Consumer Protection Laws and the Antitrust Laws

3200 words (13 pages) Essay in Business Law

30/07/19 Business Law Reference this

Last modified: 30/07/19 Author: Law student

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In this world there are several times that an incident may occur in which a person or company may do something that could be considered unethical. Unfortunately, there have been several unethical situations that have occurred as the world has evolved that many laws have been put into place by government and other authority figures in power. Some of the laws that have been put into place overtime have been the consumer protection laws and the antitrust laws. This paper is going to discuss these laws more in depth as well as additional legal terms that are important to have an understanding of. An overview of Amazon’s consumer protection issues will also be provided, along with information on the company’s ethical dilemmas, and ethical frameworks that were used throughout their decision making process.

Consumer Protection

Consumer protection laws were put in place to protect and monitor consumer affairs. Consumer protection laws tend to fall under the Federal Trade Commission which was founded by Woodrow Wilson back in 1914 (Shaw, 2018). The Federal Trade Commission has three main goals that it wishes to achieve, one being to protect consumers by helping to prevent fraud and unfair business practices, then to help competition continue, and lastly to assist with individual and collective organizational performance as a whole (Shaw, 2018). There are a few laws that are currently in place to help with consumer protection, such as the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Food, Drug, and Cosmetics Act, the Uniform Deceptive Trade Practices Act, and the Department of Consumer Affairs (Consumer Protection, n.d.).

While many companies do their best at abiding by the above consumer protection laws, there are times that consumer’s information is put at risk. For example, Dish Network often calls potential clients for marketing and sale purposes, but when a caller requests to have their name on the national Do Not Call list and they continue to receive a phone call it is breaking the consumer protection laws (Shaw, 2018). Unfortunately, this is something many people deal with, and it not only causes customers to be irritated with the company, but also poses a risk for the company if they break a consumer protection law. Another example of a company that has been in the news recently due to consumer protection issues is Uber due to the company’s false advertising.

As mentioned earlier, consumer protection laws are going to be looked into more thoroughly by looking at Amazon, which is a large company that has had continuous issues with their consumer protection laws. However, before this is discussed, it’s important to also take a look at what antitrust laws are, and why they are vital to our society, working individuals, and companies.

Antitrust Legislation

Antitrust legislation was put into place in order to help protect consumers from business practices that might be unfair and limit competition and price control (Consumer Protection, n.d.). The Sherman Act was the first antitrust law that was put into place back in 1890, and some of the other antitrust laws are the Federal Trade Commission Act, and the Clayton Act (Consumer Protection, n.d.). Antitrust laws are vital to our society because they assist with preventing mergers or acquisitions that could end up leading to a monopoly (Antitrust Laws, 2018).

Upon researching some cases that involved antitrust laws, one of the first examples was when the American Sugar Refining Company bought the E.C. Knight Company and at least three more companies in 1892 (Sherman Antitrust, n.d.). By the American Sugar Refining Company purchasing these other companies, it allowed for the company to be considered a monopoly, controlling most of the sugar refining industry (Sherman Antitrust, n.d.). This is exactly why the antitrust legislation was put into place, to help prevent a monopoly from forming. Another example of a company that struggled with the antitrust legislation was AT&T that was a company that was monopolizing the market (Infamous Antitrust, n.d). Remember, antitrust laws were put into place in order to help prevent a monopoly from forming, so after a few years went by with AT&T pretty much dominating the marketplace, the Attorney General filed a suit against the firm in 1974 which led to the company splitting up into seven different companies (Infamous Antitrust, n.d.). By splitting up the company into seven different companies it helped prevent a monopoly situation, and allowed for there to be more room for competition between other companies. As time went on, two of these companies became Qwest and Verizon, while the others remained AT&T (Infamous Antitrust, n.d.).

Legal Concepts

There are many legal concepts that are often involved when it comes to ethical dilemmas, ethical frameworks, and antitrust or consumer protection problems. Some of the legal concepts that will be discussed in this paper in regards to consumer protection problems with Amazon are law, product liability, plaintiff, and civil lawsuit.

Law

Since this paper is focusing on antitrust laws and consumer protection laws, it seemed necessary to first take the time to explain what a law is and how it typically functions. Law can be defined by Mayer, Warner, Siedel, Lieberman and Martina (n.d) as a body of rules that is often created by authority figures that has a binding legal force behind it, and it must be obeyed by citizens or there will be consequences. Our world is governed and ran by more laws and regulations than one can even count. Laws were put into place in order to help the world run smoother, and be a safer place to live. Mayer et al., (n.d.) discuss laws as being in place to help keep the world peaceful, maintain the status quo, assist with allowing people to have their own individual rights, protect the minorities from the majorities, encourage social justice, and lastly to provide for orderly social change (p.2). As discussed earlier, antitrust laws and consumer protection laws were put into place in order to protect people and businesses.

Product Liability

When discussing consumer protection laws, product liability plays a big role. Product liability laws are considered to be state laws, which means depending on what state the company is operating in will determine how the laws differ (What Is Consumer Protection, 2018). Product liability also means that the business or company is responsible for the selling of defective goods and for the manufacturing (What Is Consumer Protection, 2018). For example, if a customer buys a product and it ends up being defective, then this falls back on the company as being responsible for producing and selling the product.

Plaintiff

In many of the below examples involving Amazon, there are several cases that involve a plaintiff. A plaintiff is the person who has been wronged in some way and is looking for some sort of pay back by bringing a civil action to the court of law (Plaintiff, 2018). A third party plaintiff, on the other hand, is considered to be the defendant who is filing a grievance usually against a third party (Plaintiff, 2016).

Civil Lawsuit

Due to the fact that many of the cases discussed in this paper involve a civil lawsuit, it’s important to define and explain what a civil lawsuit is and when it is necessary. A civil lawsuit can be defined as the lawsuit that is brought to court when one individual is claiming to have suffered a loss of some sort due to particular actions that were taken by another individual (Sherman Antitrust, n.d.). According to Damaschin (2017), a civil lawsuit often requires genuine documents or even electronic documents as long as they both abide by the terms.

Case Study of Consumer Protection

One example of a company that has been in the news several different times due to some consumer protection problems is Amazon. Back in 2015 a class action lawsuit was filed against Amazon.com in Tampa, Florida by Donovan Hargrett for violating the federal Fair Credit Reporting Act by improperly using customer’s credit reports for decisions regarding assignments, termination, and hiring (Ahearn, 2015). In this case, Donovan Hargrett was considered the plaintiff, which is the legal term for the person who brings the case to court (Mayer et al., n.d.). The plaintiff was in the process of applying for a position with Amazon that required a background check to be completed before he could move forward with employment. Unfortunately, after the background check came for Hargrett, the company decided to deny him for the position. Hargrett later found out that he was denied this position due to what came back in his background check report. Hargrett felt this was not only unfair, but also violated consumer protection laws, which is what ultimately led him to taking the company to court.

Another example of how Amazon violated the consumer protection act was the case of the Federal Trade Commission charging several individuals and entities for violating their rules by making customers believe they could be financially well off if they sold certain products through Amazon.com (Fallor, 2018). Turns out this was a huge scam by two brothers where they promised consumers that they could get rich quickly by selling products on Amazon, but charged an arm and a leg for the courses that would supposedly teach them how to do this (Fallor, 2018). Of course these courses were complete scams and just a way for these two men to make money, but this was obviously a violation of the consumer protection act. Amazon was appalled by this situation, which led to the Amazon spokesperson saying that the company is dedicated to protecting the Amazon marketplace so that this doesn’t occur again, but also is working closely with other consumer protection firms to better protect Amazon’s customers (Fallor, 2018).

As recent as June 2018 Senator Jeff Flake and Senator Chris Coons wrote a letter to Amazon’s CEO Jeff Bezos after they heard about the situation with Amazon’s Echo smart voice assistant Alexa in Portland, Oregon where it recorded a couple’s conversation and then sent it to a friend on their contact list (Brown, 2018). This letter to Bezos included several questions asking for more information about how Amazon uses, stores, and retains their customers’ personal information (Brown, 2018). What’s interesting about Amazon is that the company appears to making efforts to correct the issues that are revolving around consumer protection problems, but yet they keep having issues come up, and customers continue to purchase from Amazon.com and utilize other Amazon products that could expose their personal data.

With the issue of private conversations being recorded and sent to people without a customer’s knowledge, it definitely poses a threat of consumer protection, not only for Amazon, but other similar companies. It’s important for Amazon, as well as other companies who utilize this type of technology to really research and test their products to ensure consumer protection is not going to be an issue. While there are some people that will not be bothered by this type of problem, many people will not purchase these products if they believe their personal information and conversations are going to be jeopardized.

Ethical Dilemmas

An ethical dilemma is when there is a particular situation where a decision has to be made involving two different courses of action (Ethical Dilemma, n.d.). Amazon has faced many ethical dilemmas within the last few years. In the case of Hargrett versus Amazon, the ethical dilemma was that Amazon didn’t like what they saw on the background check, and without consulting with the candidate before denying him they used his personal data to make the decision. This ethical dilemma is whether or not Amazon had the right to dismiss is employment without his consent, which the consumer protection laws would indicate the answer is no. In the case of the two brothers scamming other Amazon users, the ethical dilemma was that these two brothers were making a profit off of false advertising from Amazon.com. This put the company in a very bad position, but also opened up their eyes to seeing how important it is for them to look into the consumer protection protocol and connect with other consumer protection firms in order to prevent issues like this from occurring. In the case of Alexa recording the couple’s conversation and sending it to a friend on their contact list, the ethical dilemma was whether or not Amazon’s products are safe for consumers to use where their consumer protection rights won’t be violated. The two U.S. Senators were so concerned about this violation that they felt the need to reach out, which ultimately led to Amazon reviewing the case and taking the necessary steps to prevent any further issues when it comes to consumer protection.

Ethical Frameworks

Ethical frameworks are often utilized by companies when they are looking at an ethical dilemma or situation that might need to be resolved. There are four main ethical frameworks that a company could choose from, such as utilitarianism, deontology, social justice and social contract theory, and virtue theory (Mayer et. al., n.d.). When consumer protection laws and antitrust laws were first put in place, government officials appeared to use the utilitarianism approach in order to make their decision.

In most of the cases that were talked about above, Amazon’s managers appeared to use the utilitarian and deontology frameworks to make their decisions when it comes to the consumer protection issues. Utilitarianism is the type of ethical framework that focuses on what’s good, and looks at the results instead of the rules (Mayer et. al, n.d.). Utilitarianism can be described as when a particular action, event, or law, is considered to be right when it increases the happiness of people throughout the community and the action provides the greatest good to the community (Mayer et. al., n.d.). Amazon’s managers appear to be aware of the consumer protection issues that occurring and using the utilitarian approach in order to fix the problem and protect their customers. This is a great example of Amazon using the utilitarian framework because the company is attempting to do what’s best for the Amazon community as a whole.

Deontology is another ethical framework that focuses on the right rules instead of achieving the right results (Mayer et. al., n.d.). This framework is often used by managers in order to decide on a course of action that would also be good for everyone, which is similar to the utilitarianism ethical framework. Amazon’s managers has definitely attempted to use the deontology framework in order to take the necessary steps to protect their consumers, which is a course of action that is best for all their current and future customers.

While it appears that Amazon uses the utilitarianism and deontology ethical frameworks in order to make most of their decisions, it could be argued in the case of Hargrett v. Amazon that the company was doing what was best for themselves instead of what was best for Hargrett and other employees that they might be considering hiring. This would be an example of what’s called ethical egoism, which is the type of framework that means the person or company tends to focus on what their interests and needs are instead of what is best for others (Deoram, 2012).

Conclusion

Consumer protection laws and antitrust laws have been around for years and have continued to evolve. This paper defined and discussed consumer protection laws and their importance, along with antitrust laws and why they are both necessary to have in place to protect consumers and companies. The case study involving Amazon is just one example of a company that has had consumer protection issues and has had to take the necessary steps to correct these problems. The ethical dilemmas faced by Amazon has provided the company with the opportunity to review the way they are conducting business and take the necessary steps to prevent any further issues. Amazon utilized the utilitarian and deontology ethical frameworks in order to make their decisions on how to move forward with correcting any consumer protection issues. This paper should have provided a good overview of what consumer protection laws and antitrust laws are and how they can be corrected in the event they are compromised.    

References

  • Antitrust Laws. (2018). In Helicon (Ed.), The Hutchinson unabridged encyclopedia with atlas and weather guide. Abington, UK: Helicon. Retrieved from http://ezproxy.apus.edu/login?url=https://search.credoreference.com/content/entry/heliconhe/antitrust_laws/0?institutionId=8703
  • Brown, B. (2018, June 15). U.S. senators question Amazon about transmission of recorded private conversation. Retrieved from https://www.digitaltrends.com/home/senators-question-amazon-consumer-privacy-protection/
  • Consumer Protection and Antitrust Laws. (n.d.). Retrieved from https://courses.lumenlearning.com/suny-hccc-introbusiness/chapter/consumer-protection-and-antitrust-laws/
  • Damaschin, E. (2017). Classified Documents in Civil Lawsuits. Lex Et Scientia, Xxiv(1), 30-38. Retrieved from https://search-proquest-com.ezproxy1.apus.edu/docview/1923722176?accountid=8289
  • Deoram, S. (2012). A Review of Perspectives on Frameworks for Ethical Theories in Public Service Life. Retrieved from https://apsdpr.org/index.php/apsdpr/article/viewFile/112/111
  • Ethical Dilemma. (n.d.). Retrieved from https://en.oxforddictionaries.com/definition/ethical_dilemma
  • Fallor, E. (2018). Federal trade commission charges several in ‘deceptive’ amazon scheme. SNL Kagan Media & Communications Report, Retrieved from https://search-proquest-com.ezproxy2.apus.edu/docview/2018896593?accountid=8289
  • Infamous Antitrust Cases. (n.d.). Retrieved from https://www.hg.org/legal-articles/infamous-antitrust-cases-6025
  • Mayer, D., Warner, D., Siedel, G. Lieberman, J., & Martina, A. (n.d.) Business Law and the Legal Environment. Washington, D. C.:Saylor Foundation. Retrieved from https://www.saylor.org/site/textbooks/Business%20Law%20and%20the%20Legal%20Environment.pdf
  • Plaintiff. (2016). In S. H. Gifis, Dictionary of legal terms: definitions and explanations for non-lawyers (5th ed.). Hauppauge, NY: Barron’s Educational Series. Retrieved from http://ezproxy.apus.edu/login?url=https://search.credoreference.com/content/entry/barronsgkwm/plaintiff/0?institutionId=8703
  • Plaintiff. (2018). In Helicon (Ed.), The Hutchinson unabridged encyclopedia with atlas and weather guide. Abington, UK: Helicon. Retrieved from http://ezproxy.apus.edu/login?url=https://search.credoreference.com/content/entry/heliconhe/plaintiff/0?institutionId=8703
  • Shaw, J. (2018, May 2). 11 Times Big Brands Violated Consumer Protection Laws. Retrieved from https://www.zpllp.com/11-times-big-brands-violated-consumer-protection-laws/
  • Sherman Antitrust Act. (n.d.). Retrieved from https://legaldictionary.net/sherman-antitrust-act/
  • What Is Consumer Protection? –Product Liability, Laws & Rights. (n.d.). Retrieved from https://study.com/academy/lesson/what-is-consumer-protection-product-liability-laws-rights.html
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