1. For the following three cases, explain why the FTC targeted that business, what was

accomplished by the FTC, and what sanction, if any, was imposed personally against the officers

of the companies involved in consumer fraud:

a. A judgment against POM Wonderful:

http://www.ftc.gov/opa/2013/01/pom.shtm

http://www.ftc.gov/opa/2010/09/pom.shtm,

b. A consent order with an Ohio car dealer:

http://www.ftc.gov/opa/2013/09/autoads.shtm

c. A settlement agreement with Lifelock, an identity theft protection service:

http://www.ftc.gov/opa/2010/03/lifelock.shtm

2. After obtaining his “Funeral and Embalmers” license, Derrick wants to bring his family

funeral business into the future by offering the latest options for funerals, including an

option to have the carbon extracted from your remains and have it made into jewelry. Or you can

be planted in an eco-friendly coffin and fertilize a tree. Or you could have your ashes sent up

in a weather balloon to help seed rain clouds!

a) After reviewing the FTC’s guide to advertising, identify at least 3 key points that Derrick

needs to know before he begins advertising his new options:

http://business.ftc.gov/documents/bus35-advertising-faqs-guide-small-business

b) After reviewing the FTC guides for selected industries, http://business.ftc.gov/selected-

industries, advise Derrick whether the FTC has rules for his business and why he should follow

them.

c) Help Derrick decide whether to advertise his new services on the internet, by reviewing the

FTC Guide for Internet Advertising, then identifying at least 3 additional requirements that he

must follow: http://business.ftc.gov/documents/bus41-dot-com-disclosures-information-about-

online-advertising

3. The Cruz family decided to expand its successful recreation business to a vacation spot in

Florida, by duplicating the zipline that it operates in Costa Rica which propels you over a

jungle forest, across a river and a wildlife habitat, and ends the ride by stopping on the

dance floor of a popular bar. The Costa Rica zip line, gets 5 stars by all its guests who rate

them on review sites like TripAdvisor. To expedite the ratings at its new location, Cruz

decided to make up customer reviews, using fictitious names, and by giving a huge rebate to any

new customer who agrees to submit a 5 star rating after their first zipline tour. After

reviewing the FTC guides on endorsement and testimonials, what advice can you give Cruz on the

legality of his marketing plan? :http://business.ftc.gov/documents/bus71-ftcs-revised-

endorsement-guideswhat-people-are-asking

4. David, always a math geek in school, decided to open his own small business as a math tutor

to get young kids excited about math. To attract new customers he advertised his services with

a promise to “ Turn your child into a math geek like me, Get straight A’s and Learn to Love

Math, Satisfaction Guaranteed! ” After reviewing the FTC Guide to Advertising Warranties and

Guarantees, what refund policy must David follow if any parent wants their money back when

their child doesn’t get an A in math class after using his services! Should he continue using

this promise? Here is the rule: http://www.ecfr.gov/cgi-bin/text-idx?

SID=1b5d02f9392516fa09dbd6b12c9f52a4&node=16:1.0.1.2.18.0.5.3&rgn=div8

5. Read the following recent FTC blog on a fraudulent scheme to invade consumer’s privacy.

http://www.consumer.ftc.gov/blog/how-some-companies-get-sneak-peek-your-life-literally.

Currently, the FTC has two privacy rules; one which applies to online marketing to children,

and the other which applies to banks and privacy of financial information. In your opinion,

should the government pass more rules to protect the privacy of consumers or should businesses

be guided by their ethical standards to protect private information? Explain the reason for

your opinion and consider the legal concepts we have discussed all semester. If you are not in

favor of more government regulation, how can consumers seek a remedy for an invasion of their

privacy? Should the only remedy be individual lawsuits for an intentional tort or for breach of

contract? If you favor more government action, what are the potential obstacles to passing and

enforcing such legislation?

6. The biggest misconception of consumer protection rights may be the assumption by many

customers that they have a 3 day right to cancel any written contract. In reality, the right to

cancel is limited to less than 10 types of contracts. Under federal law, a right to cancel

exists for most types of door to door sales, for some types of telephone sales, and for some

types of second mortgage or home equity loans. Under Ohio law, a right to cancel exists for

some types of prepaid contracts (health spas, dance studios, dating services), home

solicitation sales, business opportunity plans, sales for hearing aids, and contracts for

credit repair services. Each of these laws have exemptions and detailed requirements, so all

businesses who sell to consumers, should consult with a lawyer, with specialized knowledge of

consumer law to assure compliance with the law. After reviewing the FTC Cooling Off Rule,

http://www.consumer.ftc.gov/articles/0176-protections-home-purchases-cooling-rule, explain

whether a small bakery business, specializing in cakes, would have to provide a three day right

to cancel if they set up a booth as a bridal show at a local convention center, and signed up

couples for providing their wedding cake. Be sure to discuss what type of businesses and

transactions must comply with the FTC Cooling Off Rule, and whether or not this cake business

would have to comply. Also discuss the purpose behind the law- why consumers need extra

protection for these types of transactions.

7. After reading this blog about frauds targeting small businesses,

http://business.ftc.gov/blog/2013/07/business-buyer-beware, and following the link in the story

to this page, http://business.ftc.gov/blog/2011/11/csi-b2b, describe ONE of the scams

discussed, in your own words, and provide your opinion on why anyone would fall for such a

scam, or tell a personal story about someone you know who fell for such a scam, or comment on

what and who should be taking action to stop this type of fraud.

8. After reading this blog entry on marketing by texting

http://www.business.ftc.gov/blog/2013/03/screen-regs-and-spam, identify at least 3 reasons why

a business would want to use a text marketing campaign, and 3 reasons why they should not use

texting as a marketing method.

9. Both the FDA & CPSC regularly issue recalls of unsafe products, which get removed from

retail shelves by major retailers but often end up for sale at flea markets, second hand shops,

or internet resellers like Craigslist or Ebay. Discuss the legal and ethical obligations of any

seller to stop selling any products that are subject to a recall. Be sure to include how they

find out about recalls, and what potential penalty or legal liability can be assessed for

selling unsafe products. Check here for how to get specific information about recalls and don’t

miss the app you can download! http://www.cpsc.gov/en/Recalls/

10. Buck Prescott owns a Big Buck’s Home Goods and Furnishings, a one-stop shopping spot for

all your home good and furnishing needs. With the economy in a bit of a downturn, sales have

been slow. To combat this Buck decided that the store should begin offering one year, same as

cash financing to customers making purchases over $1,000, which allows consumers to make

minimum payments each month, with a lump sum due at the end of 12 months, or to pay the whole

amount at the end of 12 months,

a) Buck knows he has to provide something in writing to his customers to give them the details

of the same as cash deal because but he intends to add in interest at the rate of 29% if any

payment is late. Identify what law he needs to follow and identify at least 2 key disclosures

required by that Act.

b) Buck is concerned that the financing program could come back to bite the company if too many

“dead beats” are given the loans. Before Buck advises his sales associates to only offer the

same as cash financing to “clean cut individuals” who wear “nice shoes and clothing”, identify

what law Buck should consider, and what legal consequences he could face if he violates this

law.
Answer all questions simply