October 5, 2022
  • October 5, 2022

FTC Prioritizes Consumer Rights Investigations

By on July 28, 2022 0

Following his report to Congress in 2021 on what he called illegal repair restrictions, Deny fix, the Federal Trade Commission (FTC or Commission) has announced that it will prioritize investigations into the limits of consumer redress rights pursuant to its authority under the Magnuson-Moss Warranty Act (Warranty Act) and the Section 5 of the FTC Act. In his sequel Policy Statement on Repair Restrictions Imposed by Manufacturers and Sellers, the FTC explained that “preventing consumers and businesses from choosing how they repair products can significantly increase the total cost of repairs, generate harmful electronic waste, and unnecessarily increase wait times for repairs.” With three successive enforcement actions, the FTC signaled it was serious. Companies that restrict consumers’ right to repair goods at the repairer or supplier of their choice could well find themselves the target of an FTC complaint, as Harley-Davidson, Westinghouse and Weber Stephens recently discovered.

On June 23, 2022, the FTC announced that it had filed a lawsuit against the motorcycle icon Harley-Davidson Motor Company (Harley-Davidson) and generator manufacturer Westinghouse Outdoor Power Equipment/MWE Investments, LLC (MWE). Shortly thereafter, on July 7, 2022, the Commission filed a third complaint on similar grounds against the grill company Weber-Stephens (Weber). In each case, the FTC alleged that the company had imposed unlawful stipulations on consumer redress rights in violation of Warranty Act § 2302(c), which prohibits a guarantor “from making a warranty for a product of consumption that costs more than $5 on the consumer. the use of an item or service, other than an item or service provided free of charge, which is identified by a trademark, trade or company name, unless the guarantor requests and obtains a derogation from the Commission. The FTC also accused the companies of deceptive conduct for stating that their warranties were conditioned on the use of branded products or services in violation of Section 5 of the FTC Act.

Harley Davidson and Westinghouse/MWE Investments

The FTC’s complaint against Harley-Davidson alleges that the company conditions its warranty on the use of genuine Harley-Davidson parts and accessories, in violation of warranty law. For example, the company’s 2021 warranty tells customers “to insist that your authorized Harley-Davidson dealer use only genuine Harley-Davidson replacement parts and accessories to keep your Harley-Davidson motorcycle intact.” and its limited warranty. The FTC also accused Harley-Davidson of failing to fully explain what is covered or excluded from its warranty, which instead instructs customers to “see an authorized Harley-Davidson dealer for details.”

The FTC complaint against Westinghouse licensor and manufacturer MWE alleges that the company conditioned its warranty for electric and gas generators on the use of Westinghouse suppliers and service providers for repairs. MWE’s warranty for portable generators, for example, excludes “portable generators that use non-MWE Investments, LLC replacement parts” and “products that are altered or modified in a manner not authorized in writing by MWE Investments, LLC”.

The Harley-Davidson Consent Order and MWE Consent Order are nearly identical and require each company to cease making warranties conditional on a customer’s use of brand-affiliated parts or services (unless the parts or services are provided free of charge or the company has obtained a waiver from the FTC under 15 USC § 2303(c)). Orders require both companies to clearly and prominently disclose in their warranties the following statement: “Except as described in ____, have your products repaired by a repair facility not affiliated with [company name] will not void this warranty and the use of third party parts will not void this warranty. » Companies should notify customers, dealers and service providers of the revised warranty and post it on their websites. In addition, Harley-Davidson must provide a “clear description and identification of the products, parts, features, components or properties covered by the warranty and, if applicable, for clarification purposes, excluded from the warranty” .

The order, however, clarifies that certain types of product damage to Harley-Davidson vehicles caused by parts or third-party repairers may be excluded of “warranty coverage for defects or damage caused by unauthorized parts, service or use of the vehicle, including defects or damage caused by the use of aftermarket parts or use of the vehicle for racing or competition, and denial of coverage may be based on the installation of parts designed for unauthorized uses of the vehicle, such as a trailer hitch.” The company may also, pursuant to a 2017 consent decree between Harley-Davidson and the Environmental Protection Agency, “exclude warranty coverage and deny all warranty claims for functional defects of powertrain components for any Harley-Davidson motorcycle registered in the United States if the vehicle has been tuned using a tuning product not covered by an executive order of the California Air and Resources Board.It is important to note that these exclusions allow the entr eprise to protect the safety and technical control of its motorcycles and to comply with environmental regulatory requirements.

Weber-Stephens

As with Harley-Davidson and MWE, the FTC complaint against Weber accuses the company of improper packaging warranties on a customer’s use of the company’s repairers and parts. The Weber Consent Ordersuch as the Harley-Davidson and MWE orders, prohibits the company from imposing warranties that require customers to use the company’s parts and services and requires it to inform purchasers of its gas or electric grills that “The use of third party parts will not void this warranty.”

Committee approval

The Commission’s vote in favor of issuing the administrative complaint and accepting the consent agreement was in each case unanimous. FTC Chair Lina Khan and Commissioner Rebecca Slaughter released a joint statement following the Harley-Davidson and MWE orders in which they noted that “the consent orders obtained in these cases prohibit both manufacturers from continuing to unlawfully tie their warranties to the use of authorized services or parts and prohibit them from misrepresent any material fact regarding the warranty. It is important to note that companies are also required to clearly and prominently state in public statements that the use of third-party parts or repair services will not void the warranty. They must also provide customers with a clear notice alerting them to the change.

The imposition of warranty limits on the consumer’s right to repair is a priority issue for the Commission. For some types of products, unauthorized service or installation of unauthorized parts could create potential safety issues that should be carefully evaluated. Companies should carefully review their warranties to ensure they comply with warranty law requirements and consider the need to request a waiver or consider other options.