FTC Clarifies That a Manufacturer-Provided Warranty Cannot Deceptively Imply That Using an Unauthorized Part Will Void the Warranty
The Magnuson-Moss Warranty Act (15 USC 2301, et seq.) (the “Act”) governs consumer product warranties and requires manufacturers and sellers to provide detailed information about the warranty coverage of consumer products. A “consumer product” is broadly defined under the Act to be any personal property that is normally used for personal, family or household purposes. 15 USC 2301(1).
The Act generally prohibits manufacturers from conditioning warranties on the consumer’s use of a replacement product or repair service identified by brand or name, unless the article or service is provided without charge to the consumer. 15 USC 2302(c). In other words, a manufacturer cannot “tie” the effectiveness of the warranty it provides for the product to the use of specified replacement parts or authorized service providers. For example, a warranty providing that it would be void because of the use of services performed by anyone other than an authorized "ABC" dealer or with the use of genuine "ABC" replacement parts is a prohibited warranty under the Act.
As manufacturers tried to soften and draft around these prohibitions, many consumers became confused as to whether using brand name parts or authorized service centers was required. In this 40th anniversary of the Act, the Federal Trade Commission (“FTC”) recently published revisions to its interpretation of the anti-tying prohibition in the Act. The FTC updated interpretation clarifies that the manufacturer-provided warranty cannot deceptively imply that using unauthorized parts will void the warranty, unless the specified parts are provided to the consumer free of charge.1
In light of the new interpretation, we recommend that our clients review and update their warranties for consumer products to comply with the Act. For more detailed information or to address specific questions regarding the Act or the FTC’s interpretation, please contact one of the Taft professionals listed here.
1 Therefore, to clarify the tying prohibition of the Act, part 700.10(c) will be changed as follows:
(c) No warrantor may condition the continued validity of a warranty on the use of only authorized repair service and/or authorized replacement parts for non-warranty service and maintenance (other than an article or service provided without charge under the warranty or unless the warrantor has obtained a waiver pursuant to section 102(c) of the Act, 15 U.S.C. 2302(c)). For example, provisions such as, “This warranty is void if service is performed by anyone other than an authorized ‘ABC’ dealer and all replacement parts must be genuine ‘ABC’ parts,” and the like, are prohibited where the service or parts are not covered by the warranty. These provisions violate the Act in two ways. First, they violate the section 102(c), 15 U.S.C. 2302(c), ban against tying arrangements. Second, such provisions are deceptive under section 110 of the Act, 15 U.S.C. 2310, because a warrantor cannot, as a matter of law, avoid liability under a written warranty where a defect is unrelated to the use by a consumer of “unauthorized” articles or service. In addition, warranty language that implies to a consumer acting reasonably in the circumstances that warranty coverage requires the consumer’s purchase of an article or service identified by brand, trade or corporate name is similarly deceptive. For example, a provision in the warranty such as, “use only an authorized ‘ABC’ dealer” or “use only ‘ABC’ replacement parts,” is prohibited where the service or parts are not provided free of charge pursuant to the warranty. This does not preclude a warrantor from expressly excluding liability for defects or damage caused by “unauthorized” articles or service; nor does it preclude the warrantor from denying liability where the warrantor can demonstrate that the defect or damage was so caused. (Emphasis in original)
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