The Federal Trade Commission (FTC) has taken action to address the market realities of automakers’ statements regarding the use of branded products and services. In a soon-to-be published final action, FTC updates its interpretation of the Magnuson Moss Warranty Act (MMWA)’s prohibition against tie-in sales to officially include “warranty language that implies a consumer acting reasonably in the circumstances that warranty coverage requires the consumer’s purchase of an article or service identified by brand, trade or corporate name is similarly deceptive.
“For example, a provision in the warranty such as, ‘use only an authorized ‘ABC’ dealer’ or ‘use only ‘ABC’ replacement parts,’ is prohibited where the service or parts are not provided free of charge pursuant to the warranty.”
This represents a significant departure from prior interpretation that essentially recognized nothing short of a manufacturer prefacing tie-in sales requirements with “this warranty is void if you don’t use our branded products and/or services” — a phrase savvy automakers found many ways to dance around.
In addition, FTC is clarifying that neither service bulletins nor mere managerial contentions are enough to deny warranty coverage over the use of non-branded products and services:
“Simply providing a consumer with a copy of a service bulletin or denying coverage with a bald, unsupported statement that the ‘unauthorized’ parts or service caused the vehicle damage would be insufficient under the Commission’s existing Interpretations. Warrantors must have a basis for warranty denials by demonstrating to consumers that the use of ‘unauthorized’ parts or service caused the defect or damage to the vehicle. Further, denying warranty coverage by simply pointing to a service bulletin that informs consumers only ‘authorized’ parts or service should be used to maintain warranty coverage may also violate the MMWA’s proscriptions against tying. Therefore, whether the demonstration is in writing or oral, a warrantor denying warranty coverage due to the use of ‘unauthorized’ parts or service must show that such use caused the defect or damage to the vehicle,” according to the Final Action Concerning Review of Interpretations of Magnuson-Moss Warranty Act; FTC Prepublication Document at 17.
“After 12 years of advocating for more effective MMWA enforcement policies, we in the fast lube industry are both gratified and relieved the FTC has made this historic shift to protect consumers and level the aftermarket paying field,” said Len Minco, AOCA president.