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CHAPTER 14
CONSUMER PROTECTION
INTRODUCTION
Safeguarding consumers while continuing to supply them with the goods and services
they want, at the prices they want, is a prime social responsibility of business. Many
companies recognize that providing customers with excellent service and product quality
is an effective, as well as ethical, business strategy. Consumers, through their
organizations, have advocated for their rights to safety, to be informed, to choose, to be
heard, and to privacy. Government agencies serve as watchdogs for consumers,
supplementing the actions taken by consumers to protect themselves through self-
advocacy and use of the courts and by the actions of socially responsible corporations.
PREVIEW CASES
Takata airbag recalls
Corinthian Colleges’ Deceptive Recruiting Practices
Neuromarketing
CHAPTER OUTLINE
I. The Rights of Consumers
A. The Right to be Informed
B. The Right to Safety
Teaching Tip: Introduction
These preview cases introduce students to several issues in consumer
protection. In the first example, defective airbags exploded, and sent
dangerous metal shards flying inside motor vehicles. In the second,
Corinthian Colleges used highly deceptive recruitment practices to lure
unsuspecting students. The third describes neuromarketing—using
brain scanning technology to learn how individuals respond to various
kinds of advertising. All three examples address various aspects of
consumer rights.
Teaching Tip: Takata Video
A segment from the PBS Newshour on the Takata Recalls may be
found at: www.youtube.com/watch?v=4-HS1r3ULdE
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C. The Right to Choose
D. The Right to be Heard
E. The Right to Privacy
II. SELF-ADVOCACY FOR CONSUMER INTERESTS
A. Reasons for the Consumer Movement
III. HOW GOVERNMENT PROTECTS CONSUMERS
A. Goals of Consumer Laws
B. Major Consumer Protection Agencies
A. Consumer self-help
B. Industry self-regulation
C. Privacy legislation
A. Strict Liability
Teaching Tip: Drug Approval Decisions
The text discusses the FDA’s review of new pharmaceutical drugs and
devices prior to their introduction. Students may be asked to find a
current example of a drug under FDA review, or recently reviewed by
the FDA, and to examine the FDA’s decision. What criteria should the
FDA use in determining if the benefits of a new medicine outweigh the
risks?
Teaching Tip: Consumer Privacy
A PBS Newshour segment on FTC recommendations on major data
brokers may be found at: www.youtube.com/watch?v=OPo76PvIAxk
A PBS Newshour segment on what data brokers know about
consumers may be found at:
www.youtube.com/watch?v=1-fDDctiCW8
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B. Product Liability Reform and Alternative Dispute Resolution
VI. POSITIVE BUSINESS RESPONSES TO CONSUMERISM
A. Managing for Quality
B. Voluntary Industry Codes of Conduct
C. Consumer Affairs Departments
D. Product Recalls
VII. CONSUMERISM’S ACHIEVEMENTS
GETTING STARTED
KEY LEARNING OBJECTIVES
LO 14-1: Knowing the five major rights of consumers.
LO 14-2: Analyzing the reasons for consumer advocacy and the methods
consumer organizations use to advance their interests.
LO 14-3: Assessing the ways in which government regulatory agencies protect
Teaching Tip: Product Liability
Students may be asked to evaluate the effects of the 2005 Class Action
Fairness Act. What has been the impact of this legislation, and to what
extent has, or has not, this new law addressed the concerns of
advocates for tort reform?
Teaching Tip: Product Recalls
Students may be asked to bring in an example of a recent product
recall. Do you believe the company took the right action? What, if
anything, should the company have done differently?
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consumers and what kinds of products are most likely to be regulated.
LO 14-4: Determining how consumer privacy online can best be protected.
LO 14-5: Examining how the courts protect consumers and efforts by businesses
to change product liability laws.
LO 14-6: Evaluating how socially responsible corporations can proactively
respond to consumer needs.
Socially responsible companies have responded to the consumer movement by giving
KEY TERMS
alternative dispute resolution
behavioral advertising
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INTERNET RESOURCES
DISCUSSION CASE
LUMBER LIQUIDATORS
Discussion Case
1. If you were a manager at Lumber Liquidators, what if anything would you do
now, beyond what the company has already done?
former FBI director to review the company’s compliance programs. Whether these
actions would be sufficient to restore consumers’ trust in the company remained an
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2. If you were a consumer who had installed Lumber Liquidators laminate flooring
in your home or business, what would you do now?
3. Do you think the government acted appropriately to protect consumers? What
more can or should it have done?
4. Do you believe that lawsuits filed by consumer activists will help solve the
problem of unsafe flooring?
Possibly. If the class-action lawsuits result in large settlements for impacted
consumers (and their attorneys), Lumber Liquidators and other flooring and home
5. In your opinion, who was most responsible for the fact that consumers were
exposed to formaldehyde at levels that exceeded the safety limits established by
California regulations?
A number of parties were responsible. Arguably, Lumber Liquidators bore the
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ultimately responsible for the safety of the products sold in its stores and under its
brand. But, others also bore responsibility. The government (except for California)
is.”
6. Who should be responsible for assuring the safety of flooring products: the
retailer, the supplier, the customer, lawyers, or government regulators? Why do
you think so?
A lesson of this case is that all parties need to be involved in promoting and