This document tells you the following:

• How do you protect yourself against unfair or deceptive sales practices?
• What is the Federal Trade Commission and how is it related to unfair and deceptive sales practices?
• What is the Georgia Fair Business Practices Act?
• What are some practices that are considered unfair or deceptive in Georgia?
• What can you do if you are stung by one of these practices?
• What happens when you don't buy in stores?
• What is the Door-to-Door Trade Regulations Rule?
• What is the "Transient Merchants" law and how does it protect consumers?
• How do FTC rules and the U.S. Postal Service protect buyers?

Claims and Advertising

SITUATION 15 A newspaper ad reads:

SPECIAL BUY
Athlete's Own Exercise Apparatus. Good quality. One device develops muscle strength of skiers, cyclists, football players, and weight lifters. $75.

Fred arrives at the store 10 minutes after it opens. He finds that the advertised model has been sold out. However, the salesman is eager to show him several other models. He says they are much better, but they are three times the price.

SITUATION 16 While walking down the street, Joan sees a large sign on a furniture store window that says:

GOING OUT OF BUSINESS SALE
Come in today. All prices slashed 50%.

Inside she finds the dining room set of her dreams. Taking advantage of the bargain, she buys the set. However, three months later she sees the same set for less at a department store. Furthermore, the furniture store where she bought her set has not gone out of business.

The examples show two unfair and deceptive sales practices.

Unfair sales practices have existed for as long as people have been buying and selling goods. Careful shopping continues to be the best protection against being stung by such practices. A wise consumer will follow the rule of caveat emptor (let the buyer beware).

Do consumers like those in situations 15 and 16 have any legal recourse?

Legislation in the twentieth century made these practices illegal as well as unethical. In 1914, Congress established the Federal Trade Commission (FTC) and prohibited unfair and deceptive sales practices. It gave the FTC power to issue rules and regulations governing certain transactions. Although the FTC can sue companies, consumers cannot use its provisions as the basis of a lawsuit. Therefore, most legal actions against unfair and deceptive practices depend on state laws and must be made in state courts.

Most states have passed such laws. They are nicknamed "little FTC acts." In Georgia, such an act was passed in 1975, the Georgia Fair Business Practices Act. This act established the Governor's Office of Consumer Affairs. Its staff is responsible for enforcing the Fair Business Practices Act and is trained to help consumers resolve conflicts with sellers.

The act defines certain sales practices as unfair and deceptive. It gives the administrator of the Governor's Office of Consumer Affairs power to define other practices as unfair.

Some practices that are considered "unfair" or "deceptive" in Georgia follow:

1. Representing that goods are made (or services performed) by someone other than the person actually making the goods (or performing the services). An example of this deceptive practice would be putting a designer label on a non-designer garment.

2. Misleading buyers as to the geographic origin of goods and services. For example, labeling an American cheese with a label written in French—to deceive buyers as to the source.

3. Representing that goods or services are sponsored or approved by a person or group when they are not. An example would be claiming that a certain brand of tennis racket is used by a tennis star, but it isn't.

4. Representing that a person has credentials that he or she does not have. A violation would be stating that auto repairs were made by licensed mechanics, but they weren't.

5. Representing goods as new when they are, in fact, used.

6. Advertising goods or services with the intent not to sell them as advertised. In situation 15, the store didn't want to sell the advertised exerciser. Instead, it used the ad to lure customers in and then sell them something more expensive. This illegal practice is called "bait and switch."

7. Advertising goods or services with the intent not to supply enough to meet a reasonable public demand (unless the advertisement states a limited quantity). This deceptive practice was used in situation 15.

8. Lying about the reasons for price reductions (situation 16).

9. Advertising that products or services have uses, benefits, or qualities that they do not possess.

10. Falsely representing guarantees. For example, saying that a product has a threeyear warranty when a critical part of it, like a car engine, does not.

The Governor's Office of Consumer Affairs is responsible for enforcing other consumer protection statutes. For example, the office enforces the "lemon" law discussed earlier. In addition, the office is responsible for enforcing the Georgia No Call Law, which went into effect in January 1999. The No Call Law is designed to help people avoid unwanted calls from telemarketers. With some limited exceptions, the law prevents telemarketers from selling goods, products, and services to consumers by calling the residential phone numbers of individuals who have put their names on the Georgia No Call List. The Governor's Office of Consumer Affairs enforces the No Call Law, and another state agency, the Public Service Commission, maintains the list. The other duties of the Public Service Commission are discussed below.

Suppose that you are stung by an unfair business practice. What can you do?

You can contact the Governor's Office of Consumer Affairs. You may need to send a letter explaining the problem and copies of all relevant documents such as ads, canceled checks, and contracts to the office. The state can then investigate, and if appropriate, take action to stop the violation. Alternatively, you can sue the business. In order to sue, you must first give the seller 30 days' notice. If the company corrects the problem within that period, the problem is considered resolved.

When You Don't Buy in Stores

SITUATION 17 A door-to-door salesman convinced the Smittens to buy $500 worth of encyclopedias. The Smittens signed a contract. Later, they realized they could not afford the books.

Since they had signed the contract, what could they do?

Breaches of warranties and misleading advertising are not the only sales practices that can harm the consumer. People are sometimes pressured into buying goods or services that they don't want or can't afford. In 1974, the Federal Trade Commission established a Door-to-Door Trade Regulations Rule to protect consumers. This rule has been adopted for Georgia by the Governor's Office of Consumer Affairs. It gives the buyer the right to cancel the contract within three days of signing it. Furthermore, three duties are required of the seller:

• The seller must give the purchaser a copy of the contract or sales receipt, which must state the name and address of the seller.
• The contract must tell the buyer of this right to cancel and how to cancel.
• The seller is to leave two cancellation forms with the purchaser. If the seller does not, a letter of cancellation may be sent instead.
• The rule covers most sales that are not made at a seller's place of business. However, it does not apply to sales made entirely by phone or mail or to sales of goods costing less than $25. Nor does it cover sales of real estate, insurance, securities, or emergency home repairs. However, it should protect the Smittens in situation 17.

Knowing a seller's permanent place of business also can provide a buyer with some protection. Recognizing this protection, Georgia passed a "Transient Merchants" law in 1980. The law requires a seller without a permanent place of business to obtain a license in any county in which he or she wishes to sell.

FTC rules and the U.S. Postal Service protect buyers when goods are bought or received by mail. For example, if you receive goods that you have not requested through the mail, you do not have to pay for them.

Regulating Specialized Services

As consumers, we buy services as well as goods. Sometimes, as in a restaurant, we buy both at the same time.

Laws also regulate the sale of services. In fact, some types of services require regulation by special government agencies. These services include public utilities (which furnish electricity, gas, and telephone service). Various personal services (building, medical, cosmetic services) are also regulated by state laws and/or boards.

Public Utility Services

In the United States, electricity, gas, and phone services are usually provided by privately owned companies that are regulated by the government in order to control costs for consumers. In Georgia, the sale of electricity, gas, or telephone service by any privately owned public utility company is regulated by the Public Service Commission (PSC). Formerly, the PSC also regulated both the conditions and the price of the service. It also determined what geographic area each utility company could serve.

Regulation was considered necessary because the utilities were essentially allowed to have monopolies within their areas of service. When there is a monopoly, consumers are not able to shop around for the best deal in utility services as they might another item, such as a car. Because there was no marketplace competition to hold down prices, governments regulated the rates.
In 1997 and 1998, the State of Georgia passed laws to deregulate the sale of natural gas and local telephone service. Although these services were regulated to prevent price abuses by companies that monopolized these industries, prices had remained high. The purpose of deregulation was to decrease price and increase quality by encouraging competition. Although the electricity industry is not deregulated, some states are considering electricity deregulation in the future.

Although pricing is no longer controlled in these industries, Georgia's Public Service Commission still oversees the provision of telephone, electricity, and gas service in the state. The commission is charged with the responsibility of preventing the loss of these vital services and abuses by the companies that provide the services.

Utilities are not always provided by private companies. In other countries, utilities and some transportation systems are government owned. Today, approximately 70 percent of Georgia's land area is served by electric companies owned by cities or by cooperatives (that is, groups of users). However, private companies provide electricity to most people in the state. They serve all the major cities.

Federal as well as state regulations affect public utilities. For example, federal regulations control the prices charged for electricity sold by one electric system to another. The federal government also regulates telecommunications services, including long distance and cable service. In 1996, the federal government deregulated long distance telephone and cable rates for the same reason that Georgia did: to encourage competition and, as a result, lower prices.

Although pricing is no longer controlled, the Federal Communications Commission continues to regulate the operations of telecommunications companies to prevent abuses. For example, when long-distance services were first deregulated, some newcomers to the industry engaged in a practice called "slamming," in which they would switch customers over to their service and charge them fees without their consent. Companies that engage in this practice are subject to stiff penalties.

Insurance Services

Suppose you see a magazine ad for low-rate auto insurance for young drivers. How could you judge if the company is reliable? One way would be to find out if the company is licensed by the state to do business in Georgia.

Insurance companies in Georgia are licensed and regulated by the Insurance Commissioner. The commissioner is elected every four years by state voters. One purpose of insurance regulation is to make sure that rates and policy provisions are fair. The commissioner can regulate the rates that are charged to the public. The commissioner can also issue rules and regulations prohibiting unfair or deceptive practices.

What happens if claims are not paid promptly?

Georgia law allows penalties to be assessed against the company. The commissioner can revoke licenses to sell insurance if regulations are not followed.

Personal Services

As a consumer, you purchase personal services as well as products. You pay people to check your teeth. You may pay people to fix your bicycle or cut your hair or teach you to swim.
Some of the services you purchase are provided by professionals. The term "professional" is hard to define. It usually implies that those performing the service have had special training. Some people think primarily of law and medicine when they think of the professions. However, many other personal service occupations require specialized skills and training.

How well a person can perform his or her service is important to you. If you hire someone to set your broken arm or cut your hair, you want to be sure that person knows how to do it. How can you be sure?

For some services, Georgia's state government gives some protection. When training is necessary to perform a service, the state government may create a board to set standards and qualifications. This board usually licenses, or certifies, those who will practice the service. Boards may take away licenses if standards are not met. They can also initiate court action against anyone who practices a certified profession in the state without a license. Because citizens place so much trust in licensed professionals, a board may also suspend or even revoke a license if an individual is convicted of a drug related offense.

Some of the state's current licensing and examining boards are listed in figure 45. This list does not show all of the organizations that regulate service providers in Georgia. For example, lawyers must be admitted to the State Bar in order to practice. Teachers must be certified to teach in the public school system. City and county governments may also regulate those in certain occupations, including plumbers, electricians, and taxicab drivers.

Professional licensing, or certification, means that the person has met certain qualifications of education and experience and observes certain standards of the profession. However, certification gives no guarantee of outcome. To illustrate, consider whether the Georgia boards that license barbers and cosmetologists could act on any of the following complaints:

SITUATION 18

a. Tom complains that the barber was incompetent. He says he did a terrible job cutting his hair. The barber does not have a license.

b. Susie complains that her hair was damaged by the hairdresser. A dye was left on it for too long.

c. Teresa complains that the beauty shop was filthy. She claims that the curlers were grimy, the combs were not clean, and the floor was not swept.

d. Hank complains about the outrageous prices of his barber.

The Georgia boards of barbers and cosmetologists will handle complaints about a person practicing without a license in situation 18a. They will handle complaints about unsanitary conditions within a shop in situation 18c. However, they will not act on complaints about fees or damage to hair in situations 18d and 18b.
Some types of personal services receive more consumer complaints than do others. Private vocational schools are an example of a service that varies widely in terms of quality.

SITUATION 19 Sara sees an ad in the newspaper for a vocational school. It offers a six week course in modeling. It guarantees work to students who complete the course. Sara pays $1,200 for the course. After finishing, she is given a list of possible employers. That is her only assistance in getting a job.

SITUATION 20 Greg is talked into signing a contract to go to a computer programming school. Before the school begins, he gets a job with a company that will provide the same training.

Can he get a refund of his fees?

In Georgia, private vocational schools are called proprietary schools. The Georgia Board of Education issues guidelines and standards for these schools. In order to be approved, a school must meet the minimum requirements set by the Nonpublic Postsecondary Educational Institutions Act of 1990. Approval does not, however, indicate the quality of education offered.

Georgia guidelines require proprietary schools to have job placement services. However, differences in student skills make guaranties impossible. Sara (situation 19) could consult with an attorney as to whether she has grounds for a case as a victim of false advertising. It would have been better, however, if she'd done some checking before enrolling. 

Shopping for a private vocational school?

1. Check employment opportunities in the field.  Inquire at a Georgia Department of Labor Job Services Center.

2. Resist signing a contract until you have checked out the school.

3. Question companies with whom you might want to work:  Would they hire a graduate of this school?  Do they prefer to give on the job raining?

4. What is the school's placement record?  How many of its graduates were placed in jobs by the school?

5. Try to talk with graduates.  Were they happy with the school?  Did they find a job? (Ask school for a list of recent graduates.)

6. Compare prices of comparable courses in public schools or junior colleges.

7. Ask if the school is accredited.  Find out what the accreditation means. 

8. Ask if a diploma or certification is given after finishing the course.  Find out what that means.

What about being released from a contract with a proprietary school?

The state guidelines for these schools say that you can cancel and get a refund of part or all of your tuition. The amount refunded varies according to when you cancel. In situation 20, Greg should be able to receive some refund.

Repairs and Liens

Repair services (for cars and homes, for example) are major targets of consumer complaints. Repair services are not well regulated by law. The law presumes only that the services will be in keeping with the average standards of the trade (unless the contract specifies exactly the standards to be applied).

The best insurance for consumers is to know the person or business doing the repairs. Check out their business reputation. Be sure that they have a permanent location. Then you can reach somebody if anything goes wrong.

SITUATION 21 Eric takes his car to Willie's garage for repair. When he comes to pick it up, he sees that Willie is charging him for replacing the carburetor. When he looks under the hood.the carburetor looks unchanged. Willie cannot show him the old carburetor. Eric says he will not pay the bill. Willie says he'll keep the car until he does. He says it is his legal right to do so.

What can Eric do?

Georgia has a mechanic's lien law. A lien is a charge on property for some debt for work performed. It can be made through a court when a person shows the authorization of another party (the debtor) to perform some work. Under this law, Willie's shop could keep Eric's car until he pays for the repair.