Look at those lists of the most admired companies in America and what do you notice about them? Great products, for sure. But many also enjoy stellar reputations for service after the sale. When a buyer is confident you’ll stand by your product, you’ve probably created a customer for life. One measure of that is how you honor your obligations under the Magnuson-Moss Warranty Act. The FTC just made a few changes in that area. Is a warranty check-up warranted for your company?
The Magnuson-Moss Warranty Act has been around since 1975 and the FTC has Rules, Guides, and Interpretations in place. What’s the difference between the three? The Rules require certain disclosures, specify that warranty information must be available to consumers before they buy, and set standards for any informal dispute settlement provisions in a warranty. The Guides help advertisers avoid unfair or deceptive practices. The Interpretations offer the FTC’s views on the terms of the statute itself.
But rules and guides shouldn’t stay on the books “just because.” That’s why the FTC systematically reviews them to make sure they’re still doing the job. We asked for your feedback about how the Warranty Act is working in the real world. Based on what we learned, the FTC announced that for the most part, the Rules and Guides will remain in place in their current form. But the Commission made a few tweaks to the Interpretations you should know about.
First, the revised Interpretations clarify that implied tying is prohibited. Specifically, warranty language that leads a consumer to believe that a warranty is conditioned on the use of specified parts or service violates the law. Second, the Interpretations also clarify that the Warranty Act applies to service contracts if they’re regulated by states as insurance – unless the Warranty Act directly conflicts with the state law. Everything else in the Rules, Guides and Interpretations remains the same.
If you haven’t given much thought to warranties in a while, here’s a recap of what else the FTC has been doing. In 2010, FTC staff issued an advisory opinion about warranties on parts from places other than “authorized” dealers. In 2013, a staff survey revealed that some online retailers were selling electronics and appliances without first disclosing complete warranty information. We sent warning letters to companies reminding them to review their sites to make sure they provide complete information about product warranties before consumers make online purchases, as required by the FTC’s Pre-Sale Availability Rule. A few months ago, we announced a proposed settlement with BMW of North America, charging that its MINI division illegally conditioned warranty coverage on use of its parts and services. And we just published new information for car owners about auto warranties and routine maintenance.
If your business offers warranties, here are some steps to consider:
- Read your warranties to see if they prohibit a consumer from using other sellers’ parts or services – or if consumers might read your warranty to imply that. Conform your policies to the just-announced clarifications to the Warranty Act’s Interpretations.
- Check your website to make sure your warranties are posted close to the warranted products.
- Review your warranties and service contracts to ensure all material terms and conditions are disclosed clearly and conspicuously.
- Read the FTC’s brochure, A Businessperson’s Guide to Federal Warranty Law.