From: "Ed Foster"
To: Secretary, Federal Trade Commission
From: Ed Foster
Columnist and Contributing Editor, InfoWorld
Re: High-Tech Warranty Project -- Comment, P994413
1. As someone with a fairly unique perspective on the issue of warranty protections for software customers, I'd like to submit some material to the project in the hopes you will find it helpful. For over five years, I have been writing the "Gripe Line" column for InfoWorld, a weekly information technology news publication. This means I hear from readers on a daily about the real world problems facing customers of technology products and services. In addition, over that same period I have been the only journalist to closely observe the drafting process of what has become the Uniform Computer Information Transaction Act (UCITA), a process I'd originally hoped might produce rules that would alleviate the problems my readers encounter.
2. Even if UCITA were not part of the equation, I would argue that we are well past the time when something needs to be done to give all consumers more protection against sharp practices in the software industry and in e-commerce. InfoWorld's readers are business users, many of them technology professionals who procure software and data services for their companies. In spite of the fact they have more knowledge and better negotiating leverage than most consumers, they far too often find themselves with no practical recourse when IT products fail to meet even minimal expectations.
3. I believe UCITA's existence makes a bad situation even worse. The process that created UCITA was far removed from the realities of the high-tech world and the problems that software and e-commerce customers face. With its blanket endorsement of shrinkwrap/clickwrap licenses, UCITA allows software publishers and online services to write their own rules for how they treat their customers. Industry practices that vendors now abandon quickly when faced with a recalcitrant customer will be legally endorsed.
4. Allow me to briefly summarize the areas where I think UCITA will have the most serious consequences for consumers of information technology products and services. As collateral material, I include links to the material I've published in InfoWorld and on InfoWorld's website (http://www.infoworld.com and http://www.infoworld.com/ucita) to provide a more detailed explanation of my conclusions.
5. Some of the most dramatic evidence of how UCITA will impact software customers come from court decisions where the software industry's arguments for blanket enforcement of end user license agreements were heard. A recent decision by the Washington state supreme court (Mortenson vs Timberline Software) upheld the lower court ruling that enforced a shrinkwrap disclaimer of consequential damages. This prevented a lawsuit by a construction company that had suffered a $2 million loss due to a bug which the software publisher knew about and failed to disclose. (Please see Appendix A)
6. An even scarier federal district court decision for all types of consumers (Hill vs Gateway) involves a ruling that upheld a mandatory arbitration clause in terms included in the box with a Gateway computer. Although Gateway had acknowledged that components of the system were inferior to what customers were led to expect, the plaintiffs were denied any real remedy. I heard from a number of customers who purchased that same computer at the time, and I am still flabbergasted that the practices Gateway openly admitted would be countenanced by any court. (Please see Appendix B)
7. Under UCITA, even those who do read the licensing fine print after they get the product can still be surprised by modifications made to the license at a later date with no real notice to them other than posting the changes somewhere on a website. This poses a grave threat to consumers participating in e-commerce, as one can readily see by how many web-based businesses now state that their terms of service can be modified at any time with no notice to customers unless they continually re-reading posted terms to spot changes. Just how eagerly some service providers will embrace this way of doing business is illustrated by Excite@Home's well-documented actions last year when implementing a performance limitation in its service. (Please see Appendix C)
8. Customers also have to be concerned that under UCITA software they have purchased will arbitrarily be taken away at some point by the publisher. The law's controversial "electronic self help" provision poses a grave security risk to business customers as it gives software publishers the right to include remote disabling mechanisms in their programs. Safeguards in that provision against wrongful use of electronic self help would not apply to these destructive mechanisms by accident or by a third party, the risk of which is all placed on the unknowing customer. The same safeguards also do not apply to
UCITA's "automatic restraints" provision, which permits software publishers to terminate use of their software at their discretion. (Please see Appendix D)
9. I think it's important to recognize that a UCITA-like approach to dealing with customers is already very much with us, even in more traditional sales channels. A recent example is a reader who purchased a laptop by phone after seeing an ad in a magazine with an attractive price. When the system arrived, it came with an invoice with almost double the price he was expecting to pay, and the customer was denied the right to return the machine for a refund on the basis of terms he could only see on the back of the invoice and on the company's website. (please see Appendix E.)
10. The situations I write about on a weekly basis represent only the tip of the iceberg. Virtually every day I hear from readers who find themselves in such typical circumstances as discovering a product they have already paid for is not yet available, or that they must pay a support fee in order to get a software program to work, or that features they were promised will not be delivered. Just to provide some sense of the type of warranty issues I hear about every day, I am attaching a file consisting of excerpts from e-mail complaints in my "unresolved gripe" file; i.e., complaints that I would have liked to help readers with but could not because they weren't egregious enough in comparison with others. (Please see Unresolved.doc attachment)
11. I thank you for your consideration in even taking on this daunting task, and I hope have helped provide some perspective on the problems facing high-tech customers. I don't know what the answers to these problem are, but I do know it's not UCITA.