{"id":229,"date":"2014-09-17T00:42:04","date_gmt":"2014-09-17T00:42:04","guid":{"rendered":"https:\/\/courses.candelalearning.com\/buslegalenv\/?post_type=chapter&p=229"},"modified":"2015-04-15T22:05:14","modified_gmt":"2015-04-15T22:05:14","slug":"27-6-summary-and-exercises","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/clinton-buslegalenv\/chapter\/27-6-summary-and-exercises\/","title":{"raw":"Summary and Exercises","rendered":"Summary and Exercises"},"content":{"raw":"

Summary<\/h2>\r\n
\r\n
\r\n\r\nSection 5 of the Federal Trade Commission (FTC) Act gives the FTC the power to enforce a provision prohibiting \u201cunfair methods of competition and unfair or deceptive acts or practices in commerce.\u201d Under this power, the FTC may bring enforcement proceedings against companies on a case-by-case basis or may promulgate trade regulation rules.\r\n\r\nA deceptive act or practice need not actually deceive as long as it is \u201clikely to mislead.\u201d An unfair act or practice need not deceive at all but must offend a common sense of propriety or justice or of an honest way of acting. Among the proscribed acts or practices are these: failure to disclose pertinent facts, false or misleading description of products, misleading price and savings claims, bait-and-switch advertisements, free-offer claims, false product comparisons and disparagements, and endorsements by those who do not use the product or who have no reasonable basis for making the claims. Among the unfair trade practices that the FTC has sought to deter are certain types of contests and sweepstakes, high-pressure door-to-door and mail-order selling, and certain types of negative-option plans.\r\n\r\nThe FTC has a number of remedial weapons: cease and desist orders tailored to the particular deception or unfair act (including affirmative disclosure in advertising and corrections in future advertising), civil monetary penalties, and injunctions, damages, and restitution on behalf of injured consumers. Only the FTC may sue to correct violations of Section 5; private parties have no right to sue under Section 5, but they can sue for certain kinds of false advertising under the federal trademark laws.\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n

Exercises<\/h3>\r\n
\r\n
    \r\n\t
  1. Icebox Ike, a well-known tackle for a professional football team, was recently signed to a multimillion-dollar contract to appear in a series of nationally televised advertisements touting the pleasures of going to the ballet and showing him in the audience watching a ballet. In fact, Icebox has never been to a ballet, although he has told his friends that he \u201ctruly believes\u201d ballet is a \u201cwonderful thing.\u201d The FTC opens an investigation to determine whether there are grounds to take legal action against Icebox and the ballet company ads. What advice can you give Icebox Ike? What remedies can the FTC seek?<\/li>\r\n\t
  2. Door-to-door salespersons of an encyclopedia company offer a complete set of encyclopedias to \u201cselected\u201d customers. They tell customers that their only obligation is to pay for a ten-year updating service. In fact, the price of the updating service includes the cost of the encyclopedias. The FTC sues, charging deception under Section 5 of the FTC Act. The encyclopedia company defends itself on the ground that no one could possibly have been misled because everyone must have understood that no company could afford to give away a twenty-volume set of books for free. What is the result?<\/li>\r\n\t
  3. Vanessa Cosmetics takes out full-page advertisements in the local newspaper stating that \u201cthis Sunday only\u201d the Vanessa Makeup Kit will be \u201creduced to only $25.\u201d In fact, the regular price has been $25.50. Does this constitute deceptive advertising? Why?<\/li>\r\n\t
  4. Lilliputian Department Stores advertises a \u201cspecial\u201d on an electric carrot slicer, priced \u201cthis week only at $10.\u201d When customers come to the store, they find the carrot slicer in frayed boxes, and the advertised special is clearly inferior to a higher-grade carrot slicer priced at $25. When customers ask about the difference, the store clerk tells them, \u201cYou wouldn\u2019t want to buy the cheaper one; it wears out much too fast.\u201d What grounds, if any, exist to charge Lilliputian with violations of the FTC Act?<\/li>\r\n\t
  5. A toothpaste manufacturer advertises that special tests demonstrate that use of its toothpaste results in fewer cavities than a \u201cregular toothpaste.\u201d In fact, the \u201cregular\u201d toothpaste was not marketed but was merely the advertiser\u2019s brand stripped of its fluoride. Various studies over the years have demonstrated, however, that fluoride in toothpaste will reduce the number of cavities a user will get. Is this advertisement deceptive under Section 5 of the FTC Act?<\/li>\r\n\t
  6. McDonald\u2019s advertises a sweepstakes through a mailing that says prizes are to be reserved for 15,610 \u201clucky winners.\u201d The mailing further states, \u201cYou may be [a winner] but you will never know if you don\u2019t claim your prize. All prizes not claimed will never be given away, so hurry.\u201d The mailing does not give the odds of winning. The FTC sues to enjoin the mailing as deceptive. What is the result?<\/li>\r\n<\/ol>\r\n<\/section><\/div>\r\n
    \r\n
    \r\n

    SELF CHECK QUESTIONS<\/h3>\r\n
    \r\n
    \r\n
      \r\n\t
    1. Section 5 of the Federal Trade Commission Act is enforceable by\r\n
        \r\n\t
      1. a consumer in federal court<\/li>\r\n\t
      2. a consumer in state court<\/li>\r\n\t
      3. the FTC in an administrative proceeding<\/li>\r\n\t
      4. the FTC suing in federal court<\/li>\r\n<\/ol>\r\n<\/li>\r\n\t
      5. The FTC\r\n
          \r\n\t
        1. is an independent federal agency<\/li>\r\n\t
        2. is an arm of the Justice Department<\/li>\r\n\t
        3. supersedes Congress in defining deceptive trade practices<\/li>\r\n\t
        4. speaks for the president on consumer matters<\/li>\r\n<\/ol>\r\n<\/li>\r\n\t
        5. A company falsely stated that its competitor\u2019s product \u201cwon\u2019t work.\u201d Which of the following statements is false?\r\n
            \r\n\t
          1. The competitor may sue the company under state law.<\/li>\r\n\t
          2. The competitor may sue the company for violating the FTC Act.<\/li>\r\n\t
          3. The competitor may sue the company for violating the Lanham Act.<\/li>\r\n\t
          4. The FTC may sue the company for violating the FTC Act.<\/li>\r\n<\/ol>\r\n<\/li>\r\n\t
          5. The FTC may order a company that violated Section 5 of the FTC Act by false advertising\r\n
              \r\n\t
            1. to go out of business<\/li>\r\n\t
            2. to close down the division of the company that paid for false advertising<\/li>\r\n\t
            3. to issue corrective advertising<\/li>\r\n\t
            4. to buy back from its customers all the products sold by the advertising<\/li>\r\n<\/ol>\r\n<\/li>\r\n\t
            5. The ingredients in a nationally advertised cupcake must be disclosed on the package under\r\n
                \r\n\t
              1. state common law<\/li>\r\n\t
              2. a trade regulation rule promulgated by the FTC<\/li>\r\n\t
              3. the federal Food, Drug, and Cosmetic Act<\/li>\r\n\t
              4. an executive order of the president<\/li>\r\n<\/ol>\r\n<\/li>\r\n<\/ol>\r\n<\/div>\r\n<\/section><\/div>\r\n
                \r\n
                \r\n
                \r\n

                ANSWERS<\/h3>\r\n
                  \r\n\t
                1. c<\/li>\r\n\t
                2. a<\/li>\r\n\t
                3. b<\/li>\r\n\t
                4. c<\/li>\r\n\t
                5. b<\/li>\r\n<\/ol>\r\n<\/div>\r\n<\/section><\/div>\r\n

                  <\/h3>\r\n<\/div>\r\n<\/div>","rendered":"

                  Summary<\/h2>\n
                  \n
                  \n

                  Section 5 of the Federal Trade Commission (FTC) Act gives the FTC the power to enforce a provision prohibiting \u201cunfair methods of competition and unfair or deceptive acts or practices in commerce.\u201d Under this power, the FTC may bring enforcement proceedings against companies on a case-by-case basis or may promulgate trade regulation rules.<\/p>\n

                  A deceptive act or practice need not actually deceive as long as it is \u201clikely to mislead.\u201d An unfair act or practice need not deceive at all but must offend a common sense of propriety or justice or of an honest way of acting. Among the proscribed acts or practices are these: failure to disclose pertinent facts, false or misleading description of products, misleading price and savings claims, bait-and-switch advertisements, free-offer claims, false product comparisons and disparagements, and endorsements by those who do not use the product or who have no reasonable basis for making the claims. Among the unfair trade practices that the FTC has sought to deter are certain types of contests and sweepstakes, high-pressure door-to-door and mail-order selling, and certain types of negative-option plans.<\/p>\n

                  The FTC has a number of remedial weapons: cease and desist orders tailored to the particular deception or unfair act (including affirmative disclosure in advertising and corrections in future advertising), civil monetary penalties, and injunctions, damages, and restitution on behalf of injured consumers. Only the FTC may sue to correct violations of Section 5; private parties have no right to sue under Section 5, but they can sue for certain kinds of false advertising under the federal trademark laws.<\/p>\n<\/div>\n<\/div>\n

                  \n

                  Exercises<\/h3>\n
                  \n
                    \n
                  1. Icebox Ike, a well-known tackle for a professional football team, was recently signed to a multimillion-dollar contract to appear in a series of nationally televised advertisements touting the pleasures of going to the ballet and showing him in the audience watching a ballet. In fact, Icebox has never been to a ballet, although he has told his friends that he \u201ctruly believes\u201d ballet is a \u201cwonderful thing.\u201d The FTC opens an investigation to determine whether there are grounds to take legal action against Icebox and the ballet company ads. What advice can you give Icebox Ike? What remedies can the FTC seek?<\/li>\n
                  2. Door-to-door salespersons of an encyclopedia company offer a complete set of encyclopedias to \u201cselected\u201d customers. They tell customers that their only obligation is to pay for a ten-year updating service. In fact, the price of the updating service includes the cost of the encyclopedias. The FTC sues, charging deception under Section 5 of the FTC Act. The encyclopedia company defends itself on the ground that no one could possibly have been misled because everyone must have understood that no company could afford to give away a twenty-volume set of books for free. What is the result?<\/li>\n
                  3. Vanessa Cosmetics takes out full-page advertisements in the local newspaper stating that \u201cthis Sunday only\u201d the Vanessa Makeup Kit will be \u201creduced to only $25.\u201d In fact, the regular price has been $25.50. Does this constitute deceptive advertising? Why?<\/li>\n
                  4. Lilliputian Department Stores advertises a \u201cspecial\u201d on an electric carrot slicer, priced \u201cthis week only at $10.\u201d When customers come to the store, they find the carrot slicer in frayed boxes, and the advertised special is clearly inferior to a higher-grade carrot slicer priced at $25. When customers ask about the difference, the store clerk tells them, \u201cYou wouldn\u2019t want to buy the cheaper one; it wears out much too fast.\u201d What grounds, if any, exist to charge Lilliputian with violations of the FTC Act?<\/li>\n
                  5. A toothpaste manufacturer advertises that special tests demonstrate that use of its toothpaste results in fewer cavities than a \u201cregular toothpaste.\u201d In fact, the \u201cregular\u201d toothpaste was not marketed but was merely the advertiser\u2019s brand stripped of its fluoride. Various studies over the years have demonstrated, however, that fluoride in toothpaste will reduce the number of cavities a user will get. Is this advertisement deceptive under Section 5 of the FTC Act?<\/li>\n
                  6. McDonald\u2019s advertises a sweepstakes through a mailing that says prizes are to be reserved for 15,610 \u201clucky winners.\u201d The mailing further states, \u201cYou may be [a winner] but you will never know if you don\u2019t claim your prize. All prizes not claimed will never be given away, so hurry.\u201d The mailing does not give the odds of winning. The FTC sues to enjoin the mailing as deceptive. What is the result?<\/li>\n<\/ol>\n<\/section>\n<\/div>\n
                    \n
                    \n

                    SELF CHECK QUESTIONS<\/h3>\n
                    \n
                    \n
                      \n
                    1. Section 5 of the Federal Trade Commission Act is enforceable by\n
                        \n
                      1. a consumer in federal court<\/li>\n
                      2. a consumer in state court<\/li>\n
                      3. the FTC in an administrative proceeding<\/li>\n
                      4. the FTC suing in federal court<\/li>\n<\/ol>\n<\/li>\n
                      5. The FTC\n
                          \n
                        1. is an independent federal agency<\/li>\n
                        2. is an arm of the Justice Department<\/li>\n
                        3. supersedes Congress in defining deceptive trade practices<\/li>\n
                        4. speaks for the president on consumer matters<\/li>\n<\/ol>\n<\/li>\n
                        5. A company falsely stated that its competitor\u2019s product \u201cwon\u2019t work.\u201d Which of the following statements is false?\n
                            \n
                          1. The competitor may sue the company under state law.<\/li>\n
                          2. The competitor may sue the company for violating the FTC Act.<\/li>\n
                          3. The competitor may sue the company for violating the Lanham Act.<\/li>\n
                          4. The FTC may sue the company for violating the FTC Act.<\/li>\n<\/ol>\n<\/li>\n
                          5. The FTC may order a company that violated Section 5 of the FTC Act by false advertising\n
                              \n
                            1. to go out of business<\/li>\n
                            2. to close down the division of the company that paid for false advertising<\/li>\n
                            3. to issue corrective advertising<\/li>\n
                            4. to buy back from its customers all the products sold by the advertising<\/li>\n<\/ol>\n<\/li>\n
                            5. The ingredients in a nationally advertised cupcake must be disclosed on the package under\n
                                \n
                              1. state common law<\/li>\n
                              2. a trade regulation rule promulgated by the FTC<\/li>\n
                              3. the federal Food, Drug, and Cosmetic Act<\/li>\n
                              4. an executive order of the president<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<\/div>\n<\/section>\n<\/div>\n
                                \n
                                \n
                                \n
                                \n

                                ANSWERS<\/h3>\n
                                  \n
                                1. c<\/li>\n
                                2. a<\/li>\n
                                3. b<\/li>\n
                                4. c<\/li>\n
                                5. b<\/li>\n<\/ol>\n<\/div>\n<\/section>\n<\/div>\n

                                  <\/h3>\n<\/div>\n<\/div>\n\n\t\t\t
                                  \n\t\t\t

                                  Candela Citations<\/h3>\n\t\t\t\t\t
                                  \n\t\t\t\t\t\t
                                  \n\t\t\t\t\t\t\t
                                  CC licensed content, Shared previously<\/div>