Consumer Laws in Business

by Jackie Lohrey
Consumer laws say that a sale price must reflect a true sale.


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Laws on both the federal and state level exist to protect consumers from unfair or deceptive business practices. The Federal Trade Commission and state consumer-protection agencies are in charge of administering, and ensuring businesses comply with, all consumer laws. Ignorance is never permitted as a defense if a federal or state agency uncovers a violation of any consumer law. Owners of businesses of any size should know the consumer laws and take whatever steps are necessary to ensure their business is always in compliance.


The FTC doesn’t investigate individual consumer complaints. It does, however, track and monitor complaints and if a pattern develops it steps in and conducts an initial investigation. The first action typically is an administrative proceeding in which the FTC assesses a monetary penalty and asks the offending business to stop the putative harmful conduct. If the business doesn’t comply, the FTC takes further action and requests a so-called “cease and desist” order from an administrative law judge. Federal court proceedings, in which the FTC seeks a monetary penalty and a federal court injunction, are most often the final step.


False or deceptive advertising is a common consumer complaint. Consumer laws apply when making advertising claims whether the ad is “technically true” and whether the advertiser intends to mislead or deceive a consumer. If an advertisement appears to be misleading or deceptive to consumers or to the FTC a business can face state or federal legal actions and may become a defendant in a small-claims or class-action lawsuit.


Consumer laws prohibit deceptive pricing practices such as inaccurate price comparisons, deceptive price reductions and offering a product or service as “free” when in reality it isn’t. A business may not compare prices unless the products being compared are identical and the competitor sold enough of the same product at a higher price that the lower price is truly a better price. If a consumer purchases a product that comes with a free gift, the free item must truly be free of charge. A business may not increase prices to cover the cost of the free item and may not take anything away -- such as a free delivery -- that normally comes with a purchase. For example, a business can't offer two free pillows with the purchase of a chair but then add a delivery charge when it normally offers free delivery.


Consumer laws also include consumer privacy rights. Although a business that operates a website isn’t required by law to include a privacy statement, if it does it must be truthful and specific in telling consumers how the site collects, uses, shares and protects consumer information. Businesses also have a legal responsibility to safeguard confidential information such as credit reports and Social Security numbers collected when processing in-house credit applications.

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