September 15, 2022
In the past year, the FTC has promoted consumers’ so-called “right to repair” through enforcement actions and policy statements. In particular, the FTC has focused on the “Anti-Tying Rule” of the Magnuson-Moss Warranty Act (the “MMWA”), which limits manufacturers’ ability to steer consumers to manufacturer-affiliated repair shops.i The FTC’s measures dovetail with legislation in many states intended to increase consumers’ ability to seek repairs from third-party servicers, or to perform the repairs themselves. Plaintiffs’ firms have taken notice, filing a spate of class actions regarding purported violations of the Anti-Tying Rule. Those same firms have also filed a spate of consumer class actions against retailers alleging violations of the MMWA’s “Pre-Sale Availability Rule.” Manufacturers and retailers should confirm they are complying with the MMWA and state law. They can take some simple steps to reduce their litigation risk.
MMWA Section 2302(c) states in part: “No warrantor of a consumer product may condition his written or implied warranty of such product on the consumer’s using, in connection with such product, any article or service (other than article or service provided without charge under the terms of the warranty) which is identified by brand, trade, or corporate name.”ii The FTC has promulgated a regulation implementing this provision that specifically prohibits product warranties that become void if the consumer seeks a repair from a non-authorized servicer, or uses parts not manufactured by the warrantor.iii In recent months, the FTC has ordered two major manufacturers to change their product warranties in order to comply with these provisions.iv On June 23, 2022, the FTC filed administrative complaints against Harley-Davidson and MWE Investments LLC (manufacturer of Westinghouse products) claiming that the companies’ warranties “included terms that conveyed that the warranty is void if customers use independent dealers for parts or repairs.”v Since the Commission filed its complaints, both manufacturers have entered into a consent decree to change their warranty practices.
Numerous putative consumer class actions have now been filed in federal and state courts against major product manufacturers. Plaintiffs allege that they are prevented from utilizing a third party repair service for their products because doing so would void their product’s warranty, thereby constituting a violation of the MMWA’s Anti-Tying provision. In some cases, plaintiffs also assert supplemental state law claims for violations of consumer protections statutes in addition to federal claims under the MMWA.
The risk of litigation and agency action is, of course, highly dependent on the warranty language itself. Manufacturers can strengthen their position that their warranties are not, in fact, violative of the MMWA. For example, if their name-brand repair service is offered to the customer for free under the warranty, then their warranty does not violate the MMWA’s Anti-Tying provision.vi The FTC has also interpreted the MMWA to not preclude a warrantor from expressly excluding liability for defects or damage caused by articles or services not provided by the manufacturer.vii Even if product warranties are not actually unlawfully conditional under the MMWA, however, all manufacturers should be aware that the FTC has interpreted the MMWA to prohibit product warranties that even imply they are conditioned on the exclusive use of brand-name repair service or parts.viii
Retailers, like manufacturers, have seen a deluge of consumer class actions alleging violations of the MMWA. Unlike the suits against manufacturers, these are premised upon retailers’ alleged failure to meet their obligations under the Pre-Sale Availability Rule. The Rule requires: “the seller of a consumer product with a written warranty [to] make a text of the warranty readily available for examination by the prospective buyer by: (1) Displaying it in close proximity to the warranted product … or (2) Furnishing it upon request prior to sale … and placing signs reasonably calculated to elicit the prospective buyer's attention in prominent locations in the store or department advising such prospective buyers of the availability of warranties upon request.”ix Warrantors, of course, have a corresponding obligation to provide retailers with the warranty materials necessary for retailers to comply.x Plaintiffs in these suits allege that retailers are failing to make product warranties available to consumers, thereby violating the MMWA.
In order to reduce the risk of frivolous litigation, consumer product manufacturers should carefully review their product warranties to ensure that they comply with the MMWA. The FTC’s 2021 Report, Nixing the Fix: An FTC Report to Congress on Repair Restrictions, provides an in-depth explanation of the most recent rules, interpretations, and FTC guidance regarding the MMWA. In addition, retailers should carefully review their business practices to ensure that manufacturer warranties for consumer products are available to consumers pursuant to the MMWA.
If you have any questions concerning whether your company’s product warranties are in compliance with the MMWA or FTC Rules, please contact the members of the Consumer Financial Compliance and Litigation practice group at Hunton Andrews Kurth.
i 15 U.S.C. §§ 2301-2312.
ii Id. § 2302(c).
iii 16 C.F.R. § 700.10.
vi 16 C.F.R. § 700.10(a).
vii 16 C.F.R. § 700.10(c).
viii FTC, Nixing the Fix: An FTC Report to Congress on Repair Restrictions, May 2021 (available at https://www.ftc.gov/system/files/documents/reports/nixing-fix-ftc-report-congress-repair-restrictions/nixing_the_fix_report_final_5521_630pm-508_002.pdf) (last accessed August 12, 2022).
ix 16 C.F.R. § 702.3.