FTC proposes amendments to Magnuson-Moss

The FTC has released, and is seeking comments to, its proposed amendments to the Disclosure Rule and Pre-Sale Availability Rule that were previously adopted by the FTC in effectuating the Magnuson-Moss Warranty Act ("MMWA") (15 U.S.C. § 2301 et seq.), the federal law governing warranties on consumer products. These amendments come in response to the E-Warranty Act of 2015 (Pub. L. No. 114-51), which was signed into law by President Obama in September 2015, and required the FTC to revise its rules within one year of enactment to incorporate the required changes set forth in the E-Warranty Act.  

Under the current iteration of the Disclosure Rule (16 C.F.R. Part 701), written warranties for consumer products costing more than $15 must contain specific information in a single, easy-to-read document. Under the Pre-Sale Availability Rule (16 C.F.R. Part 702), the law imposes a duty on sellers and warrantors to make warranties available to consumers before buying. This latter mandate is generally met by displaying the warranty terms in close proximity to the warranted product, furnishing them upon request prior to sale, or posting them in a catalog in close conjunction to the warranted product.

The E-Warranty Act and the FTC's proposed amendments represent a significant modernization of the MMWA. The FTC's proposed amendments to the Pre-Sale Availability Rule would allow warrantors to post warranty terms on their websites, as long as they also provide a non-Internet based method for consumers to obtain them. If a manufacturer chooses to put warranty disclosures online, it would have to provide the website address on the product's packaging or in its manual. When a warrantor has chosen the online method of disseminating the warranty terms, the FTC's proposed amendments would allow sellers the additional option of using an electronic method to make those warranty terms available to consumers at the point of sale.  

Regarding the Disclosure Rule, the FTC proposes to amend the definition of "on the face of the warranty" to clarify that in the context of a warranty on a website or displayed electronically, the phrase means "in close proximity to the location where the warranty text begins." For instance, limitations on the duration of implied warranties must be "prominently displayed on the face of the warranty." 15 U.S.C. § 2308; 16 C.F.R. § 701.3(a)(7). Accordingly, under the proposed rule amendment, a warrantor who chooses to post its warranty terms on its website and limit the duration of implied warranties would have to include such language "in close proximity to the location where the warranty text begins."  

Comments to the FTC's proposed rule amendments are due by June 17, 2016.

While these rule amendments, if effectuated, will give sellers and warrantors more flexibility and likely reduce the costs associated with warranty disclosures, adopting an online or electronic-based warranty disclosure will require consideration and planning before making the switch.  For example, having an online warranty disclosure allows for revisions to be made quickly and efficiently, but each iteration that is posted publicly should be preserved, so that the applicable warranty disclosures and disclaimers can be obtained in the event warranty claims arise.  Similarly, each iteration should include its effective/posting date, so that the applicable warranty disclosures and disclaimers, at the time of sale, can be obtained.