"CAVEAT EMPTOR" OR "CAVEAT VENDOR"?

A CORPLAW COMMENTARY

by Barry J. Lipson

CORPLAW COMMENTARIES

"CAVEAT EMPTOR" OR "CAVEAT VENDOR"1?

by Barry J. Lipson
Putting aside the facts that we are all "homo sapiens" (and sometimes "homo saps"), and that we all share the
same biological functions, what else do we all have in common?
There are simple distinctions such as: Some of us are citizens, and some are not! Some of us like peanuts, and
some do not! Some of us Google, and some do not!
There are more complex distinctions such as: Some of us are conservative and see liberal as a dirty word,
some of us are proud to be liberal/progressive, and some of us defy political classification! Some of us are men,
some of us are women, and some seek sexual re-classification! Some of us are rich, some of us are poor, and some
of us are re-classified at the whims of the Stock Market!
And there are even more mind boggling distinctions such as, while Matthew 7.1 cautions Judge not,
lest ye be judged: Some of us are judges, some of us are judged; some of us are judges who have been judged;
some of us are the judged who have judged judges; and some of us collect judgments, and some lack judgment!!!
What then do we all have in common? What is the one common thread that binds us all together with a
common interest?
Why, we are all consumers of goods and services!!
And what is the traditional caution given to all consumers in a free enterprise society? "Caveat Emptor!"; or
translated into plain language: "Buyer Beware!"
But a review of the extensive legislation enacted under both Republican and Democratic administrations
quickly brings into question the viability of this time-honored doctrine of "Caveat Emptor," and its sister doctrine
"Laissez-Faire," the doctrine that commercial matters are not to be interfered with by government.

Who then should really beware, the buyer of wares or the vendor of goods?
PART I - THE CONSUMER AND FEDERALISTAN
A most interesting question, especially as, as your columnist has observed, in past writings over the past
decades, that "modern forces of social change" are like "a swinging pendulum, perpetually sweeping back and
forth, back and forth, back and forth, but always returning to the center; a center, however, that slowly and
sometimes gratingly, sometimes grandly, but surely and inexorably, is ever inching leftwards."2
We will explore whether the actual current and prospective status of the consumer under the laws and
regulations of the fifty-first Sovereignty of these United States of fifty Sovereign States, to wit Federalistan, our
Federal Government, exercising under the Commerce Clause its Constitutional insight and right, is "bright,"
"plight," trite, or might. (The term Federalistan was coined in 1993, an octet of years prior to 9/11.
However, some Islamophobics among us, suffering from Islamophobia, may object to such a designation, actually
honoring The Federalist [a/k/a The Federalist Papers], written during 1787-1788 to encourage ratification of the
U.S. Constitution.) We will then, as an example of one of the other fifty Sovereignties, make a similar excursion
into consumerism in the Commonwealth of Pennsylvania as it existed at the time of the coining of the name
Federalistan, and suggest generally some possible conclusions and practical insights.

In Federalistan, which some may characterize as continuing to be "laissez un-faire", or "unfair to sellers",
under any administration, alphabet soup agencies abound. Such agencies have been institutionalized by Acts of
Congress. Thus, pursuant to federal legislation, there is the FTC (Federal Trade Commission), FDA (Food and
Drug Administration), EPA (Environmental Protection Agency), CPSC (Consumer Products Safety Commission),
and other alphabet soup agencies, which all survived Reagan and the Bushes, to protect the consumer against unfair
business practices; to keep the consumer's drugs safe and effective, their food pure and their cosmetics safe (you be
the judge as to whether they are effective); to improve the physical environment in which the consumer lives; to
keep Barbie and Ken dolls from abusing our children and us; etc., etc., etc.
Specific federal statutes also inhibit the vendor's unconditional freedom to market their wares as they see fit by,
for example:
a) requiring disclosure of the foreign origin of goods;
b) requiring disclosure of automobile pricing and other automobile information;
c) requiring cigarette warning labels and prohibiting cigarette advertising on television;
d) requiring specified consumer package labeling information and special packaging to protect
children;
e) requiring refrigerators to be openable from the inside;
f) forbidding horse "soring", which is not "soaring" as in flying, but "soring" as in physically
irritating or injuring the horse to improve its performance and, thus, make it "soar" when racing (and
maybe also "real sore" - both physically and mentally);
g)setting automobile bumper standards and forbidding odometer resetting;
h) protecting consumers using consumer credit: 1) by requiring cost disclosures, special billing error
correction procedures and consumer access to bad credit reports, 2) by eliminating unauthorized
credit card use liability altogether or limiting it to $50.00, and 3) by placing limitations on debt
collection practices (such as no "midnight" calls or harassment at work);
i) forbidding imitation of political items and coins and other numismatic items, as unfair trade
practices, unless labeled as an "imitation";
j) setting standards for consumer product warranties and minimum standard for "full" warranties;
k) controlling toxic substances and pesticides;
l) making certain condominium and real estate cooperative contracts terminable by consumers; and
m) etc., etc., etc.
Moreover, as the Reagan/Bush era drew to a close, warnings were required by statute on smokeless tobacco
products; "blaze orange plugs" were required by statute to be placed in the barrels of imitation firearms; selling "out
of spec" screws, nuts, bolts, studs or other fasteners was criminalized with fines, and/or imprisonment for not more
than five years; and the FTC was required by Congress to regulate "pay-per-call services", more commonly known
as "900 telephone numbers". More recently, Congress has mandated the establishment of safety standards for
children's bicycle helmets, and the establishment of rules prohibiting deceptive telemarketing acts and practices and
other "abusive" telemarketing acts and practices.
Then, too, the federal antitrust statutes inhibit the unconditional freedom of the laissez-faire capitalist, by
providing the Rules of the Game to protect consumers against price fixing, bid rigging, customer allocation,
territorial divisions, group boycotts, tie-in arrangements, monopolization, anti-competitive mergers, and other
combinations, agreements and arrangements in restraint of trade, by vendors and others who want to lessen or even
eliminate what they perceive as "the burdens of competition."
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This impressive list of legislative mandates is, however, dwarfed by the immense volume of Federalistan
regulations that have grown out of such legislation, governing, sometimes in the minutest detail, vendors' conduct
and practices. Thus, these regulations, in turn, further directs or "interferes with" the manner in which vendors
conduct their business, all presumably for the benefit of the consumer. --- But 'you-all' ain't seen nothing yet!"
PART II - THE CONSUMER AND THE COMMONWEALTH
We now leave for the time being Federalistan, to explore the consumer and the Commonwealth, the
Commonwealth of Pennsylvania that is. The designation "Commonwealth" is generally used to donate "a
republican frame of government, -- one in which the welfare and rights of the entire mass of people are the main
consideration," rather than that of the traditional privileged class (Black's Law Dictionary).
Under the Pennsylvania Unfair Methods Of Competition and Unfair And Deceptive Acts and Practices
Statute, at least 17 specified practices are declared to be unlawful in Pennsylvania, and if the Pennsylvania
Attorney General believes that any business has engaged in any of these practices, he or she may interfere with that
business by petitioning the Court: 1) to enjoin that business from continuing the practice; 2) to require that business
to restore the ill-gotten money or other property obtained; and/or 3) to impose a fine for each single violation.
Moreover, if the business violates such an injunction, or even merely violates an assurance of voluntary compliance
it has made with the Attorney General, he or she may intensify this interference by commencing proceedings to
cause that fine to be increased up to five-fold for each single violation, and to also cause that business to lose its
future right to do business in the Commonwealth of Pennsylvania.
Additionally, under Pennsylvania law, private parties, consumers and the Courts may also interfere. Private
parties and consumers may sue the business and recover either actual damages or, if the Court is so inclined, three
times the actual damages, and the Court may award whatever additional relief that the Court may deem to be
necessary and proper.
What then are these illegal practices that the Commonwealth of Pennsylvania deems to be so reprehensible?
The first sixteen prohibited practices include the following categories:
a) Causing the likelihood of confusion or of misunderstanding as to source, sponsorship, approval,
certificate or affiliation, or "passing off" ones goods or services as those of another;
b) Making a misleading, deceptive or false representation:
i) as to the reasons for price reductions,
ii) as to the need for services, replacements or repairs,
iii) as to the geographic origin of any goods,
iv) as to the characteristics, ingredients, uses, benefits, quantities, quality, grade, style,
model, or compliance with a particular standard of any goods and/or services, or
v) as to the original or new condition of goods when they are actually deteriorated,
altered, reconditioned, reclaimed, used or second-hand;
c) Disparaging the goods, services or business of another by false or misleading representation of fact;
d) Advertising goods and services with the intent not to supply reasonably expectable public demand, or
with the intent not to sell as advertised, which would include the use of bait and switch tactics;
e) Promising buyers compensation for procuring a purchase contract from another when such
compensation is contingent upon an occurrence subsequent to the signing of such purchase contract;
f) Promoting or engaging in any plan commonly known as or similar to the so-called "chain-letter plan"
or "pyramid club plan";
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g) Failing to comply with the terms of any written guaranty or warranty, whether given to the buyer at,
prior to or after the making of a contract for the purchase of goods or services; and/or
h) Making repairs, improvements or replacements inferior to or below the standard agreed to in writing.
Just in case the first sixteen prohibited practices are not enough to inhibit the creativity of a caveat emptor
seller, the legislature adopted a catch-all, which is a real humdinger. Simply and eloquently, it prohibits vendors
from "engaging in any other fraudulent conduct which creates a likelihood of confusion or of
misunderstanding." Lest such a vendor takes solace in the belief that his "cleverness" would not cross over the
"fraudulent conduct" line, the courts have let it be known that such conduct embraces false suggestion,
misrepresentation, deceit, concealment, suppression, perversion or twisting of the truth, and all variety of "means
which human ingenuity can devise" to mislead or misdirect another, including "all surprise, trick, cunning,
dissembling, and any unfair way by which another is cheated."
However, Pennsylvania law does not stop here. It also singles out specific vendor conduct for specific
additional treatment. Thus, a vendor can, in addition, go to jail for up to one year and be fined for failing to
disclose that a TV picture tube he or she has sold is second-hand or reactivated. Similarly, a vendor can also go to
jail for up to one year or be fined (but this time not both) for failing to physically tag a used watch as "second-hand"
(even though this too could be "misleading", ha-ha, as the consumer just might reasonably conclude that the tag
actually meant that the watch has a "second hand" or a hand marking seconds!).
It has also been specifically declared to be illegal in Pennsylvania to misrepresent that goods are made by the
blind (if they are not), but here the additional fine is only $100.00 plus costs, and the vendor goes to jail only if he
fails to pay, and then for only 30 days. Despite this somewhat lesser apparent concern for blind manufacturers,
who regretfully probably lack easy access to this column, for the most part legislatively, at least, Pennsylvania does
appear to be a "commonwealth", and Pennsylvania consumers (as well as Federalistan consumers) do appear to
be the nuevo privileged class, but only if they, in fact, actually know and exercise their consumer rights.
PART III MORE TANTALIZING TIDBITS
Indeed, some laissez-faire advocates might think that in Pennsylvania the predictions of George Orwell for
1984 came true. Thus, in that year, "big brother" made it illegal in Pennsylvania for a creditor to refuse to sell to a
consumer who does not have a credit card, and/or for a creditor to demand or receive an "unreasonable" or
"excessive" amount of security. Penalties for doing so are similar to the "big brother" penalties described above for
perpetrating Pennsylvania unfair practices.
Also. in 1984, Pennsylvania adopted a so-called by some "Orwellian" one-year or 12,000 mile (whichever
occurs first) Automobile Lemon Law, which presumes against the automobile manufacturer if the car is in the
dealer's repair shop for the same repair three times, or if the car is out of service for the same problem for a total of
30 days or more, Again, the unfair practices "big brother" penalties apply here.
Moreover, since 1986 Pennsylvania jewelers may only lawfully charge a flat fee for appraisals, and are
forbidden from basing their fees on the traditional method of a percentage of the appraised value; and since 1987
Pennsylvania gasoline service stations are required to post a conspicuous listing of the additives that are in the
gasoline they sell. More recently, this Commonwealth has singled out health clubs for extensive regulation; has
adopted a motorized wheelchair "lemon law;" and has required consumer contracts to be written in "plain
language," which means easily readable type and layout, short words in English, short sentences, short paragraphs,
active verbs, etc.
Then, too, for well over a hundred years Pennsylvania allegedly protected consumers attending camp
meetings, conferences and other religious gatherings from itinerant businesses within one mile from the site of the
meeting (unless licensed by the manager of the meeting who may, indeed, have been the person really "protected").
The penalty for violating this prohibition was six months in jail or a $100.00 fine, or both. These penalties,
however, did not apply to regular weekly religious meetings, to farmers selling home-grown produce on their own
land, or to local businesses selling from their permanent establishments. Whether as a demonstration of Reaganite
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de-regulation zeal, or as a move to actually protect the "pious" consumer from the "mercenary" meeting manager,
this 1878 prohibition was finally repealed in 1982.
Additionally, while Pennsylvania has not yet adopted its own antitrust statutes, not only has the Supreme Court
of Pennsylvania declared the Federal Antitrust Laws to be the common law of the Commonwealth of
Pennsylvania, but the Pennsylvania legislature has already gone part way by adopting in 1983 the Anti-Bid
Rigging Act. This Act prohibits all bid rigging agreements, including, but not limited to, agreements to sell items or
services at the same price, to submit identical bids, to rotate bids, to share profits with a non-bidder, to submit prearranged or complimentary bids, to set up or divide territories, and/or to not bid at all, which directly or indirectly
impact government contracts.
Furthermore, though under Pennsylvania law it is not a crime for a vendor to send unsolicited goods,
consumers are not obligated to return them, or if sent by mail, both under Pennsylvania and Federal statutes,
consumers may treat them as if they were gifts (repeat: GIFTS!).
Finally, both Pennsylvania and the Federal government have given unqualified "full three day", or sometimes
even "three business days", unilateral contract rescission rights to consumers -- but in different areas. Pennsylvania
gives such rights to consumers who have joined a health club, and also to consumers who have been sold a product
or service for over $25.00 as the result of a contact or call at their residence, and requires that the seller give the
customer notice of this right of rescission at the time of sale. However, under older Pennsylvania legislation,
consumers, may only have qualified one day rescission rights when home improvement contracts are entered into
away from their residence.
Federal law, on the other hand, given such full three day rescission rights to a consumer who has entered into a
contract to purchase his principal dwelling, and also requires notice of this right of rescission to him at the time of
such sale. Moreover, if such notice is not given, the consumer may then have up to three full years to rescind.
These are, thus, but selected examples of government intervention, or, in the words of consumer advocates, of
the rights and protections afforded to consumers under Pennsylvania and Federalistan law.
PART IV - IN PLAIN LANGUAGE
So is the consumer the new privileged class in Twenty-First Century America, or are we still live in an
"original intent" Caveat Emptor Land? The suggestion has been made that legislation is in place to protect the
consumer, but only knowledgeable consumers can use this legislation to actually protect themselves. It has also
been alluded to that where this legislation is unclear or may go too far, only vendors with knowledgeable legal
advice will be in the position to both properly prosper, and also protect themselves with the legal equivalent of
"preventative medicine". Thus, both in Pennsylvania and Federalistan manufacturers and vendors need
knowledgeable legal advice here to avoid these pitfalls. Indeed, this will be even more important as time goes by,
especially as there are continuing legislative efforts for Pennsylvania and Federalistan to adopt additional
consumer legislation, such as has happened most recently in the banking and credit card areas.
But, in fairness, there is more! Take again, for example, Pennsylvania. Pennsylvania law not only protects
consumers, it also protects reselling "dealers" and "contractors" from their own vendors, manufacturers or
customers. Thus, under specified circumstances, Pennsylvania law since 1994 has protected contractors from nonpayment by owners; since 1987 has protected dealers generally from their suppliers; since 1983 has protected new
car dealers from motor vehicle manufacturers; since 1980 has protected motion film exhibitors from film
distributors; and since 1975 has protected gasoline and motor vehicle accessory dealers from oil companies and
suppliers. Then too, this Commonwealth also protects other apparently "powerless" or less powerful groups, such
as artists from their consignment dealers, and also from mutilators of their "fine art" creations after they have been
sold by the artist; and Pennsylvania bidders from out of state bidders who are favored in their home states.
Moreover, as the legislature and consumer or special interest groups perceive new threats to consumers, such as
were the cases with regard to health hazards from smokeless tobacco, hold-ups utilizing imitation firearms, and the
"insidiousness" of 900 numbers and telemarketing, these rights and protections are sure to be expanded. While on
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occasion, in response to "real life" applications or political pressures, the scope of such government interference
may be more narrowly construed, in particular instances, by the legislature, by the Courts, or by the governmental
agency charged with its administration, this would appear to be the exception and not the rule.
Remember, we are all consumers, and as such, only when neither our own oxen are being gored, nor our
livelihoods threatened, will we probably prefer laissez-faire to paternalism, regardless of the administration then
occupying the White House or the State House. So it appears more and more clear that WE, the consumers, as we
appear more and more to become the new "privileged class", will replace the antebellum doctrine of caveat emptor
with the "commonwealth" concept of caveat vendor, or will we not?
Or perchance, may other doctrines mosey over from Jurassic Park, such as "Caveat Emptor Reborn;" from
Boston Bay, such as "Caveat Emptor de Tea Party" (relating to consuming moldy/mouldy water-soaked Tea); or
even from south of the Mason-Dixon Line -- say from around Arkansas, Florida or Texas way -- such as "Caveat
'you-all'?"
Whatever the outcome, we know that under the Commonwealth's plain language law, while we consumers
must always remain aware and "beware," we will be saved from having to be aware of the meaning of "Latin and
foreign words or any other word whenever its use requires reliance upon an obsolete meaning," such as,
presumably, caveat emptor and laissez-faire.
Please address your comments, questions and suggestions for future Corplaw7 Commentaries Columns on marketing,
business and other legal subjects to Barry J. Lipson, Esquire, at bjlipson@gmail.com .
Copyright8
8 1990-1993-1996-2010 by Barry J. Lipson.
1

Caveat Venditor actually in Latin.

See, for example, "The Swinging Pendulum and the Independent Judiciary," Federal Speaking No. 49,
www.pawd.uscourts.gov/Documents/Misc/fsp49.pdf and www.scribd.com/doc/34161308/Federal-Speaking-49.
2