Fair Trade: Why Marketers Should Heed Federal Warranty Laws

by Lesley Fair on May 9, 2018 3:00:00 AM FTC, Direct Response, Marketing, Consumer

Fair Trade 0518

“But I’d never buy a ____ if I couldn’t check it out in person first.” To win over a skeptical segment of the buying public, direct-to-consumer retailers have spent decades successfully overcoming that hurdle. Industry members have used accurate product demonstrations, representative testimonials, in-depth documentation and other methods for building shoppers’ confidence.

Another way many direct response marketers signal their intention to stand by what they sell is by offering warranties — sometimes described as a promise that a product will meet a specified level of performance over a particular period of time. Like any other product claim, warranties are subject to the truth-in-advertising provisions of the Federal Trade Commission (FTC) Act. But if you offer written warranties, you need to be up on another law enforced by the FTC: the Magnuson-Moss Warranty Act. FTC staff just sent warning letters to six companies, raising questions about statements the companies are making that appear to tie warranty coverage to consumers’ use of authorized parts or service, a practice that may violate both the Magnuson-Moss Warranty Act and the FTC Act.
 
According to the Warranty Act:
 
No warrantor of a consumer product may condition his written or implied warranty of such product on the consumer’s using, in connection with such product, any article or service (other than article or service provided without charge under the terms of the warranty) which is identified by brand, trade, or corporate name.
 
In other words, companies can’t void a consumer’s warranty or deny warranty coverage solely because the consumer uses a part made by someone else or gets someone not authorized by the company to perform service on the product.
 
There are only two exceptions: 1) if the company provides the article or service to consumers for free; or 2) if the company gets a waiver from the FTC. The law allows the FTC to grant a waiver only if the company proves that “the warranted product will function properly only if the article or service so identified is used in connection with the warranted product, and the waiver is in the public interest.” Companies may, however, disclaim warranty coverage for defects or damage caused by the use of unauthorized parts or service.
 
FTC staff recently took a closer look at companies’ warranties and promotional materials and identified language that raised concerns about some businesses telling consumers that their warranty would be void if they used unauthorized parts or service. The companies used different terminology, but here are examples of the kind of questionable provisions that elevated concerns:
  • “The use of [the company’s parts] is required to keep your ... manufacturer’s warranties and any extended warranties intact.”
  • “This warranty shall not apply if this product ... is used with products not sold or licensed by [company name].”
  • “This warranty does not apply if this product ... has had the warranty seal on the [product] altered, defaced or removed.”
FTC staff suggested that the companies review the Magnuson-Moss Warranty Act and, if necessary, revise their practices accordingly. The letters also put the companies on notice that we’ll be taking another look at their written warranties and promotional materials after 30 days.
 
What can other business glean from the warning letters?
 
Read your warranty through consumers’ eyes. Consider the literal wording of your warranties, of course. But like any other advertising representation, companies communicate claims expressly and by implication. Are you living up to the warranty promises consumers understand you to be making?
 
Untie the NOT. Unless you meet one of Magnuson-Moss’ narrow exceptions, do not condition warranty coverage on consumers’ use of branded parts or service from you or someone you authorize.
 
Is it time for a warranty reboot? The prohibition on tying warranty coverage to certain branded parts and service is just one aspect of federal warranty law. If it’s been a while since you’ve checked your warranties, now is a good time for a refresher. Also, in 2015, the E-Warranty Act took effect. As a result, the FTC revised its rules to explain how the law’s provisions concerning “written” warranties apply in online commerce.

About the Author

Fair_Lesley_FTCLesley Fair is a Senior Attorney with the Federal Trade Commission’s Bureau of Consumer Protection. After decades as a litigator representing the FTC in deceptive advertising cases, she now specializes in industry education and outreach.

Lesley Fair's blog
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