Use It or Lose It?: FTC Warns Companies Against Conditioning Warranty Coverage on Use of Specified Parts or Services

Locke Lord LLP

On April 10, 2018, the FTC announced that its staff sent warning letters to six major companies that market and sell automobiles, cellular devices, and video gaming systems in the United States. The FTC expressed concerns with the companies’ promotional and warranty materials that require consumers to use specified parts or service providers to keep their warranties intact.  Examples of the potentially problematic provisions include the following statements:

  • The use of [company name] parts is required to keep your . . . manufacturer’s warranties and any extended warranties intact.
  • This warranty shall not apply if this product . . . is used with products not sold or licensed by [company name].
  • This warranty does not apply if this product . . . has had the warranty seal on the [product] altered, defaced, or removed.

As a matter of general policy, the FTC views such provisions as harmful to consumers and small businesses.  Further, as a legal matter, the FTC’s position is that such statements conditioning coverage in this manner are prohibited under the Magnuson-Moss Warranty Act and may be deceptive under the terms of the FTC Act.

The FTC requested the target companies review their promotional and warranty materials to ensure that such materials do not state or imply that warranty coverage is conditioned on the use of specific parts or services.  The FTC also requested that the companies revise their practices to comply with the law.  The FTC will follow-up on its letters by reviewing the companies’ websites after 30 days, and any failure to correct any potential violations may result in future law enforcement action.

While the FTC’s recent warnings focus on the consumer electronics industry, all companies providing consumer products should review and audit their own promotional and warranty materials to confirm that there are no improper warranty-voiding provisions.

A copy of the FTC’s release can be found here.

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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