With respect to warranties, up for review are the three warranty rules, the FTC’s interpretations of those rules, and its guidance on the advertising of warranties and guarantees. The warranty rules govern warranty disclosures, require that warranties be made available to consumers prior to sale, and lay out the standards for any informal dispute process that consumers must utilize prior to filing a suit for breach of warranty. The rule review has potential implications for a wide variety of retailers and manufacturers as the warranty rules have broad application – covering warranties on automobiles, personal computers, mobile devices, appliances, and a host of other consumer products. One topic that may get some attention in the rule review is whether a manufacturer’s warranty must cover damage caused by the use of non-original manufacturer parts. Manufacturers’ warranties often refuse to cover damage resulting from the use of these “aftermarket” parts and questions arise as to whether this practice is permissible under the warranty rules, or, conversely, whether it operates as an illegal “tying arrangement.” Although the FTC has addressed such questions through advisory opinions, the current interpretations might benefit from some updating to provide additional guidance on this and other “tying” scenarios. The FTC’s request for comment has questions specifically tailored to this issue.
In addition, as with other FTC regulations, the increased use of e-commerce and electronic devices is likely to play a role in this review as well. One of the warranty rules up for review requires that retailers make warranties available to consumers before they purchase a product. The current rule does not contemplate whether making warranty documents available electronically is permitted. The rule was promulgated in 1975 and contemplates only brick and mortar, catalog, and door-to-door sales. It does not have rules specifically geared to online sales nor does it otherwise contemplate electronic compliance. Again, although the FTC staff has issued opinions on similar topics and has issued guidance about online disclosures in general, retailers and manufacturers would surely benefit from more direction within the confines of the rule itself. The agency’s request for comment specifically solicits input on this issue as well. Finally, it will be interesting to see whether the FTC will use the review as an opportunity to expand the rule to cover so-called “extended warranties,” or whether it will continue to use Section 5 as its primary enforcement tool. Comments on the warranty rules are due October 24, 2011.
Another rule up for review is the “Unavailability Rule,” which prohibits grocery stores and other food retailers from advertising products at a given price unless the products are in stock and available during the stated period of the advertisement. Otherwise, the ad must disclose that “supplies are limited” or similar language to that effect. Among other things, the FTC seeks comment on whether the rule, which was last updated in 1989, continues to be effective, whether it should be expanded to cover other types of retail stores, or whether it should be amended to account for changes in technology. Comments on this rule are due October 19, 2011.
After the close of the comment period, the agency will review the comments, and, based on the feedback, determine whether to modify or repeal the rule to address the concerns raised, to reflect changes in the marketplace, or to reduce undue regulatory burden. It may also hold public workshops or roundtables if it determines that further input is needed.
- Amy Mudge and Allyson Himelfarb