Business Studies

Consumer laws were established to protect purchasers of goods and services.
• What purpose does the Federal Trade Commission serve and why must business owners be educated on Federal Trade Commission practices?
• Consider 1 of the following sections of the Federal Trade Commission Act:
• Deceptive Advertising
• Labeling and Packaging Laws
• Sales
• Regarding the section you chose, provide an example of when a deceptive practice has been used in business and the consequence(s) for the deceptive practice.

ANSWER

Federal Trade Commission

The purpose of the Federal Trade Commission is to promote competition by preventing monopoly and to protect consumers (Posner, 1969). It does this by encouraging competition and innovation, as well as advancing the interests of the consumers. In the market, it stops fraudulent, unfair and deceptive practices to protect consumers (FTC, 2020). Business owners need to be educated on FTC practices to enable them to obtain maximum benefit from the FTC. They need to be aware that the FTC can act on their behalf to investigate and sue individuals and companies. Education on the FTC practices will make them aware of their rights and responsibilities with regard to data security, deceptive advertising, identity theft, and so on.

Under the FTC, the Fair Packaging and Labeling Act (FPLA) requires that labelling is done on all consumer commodities to disclose the commodity’s identity, the manufacturer’s name and business location, packer and distributor (FTC FPLA, 2020). This Act allows for regulations to prevent deception on customers with regard to ingredient description, packaging, cents-off and size of the packages. The FPLA facilitates comparison of values and prevents deceptive labelling and packaging of consumer commodities. The Act is administered by the FTC with regard to consumer commodities that do not fall under the scope of the Food and Drug Administration.

Deceptive labelling and packaging come in varied ways. For example, a California-based manufacturer of personal care products named ‘Organix’ practised deceptive labelling by using a product name that was misleading (Aegis Law, 2020). Consumers filed a class-action lawsuit against the product line as its name misled them into thinking that the product’s ingredients were primarily organic. The manufacturer was forced to change the name of the product to avoid deceptiveness. Other consequences for deceptive labelling and packaging include paying damages to consumers due to the monetary loss incurred from purchasing an unwanted product.

References

Aegis Law, (2020). False Product Labeling Attorneys | Aegis Consumer Attorneys. Retrieved      2 September 2020, from https://www.aegislawfirm.com/consumer-rights/false-    misleading-or-deceptive-labeling/

FTC FPLA, 2020. Fair Packaging And Labeling Act: Regulations Under Section 4 Of The           Fair Packaging And Labeling Act. [online] Federal Trade Commission. Available at:             <https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-      proceedings/fair-packaging-labeling-act-regulations-0> [Accessed 2 September        2020].

FTC. (2020). What We Do. Retrieved 2 September 2020, from https://www.ftc.gov/about-           ftc/what-we-do

Posner, R. A. (1969). The federal trade commission. The University of Chicago Law         Review, 37(1), 47-89.