The FTC has issued warning letters to eight companies, accusing them of possibly imposing restrictions on third-party servicing of products in violation of the Magnusson-Moss Warranty Act (MMWA).
The MMWA is a federal law, administered by the Federal Trade Commission (FTC), directing the FTC to establish disclosure standards for written warranties, specifying standards for "full" warranties, limiting disclaimer of implied warranties, and establishing consumer remedies for breach of warranty or service contract obligations. In recent years, the FTC has actively monitored manufacturer efforts to disclaim warranties in circumstances where the manufacturer attempts to condition the warranty on the use of only "authorized" service centers or OEM parts. The FTC has brought several notable enforcement actions in the subject area. The orders in these cases have also led to class action litigation.
It has been observed by the FTC Staff that requiring consumers to use only authorized service centers and parts can impose higher costs on the consumer with little or no benefit to product safety or longevity. This also has led to a number of states enacting so-called "right to repair laws" that legislatively abrogate any manufacturer warranties that attempt to require consumers to use only authorized repair centers and parts and also require manufacturers to make repair manuals available for free and to supply parts so that consumers can attempt to repair products on their own.
The latest FTC warning letters appear to fall squarely into this pattern, signaling that the FTC is preparing to commence future enforcement of the right-to-repair policies. Among the conduct singled out by the FTC in these eight letters:
- Air purifier manufacturers' warranties purport to condition warranty coverage on replacement of air filters (in one case every 3-4 months!) with the manufacturer's own, OEM filters;
- Electronics makers purport to condition warranty coverage on evidence of removal of stickers that are placed in order detect opening of the product case by the consumer;
- A treadmill maker was accused of conditioning the warranty on use of repair parts made by the manufacturer;
- Two companies were accused of conditioning warranties on absence of signs of "tampering";
- An air filter maker tried to condition the warranty on use of only OEM parts from the manufacturer.
Testifying before a California State agency, FTC Staff said that the FTC had found scant evidence that repair restrictions are necessary to protect repair workers and consumers from injuries that could result from improperly fixing a product or using an improperly repaired product. They also said that the FTC found no empirical evidence to suggest that independent repair shops are no more or less likely than authorized repair shops to compromise or misuse customer data or that providing them access to diagnostics and firmware patches would introduce cybersecurity risks.
We are often asked whether a company can establish that use of only authorized parts or service centers is needed to ensure product safety. Yes, there is a process to establish this, but the exception is narrow and has not been litigated.
FTC Staff recommends that companies seeking to establish this need "seek a waiver" before any enforcement. To obtain the waiver, the applicant would need to show that (1) the warranted product will function properly only if the article or service so identified is used in connection with the warranted product, and (2) such a waiver is in the public interest. Our legal research shows that very few such waivers have ever been granted. Although it would not be impossible, one would not wish to count on making this showing in court during defense of litigation.
Having consumers use only authorized repair and parts:
- Enables the manufacturer to better observe trends in service type or product faults;
- In the case of parts that are relevant to product safety, the manufacturer can ensure only the highest quality substitute parts are used;
- In the case where failure of one part can lead to subsequent failures in a domino-like pattern, it can pay to install better parts earlier in the chain;
- Authorized repair technicians are often better trained and more efficient than independent repair technicians, leading to fewer repeat visits and breakdowns;
- The manufacturer can refine and document repair methods and make them available to its authorized repair technicians (bearing in mind that some state laws require manufacturers to make product repair manuals publicly available).
The FTC Staff believes that manufacturers often favor their own authorized technicians and parts mainly for financial reasons. This might be looked upon unfavorably by Staff, notwithstanding the potential benefits to consumers.
Setting aside litigation, absent having a waiver, there are limits to what a manufacturer can do to steer consumers to use its authorized parts and service. Certainly a manufacturer can run ads that encourage consumers to use the manufacturer's authorized repair centers and parts, applying customary advertising substantiation principles, but the FTC (and states) are increasingly sending signals that conditioning applicability of the warranty on this might lead to enforcement.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.