President Signs E-Warranty Statute Amendment

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In a rare display of bipartisanship, the U.S. Congress has passed and, on September 24, 2015, President Obama signed, an amendment of the federal statute regulating warranties on consumer products, the Magnuson-Moss Warranty – Federal Trade Commission Improvement Act. The E-Warranty Act of 2015 permits disclosure of consumer warranty terms via the “manufacturer’s” Internet website.

The current Federal Trade Commission Pre-Sale Availability Rule generally requires that the full text of any written warranty on a consumer product be made available before purchase, at the point-of-purchase. This requirement is implemented through separate sets of duties for warrantors and retail sellers. The current rule requires that warranties on product sales made at brick-and-mortar outlets, in door-to-door transactions, or via physical catalogs be disclosed in printed formats, e.g., on packaging, in the catalogs, and so forth.

Precisely what conditions will apply to the use of the greater flexibility granted in this legislation is unclear; the FTC is given one year from enactment of the amendment to harmonize its Pre-Sale Availability Rule with the amendment. However, the amendment itself includes two qualifications:

1. Consumer warranty text must still be made available in response to consumer request made via a phone number, address, etc., provided by the warrantor to the consumer.

2. At the “point-of-purchase” (which, for door-to-door sales, will be the consumer’s home), the electronic disclosure alternative may be used only if the seller provides a means (e.g., a computer terminal, a tablet) on which the warranty can be pulled up.

Given the uncertainty noted, warrantors and retail sellers may wish to defer making changes to their procedures for disclosing consumer warranties until the FTC has issued its conforming rule(s).

The amendment is unlikely to have a significant impact on the duties of Internet sellers, as less formal FTC pronouncements already permit the disclosure of consumer warranty text electronically on Internet sales. It is notable, however, that the FTC last year warned Internet sellers that it believes there to be widespread non-compliance with its Pre-Sale Availability Rule by Internet sellers, and that it intends to focus enforcement efforts on that industry. (Each violation of an FTC rule is punishable by a statutory fine).

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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