The Bait/Switch Referral Sale Pyramid Scheme

 

What do the above consumer scams have in common? They were all made illegal by Pennsylvania‘s Unfair Trade Practices and Consumer Protection Law (“Consumer Law”). The Consumer Law declares unlawful:

• Misrepresenting a product’s brand.
• Misrepresenting the source, sponsorship, or certification of a product or service.
• Misrepresenting characteristics, ingredients, uses, benefits or qualities of a product.
• Representing a product as new when it is not.
• Advertising goods with intent not to sell them, i.e “bait and switch.”
• Promising a discount on a product if the buyer convinces another to buy the product also, i.e “referral sales.”
• Chain letters involving money, pyramid clubs, or Ponzi schemes.
• Failure to honor a written warranty.
• Misrepresenting that repairs are needed when they are not.

The Consumer Law was passed in response to the endless number of schemes developed to relieve the consumer of his or her money through fraud. Although some of these practices have become rare because of laws like this one, the Consumer Law remains an important tool in the hands of the informed consumer.

The most important provision of the law today is the section that makes it a violation to fail to honor a written warranty. Although traditional contract law has always provided a remedy, it has proved insufficient in the typical consumer case. A good example is the sale of large screen televisions. A few years back when large screen models became popular, consumers received some unpleasant suprises with their new $1,000.00 television in the form of $150.00 service calls to fix loose and broken internal parts. Apparently, few manufacturers had bothered to consider that the sheer weight of those large televisions would cause damage to internal parts. Under traditional contract law, when the manufacturer refused to pay for the repairs under warranty (as most did) you could sue only for the $150.00. After you paid the $200.00 filing fee to start the suit and then paid your lawyer you would probably find that you could have bought several new televisions. A solution to that dilemma is provided in the Consumer Law. It allows the successful plaintiff to recover:

• Actual damages, but at least $100.00.
• Three times actual damages, i.e. “treble damages”
• Attorney’s fees

The Consumer Law has done a great service to Pennsylvania consumers by preventing unlawful conduct because of the threat of treble damages and attorney’s fees for those who violate the law; however, not everyone has received the message. If you are a victim of a consumer scam or a big corporation which refuses to honor its warranty, real help is now available.

– Mike Malin