Primary Objective of Enforcement Rules of FTC
The FTC has provided several rules that are mentioned in Title 16. The primary objective of these rules are as follows: Prevention of Fraud and Deception: In a quest to enhance their sales and profits, business organizations engage themselves in fraudulent activities, which cause financial damages to their consumers. FTC recognizes an activity to be a fraud and deceptive if;
It has the ability to mislead its customers.
It has the ability to influence the behavior as well as the decision-making ability of a consumer.
Further, FTC recognizes four primary areas in which there are high chances of conducting a fraud, such as:
Design of the Product: FTC makes sure that whether or not the product is made as per the requirements of a customer and all the shortcomings or limitations of the product have been informed to the customer.
Price of the Product: FTC ensures that the customer is paying the price that is mentioned in the advertisement and they are not overcharged. Further, if anything “free” has been promised to a customer, they duly receive it.
Advertisements and Promotions of the Product: FTC ensures that the claims made in the advertisements are practically possible and the organization is in a position to give effect to those offers and claims. Further, the rules regarding the claim of warranty and other disclosures have been adequately made.
Distribution of the Product: FTC ensures that the delivery or distribution network of the product has been delivered the exact product as purchased by the customer along with requisite quality.
Practical Application – Rules Regarding Advertising of Warranties and Guarantees
It is common for business organizations to attract their customers by offering warranties and guarantees upon the purchase of a specific product. The FTC establishes the following rules in regards the same:
Disclosure Requirements : The advertisement mentioning any warranty or guarantee must completely disclose, with clarity and prominence, all the terms and conditions governing the warranty or guarantee in such a way that the prospective buyers are able to see as well as comprehend all the details. It is necessary to mention the following in such advertisements are as follows:
To know the complete details, check the warranty with a dealer nearby.
Some restrictions may apply. See a copy of the warranty wherever XYZ products are sold.
See the full two-year warranty at the nearest store etc.
Usage of Specific Terms in Advertisements : It is common for business organizations to use terms such as “Satisfaction Guarantee,†“Money-back Guarantee,†“Free trial offer†while advertising their products. However, as per the rules of FTC, an organization can do so only if it decides to refund the complete purchase price of the product. Further, all the terms and conditions about the refund of the purchase price must be sufficiently disclosed and presented.
Obligation to Perform : In case a manufacturing organization advertises its products by offering guarantees and warrantees, then it is bound to perform all its duties and obligations as per the terms and conditions disclosed.
Non-Compliance with FTC Enforcement Rules
In case a business organization does not comply with the enforcement rules of the Foreign Trade Commission then it could face the following enforcement actions:
An order to “cease and desist” can be issued against such violating organizations with fines extending up to $43,792 for each non-compliance.
An order of “injunction” could be issued with penalties and fines extending up to $40,654 for each violation.
In order to adequately refund customers for the mental as well as physical harassment sustained by them.
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