vigilant and observe if there are unethical behavior in the marketplace so we can help keep every big corporation honest.

Disclaimer: This essay has been submitted by a student. This is not an example of the work written by our professional essay writers. You can order our professional work here.

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