FTC staff issues warranty warning

When the screen turns blue
And the car broke down
Smartphone keeps restarting
Consumers win‘Don’t be afraid
No, they won‘Don’t be afraid
As long as you stick to your warranty.

With apologies to R&B legend Ben E. King, when consumers buy a product with a warranty, they expect the business to stand behind what they’re selling. But if you ignore the Magnuson-Moss Warranty Act, sticking with the warranty won’t do your customers much good. FTC staff just issued warning letters to six companies challenging statements that appear to tie warranty coverage to consumer use of authorized parts or services, a practice that may violate the Warranty Act and the FTC Act.

According to the Mag-Moss warranty:

No guarantor of a consumer product shall condition its written or implied warranty with respect to the product on the consumer’s use of any items or services in connection with the product (other than those provided free of charge under the terms of the warranty). By brand, trade or company name.

In other words, a company cannot void a consumer’s warranty or deny coverage simply because the consumer used parts made by someone else or had the product repaired by someone not authorized by the company.

There are only two exceptions: 1) if the company provides goods or services to consumers at no charge; or 2) if the company obtains an exemption from the FTC. Under 15 USC § 2302(c), the covered product will only operate properly if the company demonstrates that “the article or service so identified will function properly only when used in conjunction with the covered product and the exemption is in the public interest.” However, the Company may not provide a warranty against defects or damage caused by the use of unauthorized parts or services.

FTC staff recently took a closer look at company warranties and promotional materials and found wording that raised concerns that some businesses are telling consumers that their warranties will be void if they use unauthorized parts or services. The companies used different language, but here are some examples of questionable terms.

• refers to the purpose of something [the company’s parts] Need to keep your . . The manufacturer’s warranty and any extended warranties remain intact.
• This warranty does not apply to this product. . .Use with products not sold or authorized [company name].
• This warranty does not apply to this product. . .Has a warranty seal [product] Altered, damaged or removed.

FTC staff recommends that these companies review the Magers-Moss Warranty Act and modify their practices accordingly, if necessary. These letters also inform companies that we will review their written warranties and promotional materials again after 30 days.

What information can other businesses get from the warning letter?

Untie the shackles of “no”. Revisit your own warranty.Unless you encounter one of the rare exceptions of Mag-Moss, no Warranty coverage is dependent on the consumer’s use of parts or services provided by you or someone authorized by you.

Read your warranty through the eyes of a consumer. Of course, consider the literal wording of the guarantee. But like other advertising presentations, companies can communicate claims to consumers explicitly or implicitly. Under these two Mag-Moss exceptions, if you choose language that would convey to a reasonable consumer that their warranty coverage requires them to use items or services identified by a brand, trade, or company name, modify your practices to avoid warranty question.

The prohibition of deception in Section 5 applies to misleading warranty claims. A violation of the Magnuson-Moss Warranty Act is a violation of Section 5 of the Federal Trade Commission Act. But unlike Mag-Moss, under the FTC Act, a claim that creates a false impression that the warranty will be voided by the use of unauthorized parts or services may be a separate act of deception. When evaluating what they say and do regarding warranties, savvy companies get the job done by asking the same questions they ask themselves when looking at advertising claims: 1) What will consumers understand us to mean? 2) Are we telling the truth?

The reach of law can be global. If you represent a foreign company, advise them on compliance with the Magmuth Warranty Act and the Federal Trade Commission Act.These laws apply when the business conduct of a non-U.S. company constitutes unfair or deceptive acts or practices, involves material conduct within the United States, or is likely to cause reasonably foreseeable harm within the United States.