Source: Sheila A. Millar, Mike Gentine and Anushka N. Rahman, Keller and Heckman LLP
Following its report to Congress in 2021 on what it characterized as unlawful repair restrictions, Nixing the Fix, the Federal Trade Commission (FTC or Commission) announced that it would prioritize investigations into limits on consumer repair rights pursuant to its authority under the Magnuson-Moss Warranty Act (Warranty Act) and Section 5 of the FTC Act. In its subsequent Policy Statement on Repair Restrictions Imposed by Manufacturers and Sellers, the FTC explained that “restricting consumers and businesses from choosing how they repair products can substantially increase the total cost of repairs, generate harmful electronic waste, and unnecessarily increase wait times for repairs.” With three successive enforcement actions, the FTC has signaled that it means business. Companies that restrict consumers’ right to repair goods at the servicer or supplier of their choice may well find themselves the target of an FTC complaint, as Harley-Davidson, Westinghouse, and Weber Stephens recently discovered.
On June 23, 2022, the FTC announced that it had brought a complaint against motorcycle icon Harley-Davidson Motor Company (Harley-Davidson) and generator manufacturer Westinghouse Outdoor Power Equipment/MWE Investments, LLC (MWE). Shortly thereafter, on July 7, 2022, the Commission brought a third complaint on similar grounds against grill company Weber-Stephens (Weber). In each case, the FTC alleged that the company imposed illegal stipulations on consumer repair rights in violation of the Warranty Act § 2302(c), which prohibits a warrantor “from conditioning a warranty for a consumer product that costs more than $5 on the consumer’s use of an article or a service, other than an article or a service provided without charge, which is identified by brand, trade, or corporate name, unless the warrantor applies for and receives a waiver from the Commission.” The FTC also charged the companies with deceptive conduct for representing that their warranties were conditioned on the use of brand products or services in violation of Section 5 of the FTC Act.
Harley Davidson and Westinghouse/MWE Investments
The FTC’s complaint against Harley-Davidson alleges that the company conditions its warranty on the use of genuine Harley-Davidson parts and accessories, in violation of the Warranty Act. For instance, the company’s 2021 warranty tells customers to “insist that your authorized Harley-Davidson dealer uses only genuine Harley-Davidson replacement parts and accessories to keep your Harley-Davidson motorcycle and its limited warranty intact.” The FTC also charged Harley-Davidson with failing to fully explain what is covered or excluded from its warranty, which instead instructs customers to “see an authorized Harley-Davidson dealer for details.”
The FTC complaint against Westinghouse licensor and manufacturer MWE alleges that the company conditioned its warranty for electric and gas generators on using Westinghouse suppliers and service providers for repairs. MWE’s warranty for portable generators, for example, excludes “portable generators that utilize non-MWE Investments, LLC replacement parts” and “products that are altered or modified in a manner not authorized in writing by MWE Investments, LLC.”
The Harley-Davidson consent order and MWE consent order are nearly identical and require each company to cease conditioning warranties on a customer’s use of parts or services affiliated with the brand (unless the parts or services are provided free of charge or the company has been granted a waiver by the FTC under 15 U.S.C. § 2303(c)). The orders require both companies to disclose clearly and conspicuously in their warranties the following statement: “Except as described in ____, taking your products to be serviced by a repair shop that is not affiliated with [company name] will not void this warranty and using third-party parts will not void this warranty.” The companies must notify customers, dealers, and service providers of the revised warranty and publish it on their websites. Further, Harley-Davidson must provide a “clear description and identification of products, or parts, or characteristics, or components or properties covered by the warranty and where necessary for clarification, excluded from the warranty.”
The order does, however, make clear that certain types of product damage to Harley-Davidson vehicles caused by third-party parts or servicers can be excluded from the “warranty coverage for defects or damage caused by unauthorized parts, service, or use of the vehicle, including defects or damage caused by use of aftermarket parts or use of the vehicle for racing or competition, and denial of coverage may be based on installation of parts designed for unauthorized uses of the vehicle, such as a trailer hitch.” The company may also, pursuant to a 2017 Consent Decree between Harley-Davidson and the Environmental Protection Agency, “exclude warranty coverage and deny all warranty claims for functional defects of powertrain components for any Harley-Davidson motorcycle registered in the United States if the vehicle was tuned using a tuning product not covered by a California Air and Resources Board Executive Order.” Importantly, these exclusions allow the company to protect the safety and roadworthiness of their motorcycles and to meet environmental regulatory requirements.
As with Harley-Davidson and MWE, the FTC complaint against Weber charges the company with improperly conditioning warranties on a customer’s use of the company’s servicers and parts. The Weber consent order, like the Harley-Davidson and MWE orders, prohibits the company from imposing warranties that require customers to use the company’s parts and services and requires it to inform purchasers of its gas or electric grills that “using third-party parts will not void this warranty.”
The Commission vote to issue the administrative complaint and to accept the consent agreement was in each case unanimous. FTC Chair Lina Khan and Commissioner Rebecca Slaughter released a joint statement following the Harley-Davidson and MWE orders in which they noted that “the consent orders obtained in these matters bar both manufacturers from continuing the unlawful tying of their warranties to the use of authorized service or parts and prohibit them from misrepresenting any material facts about the warranty. Importantly, the firms are also required to note clearly and conspicuously in public statements that using third-party parts or repair services will not void the warranty. They must also provide customers with clear notice alerting them of the change.”
Imposition of warranty limits on a consumer’s right to repair is a priority issue for the Commission. For some types of products, unauthorized service or installation of unauthorized parts could create potential safety concerns that will have to be carefully evaluated. Businesses should examine their warranties thoroughly for compliance with the Warranty Act requirements and consider the need to seek a waiver or to consider other options.