【法律文章】 Warranty Tie-In Generally Not Allowed under the U.S. Federal Warranty Law 消費品保固搭售條款在美國（聯邦）法之限..
A warranty, in general, is a warrantor’s promise on the “integrity of [the] product” and the warrantor’s “commitment to correct problems” if any defect exists in warrantor’s products.[1] Nowadays warranty tie-in (some may call it “warranty tying arrangement”) is not something rare to see. For instance, sometimes we see a “warranty void if removed” sticker placed on a consumer product (or other similar words in the warranty information of a consumer product) warranted by a warrantor.[2] We also have seen warranty provisions with terms which expressly or impliedly tie the warranty coverage to the consumer’s use of authorized replacement or repair (“warranty tie-in provision(s)”),[3] arguably suggesting that the warranty coverage will be void if a consumer has someone other than those authorized by warrantors to repair the purchased products or if a consumer uses a replacement part which has not been authorized by warrantors on the purchased products.[4] Some say that warrantors adopt this practice to maintain their monopoly on the replacement and repair of consumer products sold by warrantors.[5] However, warrantors of consumer products should better avoid employing this practice in the United States (“U.S.”) because the Federal Trade Commission (the “FTC”), as a consumer protection agency enforcing the Federal Trade Commission Act[6] (the “FTC Act”) and the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act[7] (the “Magnuson-Moss Warranty Act”), has long taken the position considering warranty tie-in not allowed under the U.S. laws.[8] An incident which took place earlier this year, in which the FTC sent warning letters to six companies (the “FTC warning letters”),[9] reveals that the FTC will not hesitate to express its concerns over warranty tie-in.[10]
This article discusses the warranty tie-in prohibition under the Magnuson-Moss Warranty Act. The discussion starts with briefing the FTC’s warning letter sent to six recipient companies earlier this year. Next, this article introduces the Magnuson-Moss Warranty Act and some general requirements that a warrantor must meet thereunder before covering the Magnuson-Moss Warranty Act’s prohibition on warranty tie-in. The last session concludes.
I. The FTC Warning Letters
In early April 2018, the FTC sent warning letters to six companies placing these companies on notice that conditioning the warranty coverage of consumer goods on the consumer’s use of specific parts or services is not allowed under the Magnuson-Moss Warranty Act.[11] In the FTC warning letters, the FTC pointed out some warranty-voiding provisions selected from the warranty materials of those six recipient companies, including: (1) provisions suggesting that warranty void if repaired by unauthorized personnel or with unauthorized parts;[12] (2) provisions stating that warranty void if breaking the warranty seals;[13] and (3) provisions indicating that warranty void if the product is used with non-approved accessories.[14] While the FTC carefully avoids alleging that the selected warranty provisions violate the laws, the FTC clearly expresses its concerns over the selected text from the warranty materials of these companies.[15] At the end of the FTC warning letters, the FTC urged these companies to review their written warranty materials, and consider, if necessary, changing their practices to be in line with the Magnuson-Moss Warranty Act’s requirements to avoid FTC enforcement actions.[16]
II. The Magnuson-Moss Warranty Act
In the U.S., the Magnuson-Moss Warranty Act is a landmark consumer protection legislation[17] governing consumer product warranties[18] and providing consumer remedies for breach of warranty on the federal level.[19] The Magnuson-Moss Warranty Act was signed into law on January 4, 1975,[20] and went into effect six months later on July 4, 1975.[21] The U.S. Congress passed the Magnuson-Moss Warranty Act with the intentions of (1) ensuring consumers’ access to complete warranty terms; (2) enabling consumers to compare warranty information prior to their purchase of consumer products; (3) promoting warranty competition among warrantors of consumer products; and (4) encouraging warrantors to completely and timely perform their warranty obligations.[22]
The Magnuson-Moss Warranty Act “applies to sales of consumer products”[23] and sets forth the “minimum federal standards for warranty.”[24] Written warranties[25] offered by a warrantor[26] on a consumer product[27] sold to a consumer[28] fall within the purview of the Magnuson-Moss Warranty Act.[29] However, the Magnuson-Moss Warranty Act “does not require any business to provide a written warranty”[30] on “a consumer product or any of its components.”[31] On the other hand, a business must comply with the Magnuson-Moss Warranty Act if it chooses to offer a written warranty on its consumer product.[32] When offering a written warranty on a consumer product, a warrantor or a seller generally must meet some basic requirements set forth by the Magnuson-Moss Warranty Act and the rules[33] adopted by the FTC, including that (1) a warrantor must identify its warranty on a consumer product costing more than ten dollars ($10)[34] as either “full”[35] or “limited”[36];[37] (2) a warrantor must disclose some required information about the warranty coverage of a consumer product costing more than fifteen dollars ($15) “in a single document in simple and readily understood language;”[38] and (3) a warrantor or a seller must make the warranty information of a consumer product costing more than fifteen dollars ($15) available to the consumers prior to the sale of the consumer products.[39]
The Magnuson-Moss Warranty Act covers warranties on goods, but not warranties on services[40] or oral warranties.[41] Moreover, “warranties on products sold for resale or for commercial purposes” do not fall within the scope of the Magnuson-Moss Act because the Act only applies to “warranties on consumer products.”[42] Furthermore, the Magnuson-Moss Warranty Act (and also the FTC Act) may apply to a company incorporated outside the U.S. (a “foreign company”) when a foreign company’s business practices (1) “cause or are likely to cause reasonably foreseeable injury within the United States,” or (2) “involve material conduct occurring within the United State.”[43]
III. Warranty Tie-In Prohibition
In the FTC warning letters, the FTC expresses its concerns over some warranty-voiding provisions selected from the warranty materials of those recipient companies because those provisions may have suspiciously touched the warranty tie-in prohibition red line of the Magnuson-Moss Warranty Act.[44] Generally speaking, the Magnuson-Moss Warranty Act prohibits (1) using a tie-in sales provision;[45] (2) disclaiming or modifying implied warranties;[46] and (3) offering deceptive warranty terms.[47] Here, a tie-in sales provision refers to provisions, terms or arrangements stating or implying that the warranty coverage of a consumer product offered by a warrantor is conditioned on the using of any article or service “identified by brand, trade or corporate name,”[48] which is the warranty tie-in discussed herein. The warranty tie-in prohibition under the Magnuson-Moss Warranty Act, in short, refers to that the Act prohibits a warrantor from tying the warranty coverage of a consumer product to the consumer’s use of a particular branded article or service.[49] This warranty tie-in prohibition applies to a warranty on any consumer product costing more than five dollars ($5),[50] regardless of whether it is a full, limited or implied warranty.[51]
Under the Magnuson-Moss Warranty Act, a warrantor may condition the warranty coverage of a consumer product on the consumer’s use of a particular branded article or service only if (1) the particular branded article or service is “provided without charge” under warranty; or (2) the FTC grants the warrantor a waiver.[52] The FTC may grant the aforementioned waiver when (1) a warrantor proves that the warranted product(s) will not function properly without a particular branded article or service; and (2) the FTC “finds that such a waiver is in the public interest.”[53] However, commentators pointed out that FTC rarely grants such a waiver.[54] On the other hand, a warrantor may, as noted by the FTC, disclaim warranty coverage for damage or defects caused by the use of any article or service not provided by the warrantor.[55]
In addition to the foregoing, warranty tie-in terms may be considered “deceptive and prohibited” under the Magnuson-Moss Warranty Act,[56] subsequently constituting a violation of Section 5 of the FTC Act.[57] In the FTC warning letters, the FTC highlights that a warranty expressly or impliedly requiring consumers to use only any particular branded article or service is deceptive and prohibited under the Magnuson-Moss Warranty Act.[58] Without a waiver granted by the FTC, a warrantor’s warranty materials claiming that the consumer’s use of unauthorized article or service would void the warranty, as noted by the FTC, is simply baseless.[59] A violation of the Magnuson-Moss Warranty Act, as pointed out by the FTC, will result in violating Section 5 of the FTC Act.[60] The FTC emphasizes that “creat[ing] a false impression that a warranty would be void due to the use of unauthorized parts or service” is prohibited as it constitutes “a deceptive practice under Section 5 of the FTC Act.”[61]
IV. Conclusion
With limited exceptions, warranty tie-in sales, provisions or arrangements are generally not allowed under U.S. federal laws.[62] Warranty tie-in may seem attractive to warrantors of consumer products as they get a chance to exploits their control over the replacement and repair of consumer products they sold.[63] Nevertheless, a warrantor of a consumer product sold in the U.S. should keep in mind that warranty tie-in is generally prohibited under the Magnuson-Moss Warranty Act unless the required branded article or service is provided for free, or the FTC grants a waiver.[64] Foreign companies should not ignore the Magnuson-Moss Warranty Act or the FTC Act because they are subject to these laws (and thus must comply with these laws) as long as their business practices (1) “cause or are likely to cause reasonably foreseeable injury within the United States,” or (2) “involve material conduct occurring within the United States.”[65] For instance, in the FTC warning letters, the FTC reminds two Taiwanese recipient companies that they are subject to the Magnuson-Moss Warranty Act and the FTC Act.[66] Warrantors of consumer products sold in the U.S. should be aware that the FTC does have concerns over warranty tie-in[67] and has taken the position against warranty tie-in for a long time.[68]
This article discusses the warranty tie-in prohibition under the Magnuson-Moss Warranty Act. The discussion starts with briefing the FTC’s warning letter sent to six recipient companies earlier this year. Next, this article introduces the Magnuson-Moss Warranty Act and some general requirements that a warrantor must meet thereunder before covering the Magnuson-Moss Warranty Act’s prohibition on warranty tie-in. The last session concludes.
I. The FTC Warning Letters
In early April 2018, the FTC sent warning letters to six companies placing these companies on notice that conditioning the warranty coverage of consumer goods on the consumer’s use of specific parts or services is not allowed under the Magnuson-Moss Warranty Act.[11] In the FTC warning letters, the FTC pointed out some warranty-voiding provisions selected from the warranty materials of those six recipient companies, including: (1) provisions suggesting that warranty void if repaired by unauthorized personnel or with unauthorized parts;[12] (2) provisions stating that warranty void if breaking the warranty seals;[13] and (3) provisions indicating that warranty void if the product is used with non-approved accessories.[14] While the FTC carefully avoids alleging that the selected warranty provisions violate the laws, the FTC clearly expresses its concerns over the selected text from the warranty materials of these companies.[15] At the end of the FTC warning letters, the FTC urged these companies to review their written warranty materials, and consider, if necessary, changing their practices to be in line with the Magnuson-Moss Warranty Act’s requirements to avoid FTC enforcement actions.[16]
II. The Magnuson-Moss Warranty Act
In the U.S., the Magnuson-Moss Warranty Act is a landmark consumer protection legislation[17] governing consumer product warranties[18] and providing consumer remedies for breach of warranty on the federal level.[19] The Magnuson-Moss Warranty Act was signed into law on January 4, 1975,[20] and went into effect six months later on July 4, 1975.[21] The U.S. Congress passed the Magnuson-Moss Warranty Act with the intentions of (1) ensuring consumers’ access to complete warranty terms; (2) enabling consumers to compare warranty information prior to their purchase of consumer products; (3) promoting warranty competition among warrantors of consumer products; and (4) encouraging warrantors to completely and timely perform their warranty obligations.[22]
The Magnuson-Moss Warranty Act “applies to sales of consumer products”[23] and sets forth the “minimum federal standards for warranty.”[24] Written warranties[25] offered by a warrantor[26] on a consumer product[27] sold to a consumer[28] fall within the purview of the Magnuson-Moss Warranty Act.[29] However, the Magnuson-Moss Warranty Act “does not require any business to provide a written warranty”[30] on “a consumer product or any of its components.”[31] On the other hand, a business must comply with the Magnuson-Moss Warranty Act if it chooses to offer a written warranty on its consumer product.[32] When offering a written warranty on a consumer product, a warrantor or a seller generally must meet some basic requirements set forth by the Magnuson-Moss Warranty Act and the rules[33] adopted by the FTC, including that (1) a warrantor must identify its warranty on a consumer product costing more than ten dollars ($10)[34] as either “full”[35] or “limited”[36];[37] (2) a warrantor must disclose some required information about the warranty coverage of a consumer product costing more than fifteen dollars ($15) “in a single document in simple and readily understood language;”[38] and (3) a warrantor or a seller must make the warranty information of a consumer product costing more than fifteen dollars ($15) available to the consumers prior to the sale of the consumer products.[39]
The Magnuson-Moss Warranty Act covers warranties on goods, but not warranties on services[40] or oral warranties.[41] Moreover, “warranties on products sold for resale or for commercial purposes” do not fall within the scope of the Magnuson-Moss Act because the Act only applies to “warranties on consumer products.”[42] Furthermore, the Magnuson-Moss Warranty Act (and also the FTC Act) may apply to a company incorporated outside the U.S. (a “foreign company”) when a foreign company’s business practices (1) “cause or are likely to cause reasonably foreseeable injury within the United States,” or (2) “involve material conduct occurring within the United State.”[43]
III. Warranty Tie-In Prohibition
In the FTC warning letters, the FTC expresses its concerns over some warranty-voiding provisions selected from the warranty materials of those recipient companies because those provisions may have suspiciously touched the warranty tie-in prohibition red line of the Magnuson-Moss Warranty Act.[44] Generally speaking, the Magnuson-Moss Warranty Act prohibits (1) using a tie-in sales provision;[45] (2) disclaiming or modifying implied warranties;[46] and (3) offering deceptive warranty terms.[47] Here, a tie-in sales provision refers to provisions, terms or arrangements stating or implying that the warranty coverage of a consumer product offered by a warrantor is conditioned on the using of any article or service “identified by brand, trade or corporate name,”[48] which is the warranty tie-in discussed herein. The warranty tie-in prohibition under the Magnuson-Moss Warranty Act, in short, refers to that the Act prohibits a warrantor from tying the warranty coverage of a consumer product to the consumer’s use of a particular branded article or service.[49] This warranty tie-in prohibition applies to a warranty on any consumer product costing more than five dollars ($5),[50] regardless of whether it is a full, limited or implied warranty.[51]
Under the Magnuson-Moss Warranty Act, a warrantor may condition the warranty coverage of a consumer product on the consumer’s use of a particular branded article or service only if (1) the particular branded article or service is “provided without charge” under warranty; or (2) the FTC grants the warrantor a waiver.[52] The FTC may grant the aforementioned waiver when (1) a warrantor proves that the warranted product(s) will not function properly without a particular branded article or service; and (2) the FTC “finds that such a waiver is in the public interest.”[53] However, commentators pointed out that FTC rarely grants such a waiver.[54] On the other hand, a warrantor may, as noted by the FTC, disclaim warranty coverage for damage or defects caused by the use of any article or service not provided by the warrantor.[55]
In addition to the foregoing, warranty tie-in terms may be considered “deceptive and prohibited” under the Magnuson-Moss Warranty Act,[56] subsequently constituting a violation of Section 5 of the FTC Act.[57] In the FTC warning letters, the FTC highlights that a warranty expressly or impliedly requiring consumers to use only any particular branded article or service is deceptive and prohibited under the Magnuson-Moss Warranty Act.[58] Without a waiver granted by the FTC, a warrantor’s warranty materials claiming that the consumer’s use of unauthorized article or service would void the warranty, as noted by the FTC, is simply baseless.[59] A violation of the Magnuson-Moss Warranty Act, as pointed out by the FTC, will result in violating Section 5 of the FTC Act.[60] The FTC emphasizes that “creat[ing] a false impression that a warranty would be void due to the use of unauthorized parts or service” is prohibited as it constitutes “a deceptive practice under Section 5 of the FTC Act.”[61]
IV. Conclusion
With limited exceptions, warranty tie-in sales, provisions or arrangements are generally not allowed under U.S. federal laws.[62] Warranty tie-in may seem attractive to warrantors of consumer products as they get a chance to exploits their control over the replacement and repair of consumer products they sold.[63] Nevertheless, a warrantor of a consumer product sold in the U.S. should keep in mind that warranty tie-in is generally prohibited under the Magnuson-Moss Warranty Act unless the required branded article or service is provided for free, or the FTC grants a waiver.[64] Foreign companies should not ignore the Magnuson-Moss Warranty Act or the FTC Act because they are subject to these laws (and thus must comply with these laws) as long as their business practices (1) “cause or are likely to cause reasonably foreseeable injury within the United States,” or (2) “involve material conduct occurring within the United States.”[65] For instance, in the FTC warning letters, the FTC reminds two Taiwanese recipient companies that they are subject to the Magnuson-Moss Warranty Act and the FTC Act.[66] Warrantors of consumer products sold in the U.S. should be aware that the FTC does have concerns over warranty tie-in[67] and has taken the position against warranty tie-in for a long time.[68]
| This article, including the information contained herein, has been prepared only for educational and general information purposes to contribute to the understanding of the warranty tie-in prohibition under the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act. It does not constitute and is not offered as individual legal advice, legal opinion or any other professional advice on any subject matters covered herein. Please obtain specific legal advice before acting on any information covered herein. While the author makes every attempt to ensure that the information contained herein is accurate, the author disclaims any liability for any omissions or errors that may be contained in this article. |
[1] Federal Trade Commission, The Businessperson’s Guide to Federal Warranty Law, available at: https://www.ftc.gov/tips-advice/business-center/guidance/businesspersons-guide-federal-warranty-law [hereinafter “FTC, Businessperson’s Guide”] (last visited Sept. 14, 2018).
[2] Scott Delacourt, Megan Brown, Tracy Heinzman & Roger Miksad, FTC Releases Text of Warranty Warning Letters; Implications for Device Lifecycle Management, Wiley Rein LLP (May 7, 2018), https://www.wileyrein.com/newsroom-articles-FTCReleasesTextofLettersWarningThatWarranty-VoidingStickersMayViolateFederalLaw.html; Jason Koebler, How Sony, Microsoft, and Other Gadget Makers Violate Federal Warranty Law, Motherboard (June 28, 2016), https://motherboard.vice.com/en_us/article/gv5ddm/warranty-void-if-removed-stickers-are-illegal (last visited Nov. 9, 2018).
[3] Press Release, FTC Staff Warns Companies that It Is Illegal to Condition Warranty Coverage on the Use of Specified Parts or Services, Federal Trade Commission (Apr. 10, 2018), https://www.ftc.gov/news-events/press-releases/2018/04/ftc-staff-warns-companies-it-illegal-condition-warranty-coverage [hereinafter “FTC Press Release”].
[4] Lesley Fair, FTC Staff Sends Warranty Warnings, Federal Trade Commission (Apr. 10, 2018), https://www.ftc.gov/news-events/blogs/business-blog/2018/04/ftc-staff-sends-warranty-warnings (last visited Nov. 9, 2018).
[5] Koebler, supra note 2.
[6] Federal Trade Commission Act, ch. 311, Pub. L. No. 63-203, 38 Stat. 717 (1914) (codified as amended at 15 U.S.C. §§41-51) [hereinafter the “FTC Act”]. With the aim of protecting the marketplace, the United States Congress enacted the FTC Act to prohibit “unfair methods of competition.” Peter C. Ward, Restitution for Consumers under the Federal Trade Commission Act: Good Intentions or Congressional Intentions?, 41 Am. U. L. Rev. 1139, 1141 (1992); Robert L. Rabin, Legitimacy, Discretion, and the Concept of Rights, 92 Yale L.J. 1174, 1177 (1983). Later the Wheeler-Lea Act of 1938 amended the FTC Act and included the FTC Act’s prohibition on “unfair or deceptive acts or practices.” Wheeler-Lea Act, Pub. L. No. 75-447, 52 Stat. 111 (1938) (codified as amended at 15 U.S.C. §§ 41, 44, 45, 52-58). See also Ward, supra note 6, at 1141.
[7] Magnuson-Moss Warranty-Federal Trade Commission Improvement Act, Pub. L. No. 93-637, 88 Stat. 2183 (1975) [hereinafter the “Magnuson-Moss Warranty Act”]. Title 1 of the Magnuson-Moss Warranty Act, codified at 15 U.S.C. §§2301-12 (Supp. IV, 1975), deals with “consumer warranties and service contracts.” Stephen W. Lee, The Magnuson-Moss Warranty Act: Consumer Information and Warranty Regulation, 51 Ind. L.J. 397, 397 n.1 (1976). Title 2 of the Magnuson-Moss Warranty Act, codified at 15 U.S.C. §§ 44-46, 49-50, 52, 56-58 (Supp. IV, 1975), amended the FTC Act. Id.
[8] Fair, supra note 4; Matthew Gault, FTC Says ‘Warranty Void If Removed’ Stickers Are Bullshit, Warns Manufacturers They’re Breaking the Law, Motherboard (Apr. 11, 2018), https://motherboard.vice.com/en_us/article/ne9qdq/warranty-void-if-removed-stickers-illegal-ftc (last visited Nov. 9, 2018); Delacourt et al., supra note 2.
[9] The FTC has released relevant documents regarding these six FTC warning letters under a Freedom of Information Act (the “FOIA”) request, including the full text of these six letters and the FTC’s response to the very FOIA request, on the FTC’s website. FOIA, Frequently Requested Records, Magnuson-Moss Warranty Act, Federal Trade Commission, https://www.ftc.gov/about-ftc/foia/frequently-requested-records/magnuson-moss-warranty-act (last visited Sept. 10, 2018). The full text of these six FTC warning letters is released and available at the foregoing FTC website. Federal Trade Commission, Compliance Warning Re: Magnuson-Moss Warranty Act, https://www.ftc.gov/system/files/documents/foia_requests/Warning-Letters.pdf [hereinafter “FTC Warning Letters”] According to these FTC warning letters, the six companies receiving these FTC warning letters are “ASUSTek Computer Inc.,” “HTC Corporation,” “Hyundai Motor America,” “Microsoft Corporation,” “Nintendo of America Inc.,” and “Sony Computer Entertainment America LLC.” Id. These FTC warning letters hereinafter are sometimes referred to collectively, the “FTC Warning Letters,” or individually, the “ASUSTek Letter,” the “HTC Letter,” the “Hyundai Letter,” the “Microsoft Letter,” the “Nintendo Letter,” or the “Sony Letter,” as the case may be.
[10] Commentators note that this is the first time that the FTC “publicly opined” about the use of warranty-voiding stickers. Delacourt et al., supra note 2.
[11] FTC Press Release, supra note 3; Fair, supra note 4.
[12] ¶4, in the ASUSTek Letter; ¶4, in the HTC Letter; ¶3, in the Hyundai Letter; ¶3, in the Microsoft Letter.
[13] ¶4, in the ASUSTek Letter; ¶4, in the HTC Letter; ¶3, in the Sony Letter.
[14] ¶3, in the Nintendo Letter; ¶3, in the Sony Letter.
[15] FTC Warning Letters, supra note 9. See also Delacourt et al., supra note 2.
[16] ¶5, in the ASUSTek Letter; ¶5, in the HTC Letter; ¶4, in the Hyundai Letter; ¶4, in the Microsoft Letter; ¶4, in the Nintendo Letter; ¶3, in the Sony Letter.
[17] Robert A. Denicola, The Magnuson-Moss Warranty Act: Making Consumer Product Warranty a Federal Case, 44 Fordham L. Rev. 273, 273 (1975); Lee, supra note 7, at 397.
[18] Denicola, supra note 17, at 273; Lee, supra note 7, at 397; Kathleen F. Brickey, The Magnuson-Moss Act - An Analysis of the Efficacy of Federal Warranty Regulation as a Consumer Protection Tool, 18 Santa Clara L. Rev. 73, 80 (1978); FTC, Businessperson’s Guide, supra note 1.
[19] Brickey, supra note 18, at 73.
[20] Lee, supra note 7, at 397.
[21] Denicola, supra note 17, at 273.
[22] FTC, Businessperson’s Guide, supra note 1. See also Brickey, supra note 18, at 79-80; Jonathan A. Eddy, Effects of the Magnuson-Moss Act upon Consumer Product Warranties, 55 N.C. L. Rev. 835, 835, 861-62 (1977); Janet Steverson & Aaron Munter, Then and Now: Reviving the Promise of the Magnuson-Moss Warranty Act, 63 U. Kan. L. Rev. 227, 229 (2015).
[23] William R. Kutner, Consumer Product Warranties Under the Magnuson-Moss Warranty Act, 62 Cornell L. Rev. 738, 738 (1977). See also Denicola, supra note 17, at 276.
[24] Eddy, supra note 22, at 862.
[25] Under the Magnuson-Moss Warranty Act, a “written warranty” refers to “(A) any written affirmation of fact or written promise made in connection with the sale of a consumer product by a supplier to a buyer which relates to the nature of the material or workmanship and affirms or promises that such material or workmanship is defect free or will meet a specified level of performance over a specified period of time, or (B) any undertaking in writing in connection with the sale by a supplier of a consumer product to refund, repair, replace, or take other remedial action with respect to such product in the event that such product fails to meet the specifications set forth in the undertaking,
which written affirmation, promise, or undertaking becomes part of the basis of the bargain between a supplier and a buyer for purposes other than resale of such product.” 15 U.S.C. § 2301(6). It is worth noting that the Magnuson-Moss Warranty Act also deals with “implied warranties” and “service contracts.” Kutner, supra note 23, at 744. Under the Magnuson-Moss Warranty Act, an “implied warranty” refers to “an implied warranty arising under State law (as modified by sections 2308 and 2304(a) of this title) in connection with the sale by a supplier of a consumer product.” 15 U.S.C. § 2301(7). On the other hand, the Magnuson-Moss Warranty Act defines a “service contract” as “a contract in writing to perform, over a fixed period of time or for a specified duration, services relating to the maintenance or repair (or both) of a consumer product.” Id. at (8).
which written affirmation, promise, or undertaking becomes part of the basis of the bargain between a supplier and a buyer for purposes other than resale of such product.” 15 U.S.C. § 2301(6). It is worth noting that the Magnuson-Moss Warranty Act also deals with “implied warranties” and “service contracts.” Kutner, supra note 23, at 744. Under the Magnuson-Moss Warranty Act, an “implied warranty” refers to “an implied warranty arising under State law (as modified by sections 2308 and 2304(a) of this title) in connection with the sale by a supplier of a consumer product.” 15 U.S.C. § 2301(7). On the other hand, the Magnuson-Moss Warranty Act defines a “service contract” as “a contract in writing to perform, over a fixed period of time or for a specified duration, services relating to the maintenance or repair (or both) of a consumer product.” Id. at (8).
[26] Under the Magnuson-Moss Warranty Act, a “warrantor” means “any supplier or other person who gives or offers to give a written warranty or who is or may be obligated under an implied warranty.” 15 U.S.C. § 2301(5). Under the same Act, a “supplier” refers to “any person engaged in the business of making a consumer product directly or indirectly available to consumers.” 15 U.S.C. § 2301(4).
[27] Under the Magnuson-Moss Warranty Act, a “consumer product” means “any tangible personal property which is distributed in commerce and which is normally used for personal, family, or household purposes (including any such property intended to be attached to or installed in any real property without regard to whether it is so attached or installed).” 15 U.S.C. § 2301(1). Under the same Act, “distributed in commerce” refers to “sold in commerce, introduced or delivered for introduction into commerce, or held for sale or distribution after introduction into commerce.” 15 U.S.C. § 2301(13).
[28] Under the Magnuson-Moss Warranty Act, a “consumer” means “a buyer (other than for purposes of resale) of any consumer product, any person to whom such product is transferred during the duration of an implied or written warranty (or service contract) applicable to the product, and any other person who is entitled by the terms of such warranty (or service contract) or under applicable State law to enforce against the warrantor (or service contractor) the obligations of the warranty (or service contract).” 15 U.S.C. § 2301(3).
[29] Denicola, supra note 17, at 275; Brickey, supra note 18, at 81; Curtis R. Reitz, Manufacturers’ Warranties of Consumer Goods, 75 Wash. U. L. Q. 357, 365 n.26 (1997).
[30] FTC, Businessperson’s Guide, supra note 1. See also Kutner, supra note 23, at 748, 766.
[31] 15 U.S.C. § 2302(b)(2).
[32] FTC, Businessperson’s Guide, supra note 1.
[33] In addition to the Magnuson-Moss Warranty Act, the following rules adopted by the FTC under the U.S. Congress’ direction cover further details about what a warrantor or a seller must meet when offering a written warranty on a consumer product:
(1) the Rule on Disclosure of Written Consumer Product Warranty (the “Disclosure Rule”; 16 CFR Part 701), directing what must be disclosed in a written warranty on a consumer product;
(2) the Rule on Pre-Sale Availability of Written Warranty Terms (the “Pre-Sale Availability Rule”; 16 CFR Part 702), directing what term is required to be included in a written warranty on a consumer product available to consumers prior to sale; and
(3) the Rule on Informal Dispute Settlement Procedures (the “Dispute Resolution Rule”; 16 CFR Part 703), providing a dispute settlement mechanism that must be complied if a warrantor requires his customers to use a dispute settlement mechanism before suing under the Magnuson-Moss Warranty Act.
Other than the three aforementioned rules, the Interpretations of Magnuson-Moss Warranty Act (16 CFR Part 700), an interpretive rule issued by the FTC, is also helpful in clarifying some terms of the Magnuson-Moss Warranty Act as well as explaining some provisions of the same Act. 16 CFR Parts 700, 701, 702 & 703; FTC, Businessperson’s Guide, supra note 1.
(1) the Rule on Disclosure of Written Consumer Product Warranty (the “Disclosure Rule”; 16 CFR Part 701), directing what must be disclosed in a written warranty on a consumer product;
(2) the Rule on Pre-Sale Availability of Written Warranty Terms (the “Pre-Sale Availability Rule”; 16 CFR Part 702), directing what term is required to be included in a written warranty on a consumer product available to consumers prior to sale; and
(3) the Rule on Informal Dispute Settlement Procedures (the “Dispute Resolution Rule”; 16 CFR Part 703), providing a dispute settlement mechanism that must be complied if a warrantor requires his customers to use a dispute settlement mechanism before suing under the Magnuson-Moss Warranty Act.
Other than the three aforementioned rules, the Interpretations of Magnuson-Moss Warranty Act (16 CFR Part 700), an interpretive rule issued by the FTC, is also helpful in clarifying some terms of the Magnuson-Moss Warranty Act as well as explaining some provisions of the same Act. 16 CFR Parts 700, 701, 702 & 703; FTC, Businessperson’s Guide, supra note 1.
[34] 15 U.S.C. § 2303(d).
[35] The Magnuson-Moss Warranty Act requires that a “full” warranty must meet the requirements set forth in its Section 104 (15 U.S.C. § 2304). Lee, supra note 7, at 407; Steverson & Munter, supra note 22, at 244. A warranty designated as a “full” warranty will be presumed that the warrantor has “incorporated the provisions of the minimum warranty” set forth by the Magnuson-Moss Warranty Act. Lee, supra note 7, at 408.
[36] Any warranty which does not meet the minimum warranty requirements set forth in Section 104 of the Magnuson-Moss Warranty Act must be designated as a “limited” warranty. Lee, supra note 7, at 407.
[37] 15 U.S.C. § 2303(a).
[38] Id.; 16 CFR 701.3(a).
[39] 15 U.S.C. § 2302(b); 16 CFR 702.3(b).
[41] Denicola, supra note 17, at 275; FTC, Businessperson’s Guide, supra note 1.
[42] FTC, Businessperson’s Guide, supra note 1.
[43] 15 U.S.C. § 2310(b).
[44] FTC Press Release, supra note 3; Fair, supra note 4.
[45] 15 U.S.C. § 2302(c).
[46] 15 U.S.C. § 2308.
[47] 15 U.S.C. § 2310(c) & (d).
[49] 15 U.S.C. § 2302(c). See also Lee, supra note 7, at 411; Stephen P. Safranski & Jeffrey R. Vesel, Warranty Tie-in Sales Provisions Are Generally Illegal, But Could They Also Violate Antitrust Laws?, Recharger Magazine (Sept. 22, 2005), at 54.
[50] 15 U.S.C. § 2302(e).
[51] Denicola, supra note 17, at 293.
[52] 15 U.S.C. § 2302(c).
[53] Id.
[54] Delacourt et al., supra note 2.
[55] FTC, Businessperson’s Guide, supra note 1.
[56] 16 CFR 700.10; 15 U.S.C. § 2310(c).
[57] 15 U.S.C. § 2310(b); 15 U.S.C. § 45(a)(1).
[58] ¶2, in the ASUSTek Letter; ¶2, in the HTC Letter; ¶1, in the Hyundai Letter; ¶1, in the Microsoft Letter; ¶1, in the Nintendo Letter; ¶1, in the Sony Letter.
[59] ¶3, in the ASUSTek Letter; ¶3, in the HTC Letter; ¶2, in the Hyundai Letter; ¶2, in the Microsoft Letter; ¶2, in the Nintendo Letter; ¶2, in the Sony Letter.
[60] ¶2, in the ASUSTek Letter; ¶2, in the HTC Letter; ¶1, in the Hyundai Letter; ¶1, in the Microsoft Letter; ¶1, in the Nintendo Letter; ¶1, in the Sony Letter.
[61] ¶3, in the ASUSTek Letter; ¶3, in the HTC Letter; ¶2, in the Hyundai Letter; ¶2, in the Microsoft Letter; ¶2, in the Nintendo Letter; ¶2, in the Sony Letter.
[62] In addition to violating the Magnuson-Moss Warranty Act and the FTC Act, warranty tie-in sales, provisions or arrangements may have antitrust issues because “[i]llegal tying is a violation of the Sherman Act.” Safranski & Vesel, supra note 49, at 54.
[63] Koebler, supra note 2.
[64] 15 U.S.C. § 2302(c).
[65] 15 U.S.C. § 2310(b).
[66] ¶1, in the ASUSTek Letter; ¶1, in the HTC Letter.
[67] Fair, supra note 4; Gault, supra note 8.
[68] Gault, supra note 8; Delacourt et al., supra note 2.
