Analysis of Proposed Consent Order
The Federal Trade Commission has accepted, subject to final approval, an agreement containing a consent order from Tiger Direct, Inc. ("Tiger Direct"), a mail order retailer of computer products.
The proposed consent order has been placed on the public record for sixty (60) days for reception of comments by interested persons. Comments received during this period will become part of the public record. After sixty (60) days, the Commission will again review the agreement and the comments received and will decide whether it should withdraw from the agreement or make final the agreement's proposed order.
The Commission's complaint alleges that Tiger Direct violated Section 5 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 45(a)(1), by deceptively advertising its on-site warranty service for Tiger-brand computer systems. Additionally, the complaint alleges that Tiger Direct has violated the Magnuson-Moss Warranty Act ("Warranty Act"), 15 U.S.C. § 2301 et seq., and two Rules promulgated thereunder: the Rule concerning the Disclosure of Written Consumer Product Warranty Terms and Conditions ("Disclosure Rule"), 16 C.F.R. § 701; and the Rule concerning the Pre-Sale Availability of Written Warranty Terms ("Pre-Sale Availability Rule"), 16 C.F.R. § 702. Under Section 110(b) of the Warranty Act, 15 U. S.C. § 2310(b), violations of the Warranty Act or its Rules are also violations of Section 5 of the FTC Act.
First, the complaint alleges that Tiger Direct violated Section 5 of the FTC Act by misrepresenting that it would provide on-site warranty service to purchasers of Tiger-brand computer systems when notified that the system or any of its parts was defective or had malfunctioned and that it would provide such service within a reasonable period of time after being notified of a problem.
Second, the complaint alleges that Tiger Direct violated the Pre-Sale Availability Rule by failing to disclose material warranty terms or otherwise comply with the Rule. The complaint also alleges that Tiger Direct failed to comply with the requirements of the Disclosure Rule that certain language be included in written warranties including: what the warrantor will not pay for or provide, where necessary for clarification; a step-by-step explanation of the procedure that the consumer should follow in order to obtain performance of any warranty obligation; a notice that its warranty exclusion of incidental and consequential damages does not apply to consumers in states that prohibit such exclusions; and that a consumer may have other rights that vary from state to state. In addition, the complaint alleges that Tiger Direct violated the Warranty Act by failing to clearly and conspicuously designate its written warranty as "full" or "limited" and by disclaiming all implied warranties, which the Warranty Act prohibits.
The proposed consent order contains provisions designed to remedy the violations charged and to prevent Tiger Direct from engaging in similar deceptive acts and practices in the future.
Part I of the proposed order prohibits Tiger Direct from representing that it provides on-site service unless it discloses all limitations and conditions that apply to obtaining on-site service clearly, prominently and in close proximity to the on-site service representation.
Part II of the proposed order provides that Tiger Direct shall provide warranty service within a reasonable period of time after receiving notice from a consumer of a problem. The order defines a reasonable period of time as the time period specified in respondent's promotional materials and advertisements, or if no time period is specified in respondent's promotional materials and advertisements, a period no longer than thirty (30) days after respondent receives notice from a consumer of a computer problem.
Part III of the proposed order contains provisions designed to remedy respondent's violations of the Warranty Act, the Disclosure Rule and the Pre-Sale Availability Rule. It prohibits respondent from failing to make the text of a warranty readily available; failing to disclose a statement of what the warrantor will not pay for or provide; failing to disclose a step-by-step explanation of the procedure the consumer should follow to obtain warranty service; failing to make the necessary disclosures regarding a consumer's rights under state law; failing to properly designate its warranty as full or limited; and disclaiming any implied warranty except as permitted.
Parts IV and V of the proposed order require Tiger Direct to distribute copies of the order and written instructions regarding its responsibilities and duties under the order and the Warranty Act, including the Disclosure Rule and the Pre-Sale Availability Rule, to certain current and future personnel. Part VI of the proposed order requires Tiger Direct to maintain copies of all such written instructions, as well as copies of warranties and advertising exemplars. Part VII of the proposed order requires Tiger Direct to notify the Commission of any changes in its corporate structure that might affect compliance with the order. Part VIII of the order requires Tiger Direct to file with the Commission one or more reports detailing compliance with the order.
Lastly, Part IX of the proposed order provides for termination of the order after twenty (20) years under certain circumstances.
The purpose of this analysis is to facilitate public comment on the proposed order, and it is not intended to constitute an official interpretation of the agreement and proposed order, or to modify any of their terms.