FTC Warns Sellers and Manufacturers About Warranty Practices
The FTC has made no secret about its recent focus upon anticompetitive practices related to repair marketers and ensuring that consumers have options when it comes to repairing products. Those that offer product warranties should take a close look at their warranty terms and related communications to ensure that they comply with the Magnuson Moss Warranty Act and developing federal and state laws specific to right to repair.
Product Repair Restrictions Workshops, Reports and Policy Statements
In 2019 Federal Trade Commission lawyers held a workshop to discuss manufacturer restrictions on proposed state consumer good repair rights legislation. For example, making it unreasonably difficult – if not impossible – for a consumer or an independent third-party – to make product repairs. Various approaches were proposed by panelists, including federal guidance on the right to repair; a requirement that manufacturers disclose product information with everyone, and not only certified repair shops; state right to repair legislation; and permitting consumers to pay for repairs.
Subsequently, in 2021, the FTC cited a report stating that there is “scant evidence to support manufacturers’ justifications for repair restrictions.” A strong statement toward legislation mandating that manufacturers ensure that consumer goods are able to be repaired without consumers having to incur extra costs.
In 2021 Federal Trade Commission attorneys approved the adoption of a policy statement reflecting aggressive enforcement against manufacturer restrictions that prevent consumers and businesses from repairing their own products. The policy statement also sanctions more aggressive enforcement of the Magnuson-Moss Warranty Act.
What is the Magnuson-Moss Warranty Act?
The Magnuson-Moss Warrant Act is the federal law that governs consumer product warranties. It requires warrantors of consumer products to provide consumers with detailed information about warranty coverage. In part, the Magnuson-Moss Warranty Act directs the FTC to establish disclosure standards for written warranties, specifies standards for “full” warranties, limits disclaimer of implied warranties, and establishes consumer remedies for breach of warranty or service contract obligations. The MMWA contains an “anti-tying provision” that restricts a company from tying a warranty to the use of a specific service provider.
FTC policy here is based upon its belief that a significant number of technological advancements and repair restrictions have unlawfully “diluted” the anti-tying provision and “steered consumers into manufacturers’ repair networks or to replace products before the end of their useful lives.”
Recent Warranty Restriction Right to Repair Enforcement Actions
In 2022, the Federal Trade Commission announced that it had obtained orders requiring three companies to fix warranties and “come clean” with consumers about their right to use third-party and aftermarket parts. The final orders against Harley-Davidson Motor Company Group, grill maker Weber-Stephen Products, and the manufacturer of Westinghouse outdoor power equipment, MWE Investments, pertain to allegations of illegally restricting consumers’ right to repair their purchased products.
The FTC alleged that Harley-Davidson and MWE Investments included terms in their warranties that claimed that the warranty would be void if customers used independent repairers or third-party parts, in violation of the Magnuson-Moss Warranty Act and the FTC Act. In addition, Harley-Davidson allegedly failed to properly disclose all warranty terms in a single document, and instead directed consumers to visit a local dealership to fully understand the warranty. The FTC announced a similar case alleging that Weber’s warranty illegally claimed that the use of aftermarket parts would void the company’s warranty on gas and electric grills.
The orders require the companies to take multiple steps to correct their alleged unlawful behavior:
- Prohibit further violations: The companies are prohibited from further alleged violations of the Warranty Act, and in Harley-Davidson’s case, the Disclosure Rule. They are also prohibited from telling consumers that their warranties will be void if they use third-party services or parts, or that they should only use branded parts or authorized service providers. If the companies violate these terms, the FTC will be able to seek civil penalties per violation in federal court.
- Recognize consumers’ right to repair: Harley-Davidson and MWE Investments are required to add specific language to their warranties similar to the following: “Taking your product to be serviced by a repair shop that is not affiliated with or an authorized dealer of [Company] will not void this warranty” and/or “using third-party parts will not void this warranty.” Weber is required to add to its warranty a statement that “Using third-party parts will not violate this warranty.”
- Come clean with consumers: The companies are also required to send and post notices informing customers that their warranties will remain in effect even if they buy aftermarket parts and/or patronize independent repairers.
- Alert dealers to compete fairly: Harley-Davidson and MWE Investments are required to direct authorized dealers to remove deceptive display materials, train and monitor employees, and not promote branded parts and dealers over third parties.
Harley-Davidson and Westinghouse both allegedly included illegal terms that voided warranties if customers used anyone other than the companies and their authorized dealers to get parts or repairs for their products. For example, a Harley warranty encouraged consumers to “insist that your authorized Harley-Davidson dealer uses only genuine Harley-Davidson replacement parts and accessories to keep your Harley-Davidson motorcycle and its limited warranty intact,” according to the FTC.
These types of restrictions violate the Magnuson Moss Warranty Act, which broadly prohibits companies from conditioning a consumer product warranty on the consumer’s use of any article or service which is identified by brand name unless it is provided for free, says the Commission. “Companies can, however, exclude warranty coverage for defects or damage caused by unauthorized parts or service.”
Under the terms of the settlements, the companies are prohibited from telling consumers that their warranties will be void if they use third-party services or parts, or that they should only use branded parts or authorized service providers. The companies agreed to affirmatively inform consumers of their rights. For example, warranties must disclose that “taking your product to be serviced by a repair shop that is not affiliated with or an authorized dealer of [Company] will not void this warranty. Also, using third-party parts will not void this warranty.”
While the FTC took action under existing law, federal and state legislatures continue efforts to pass legislation specific to right to repair.
For example, New York recently passed the first “right to repair” bill that requires all manufacturers of “digital electronic equipment” to make available to consumers and repair shops the information, tools, and spare parts needed to fix covered devices.
Recent Magnuson-Moss Warranty Act Warnings
Earlier this month, the FTC announced that they had sent warning letters to eight companies about their warranty practices that may be standing in the way of consumers’ right to repair products they have purchased. The warning letters inform the companies of FTC staff’s concerns that their practices violate the Magnuson-Moss Warranty Act.
“These warning letters put companies on notice that restricting consumers’ right to repair violates the law,” said FTC lawyer Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The Commission will continue our efforts to protect consumers’ right to repair and independent dealers’ right to compete.”
The letters to five of the companies warn that FTC staff has concerns about the companies’ statements that consumers must use specified parts or service providers to keep their warranties intact. Unless warrantors provide the parts or services for free or receive a waiver from the FTC, such statements are generally prohibited by the MMWA. Similarly, such statements may be deceptive under the FTC Act.
Letters to three other companies warn against their use of stickers containing “warranty void if removed” or similar language that are placed in locations on products that hinder consumers’ ability to perform routine maintenance and repairs on their products.
FTC counsel has urged each company to review its promotional and warranty materials to ensure that such materials do not state or imply that warranty coverage is conditioned on the use of specific parts or services. The letters state that FTC staff will review the companies’ websites after 30 days and that failure to correct any potential violations may result in law enforcement action.
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Hinch Newman LLP’s advertising and marketing practice includes successfully resolving some of the highest-profile Federal Trade Commission (FTC) and state attorneys general digital advertising and telemarketing investigations and enforcement actions. The firm possesses superior knowledge and deep legal experience in the areas of advertising, marketing, lead generation, promotions, e-commerce, privacy and intellectual property law. Through these advertising and marketing law updates, Hinch Newman provides commentary, news and analysis on issues and trends concerning developments of interest to digital marketers, including FTC and state attorneys general advertising compliance, civil investigative demands (CIDs), and administrative/judicial process. This blog is sponsored by Hinch Newman LLP.