FTC Revises Magnuson-Moss Regulations to Comply With E-Warranty Act | Practical Law

FTC Revises Magnuson-Moss Regulations to Comply With E-Warranty Act | Practical Law

The Federal Trade Commission (FTC) has adopted amendments to the rules on Disclosure of Written Consumer Product Warranty Terms and Conditions (the Disclosure Rule) and Pre-Sale Availability of Written Warranty Terms (the Pre-Sale Availability Rule). The revised rules give effect to the E-Warranty Act, signed into law in 2015, which amends the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act (Magnuson-Moss Act) by permitting manufacturers to make the terms of a product's warranty exclusively available on its website.

FTC Revises Magnuson-Moss Regulations to Comply With E-Warranty Act

Practical Law Legal Update w-003-3699 (Approx. 4 pages)

FTC Revises Magnuson-Moss Regulations to Comply With E-Warranty Act

by Practical Law Commercial Transactions
Law stated as of 07 Sep 2016 • USA (National/Federal)
The Federal Trade Commission (FTC) has adopted amendments to the rules on Disclosure of Written Consumer Product Warranty Terms and Conditions (the Disclosure Rule) and Pre-Sale Availability of Written Warranty Terms (the Pre-Sale Availability Rule). The revised rules give effect to the E-Warranty Act, signed into law in 2015, which amends the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act (Magnuson-Moss Act) by permitting manufacturers to make the terms of a product's warranty exclusively available on its website.
On September 6, 2016, the Federal Trade Commission (FTC) announced that it will be adopting amendments to its regulations under the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act (Magnuson-Moss Act). The revisions enact key provisions of the E-Warranty Act, signed into law in September, 2015. (See Legal Update, Obama Signs E-Warranty Act of 2015 Into Law Amending Magnuson-Moss Act).
The E-Warranty Act amended the Magnuson-Moss Act to allow manufacturers and suppliers to satisfy written warranty requirements by making their written warranties accessible online, provided that certain requirements protecting consumers are met. The amendments make changes to the FTC's rules on:
  • Pre-Sale Availability of Written Warranty Terms, also known as the Pre-Sale Availability Rule (16 C.F.R. § 702.1-702.3).
  • Disclosure of Written Consumer Product Warranty Terms and Conditions, also known as the Disclosure Rule (16 C.F.R. § 701.1-701.4).
The new rules will go into effect October 17, 2016.

Revised Rules

Pre-Sale Availability Rule

The Pre-Sale Availability Rule describes methods warrantors and sellers may use to provide warranty terms to consumers prior to sale. The revised rule gives warrantors the option of providing warranty terms in an accessible digital format on the warrantor's website, provided that the warrantor also:
  • Informs consumers of how to obtain warranty terms in a clear and conspicuous manner on the product, its packaging, or its manual, including:
    • the website address where the warranty terms can be reviewed; and
    • the phone number, postal address, or other non-digital means for consumers to request a copy of the warranty terms.
  • Provides a hard copy of the warranty terms promptly and free of charge upon request by the consumer.
  • Ensures warranty terms posted online are clear, conspicuous, and remain accessible to consumers.
  • Sufficiently informs consumers of the warranty terms in a way that allows the consumer to readily identify the terms that apply to the specific warranted product.
(16 C.F.R. § 702.3.)

Disclosure Rule

The Disclosure Rule already required warrantors to disclose any limitation on the duration of implied warranties on the face of the warranty. To comply with the E-Warranty Act, the FTC has revised the definition of "on the face of the warranty" to include an option for a warranty posted online. The new rule allows "on the face of the warranty" to mean any of the following:
  • On the first page of the warranty (where the warranty text begins), if the warranty is printed on one or more sheets of paper, or one or more sides of a single sheet of paper.
  • On the page on which the warranty text begins, if the warranty is printed as part of a larger document, such as a use and care manual.
  • In close proximity to the location where the warranty text begins, if the warranty is on a website or otherwise displayed electronically.
(16 C.F.R § 701.1.)

Practical Implications

The FTC's revised rules provide an alternative means of disclosing warranties to consumers by posting warranties online. Manufacturers and suppliers now have greater flexibility in how they inform consumers of product warranties. However, the underlying principles of the Magnuson-Moss Act still apply. Warrantors must continue to ensure that:
  • Consumers may easily access the warranty terms for a given product, whether digitally or in hard copy.
  • Limitations on the duration of implied warranties are stated on the face of the warranty.
For more information on the Magnuson-Moss Act and consumer warranties, see Practice Note, The Magnuson-Moss Warranty Act for Consumer Goods.