FTC Released a Guide - A Businessperson's Guide to Federal Warranty Law (December 2006)

Businessperson's Guide to Federal Warranty Law

December 2006

The Federal Trade Commission (“FTC”) released a Businessperson's Guide to Federal Warranty Law, that provides essential insights into the Magnuson-Moss Warranty Act, which governs warranties for consumer products in the U.S. This guide highlights key aspects of the law, including its scope, the distinctions between implied and express warranties, and the obligations of businesses to ensure consumer protection. The key concepts are as follows:

1. Warranties Defined. Warranties are promises from sellers regarding product quality. They fall into two categories:

   • Implied Warranties. Unwritten guarantees mandated by state law, such as the implied warranty of merchantability, which ensures products function as expected.

   • Express Warranties. Explicitly stated promises, conveyed through advertisements or written documents, which the Magnuson-Moss Act regulates.

2. Legal Obligations. The Act requires sellers to clearly communicate warranty terms and prohibits disclaiming implied warranties when a written warranty is offered. Selling products "as is" does not exempt sellers from liability for defects.

3. Consumer Rights. The Magnuson-Moss Act aims to protect consumers by ensuring they receive comprehensive warranty information, fostering competition based on warranty quality, and facilitating dispute resolution.

4. Requirements for Warrantors.

5. Warranties must be labeled as "full" or "limited."

6. Clear, understandable information about warranty coverage must be provided.

7. Warranties must be accessible to consumers before purchase.

8. Prohibitions. The Act restricts misleading warranty terms, tie-in sales provisions (which require purchase of specific items to maintain coverage), and deceptive practices regarding warranty claims.

9. Dispute Resolution. The Act promotes informal dispute resolution mechanisms, allowing consumers to address warranty issues before litigation. Warrantors may require the use of these mechanisms.

10. Consumer Lawsuits. It simplifies the process for consumers to sue for warranty breaches, allowing them to recover court costs and attorney fees, and supports class action lawsuits for significant consumer cases.

11. Pre-Sale Availability. Warranties for products over $15 must be available for consumer review before purchase, ensuring informed decision-making.

12. Advertising Guidelines. Advertisements must avoid deceptive claims and inform consumers about warranty availability, particularly for satisfaction guarantees and lifetime warranties.

13. Service Contracts. These are separate agreements offering additional protection, with distinct disclosure requirements that do not involve "full" or "limited" titles.

Overall, the FTC emphasized that the guide serves as a foundational resource for businesses to navigate federal warranty laws while emphasizing the need for transparency and fairness in warranty practices, thus protecting consumer rights under the Magnuson-Moss Warranty Act. Business owners are encouraged to consult legal experts regarding state-specific regulations, which can differ significantly from federal guidelines.

For more information, see here:  https://www.ftc.gov/tips-advice/business-center/guidance/businesspersons-guide-federal-warranty-law

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