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Manufacturer’s Corner: FTC Announces Nothing

In 2011, the FTC requested public comment regarding its interpretations, rules, and guides issued under the Magnuson-Moss Warranty Act.  After four years of hard work, the FTC today issued a press release headlined “FTC Will Keep Consumer Product Warranty Rules in Current Form with Some Modifications.”  If you are cynical and skeptical like me, you read that headline as the functional equivalent of “Breaking News: Nothing to See Here” and you raise your eyebrows and assume that there is indeed something to see there.[1]

I have to admit I was a bit disappointed to read through the 55-page final action only to discover the headline is pretty much accurate.  Most of the action is just the FTC explaining why it’s not going to change anything.  But there are a couple of noteworthy changes,[2] and one particularly noteworthy non-change. 

The FTC will amend its interpretations to clarify that implied tying in warranties is prohibited under the Act.  Here’s the new language, and it might be important to you:

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.

Also of note is the Commission’s decision that it still considers mandatory binding arbitration provisions in warranties to violate the Act.  One of the Commissioners dissented from the final action in that respect, observing that two federal courts of appeals have held otherwise.  Thus, the battle on that front continues.

The Commission finally amended its interpretations to clarify that the Act’s service contract provisions apply only to the extent they do not invalidate, impair, or supersede state laws enacted for the purpose of regulating the business of insurance.  As a practical matter, I question whether this change will be of much importance.  But, it’s something to keep an eye on.

Before concluding, I want to commend the Commission for doing something I wish all federal agencies would do: they revised their citation style to reference the US Code rather than the act pursuant to which the rules and interpretations are issued.  That makes life so much easier.  Thank you.

Long story short: if you previously were violating the MMWA, you probably still are; if you previously were not violating the MMWA, you probably still aren’t.

[1] And also, the press release was issued on a Friday right before a holiday weekend.  I mean, all the red flags are there.

[2] It seems to me the phrase “a couple of noteworthy changes” calls for the use of “is” rather than “are.”  MS-Word disagrees with me.  I’m going with Word this time, but I’m not entirely convinced.  Do you have compelling authority either way?  Please send it along.