Following the momentum of President Biden’s sweeping competition executive order, the FTC now wants in on the action. In a unanimous vote, the Commission approved to adopt a policy statement calling for more aggressive enforcement against manufacturer restrictions that prevent consumers and businesses from repairing their own products. The policy statement also pushes for more enforcement of the Magnuson-Moss Warranty Act, which restricts a company from tying a warranty to the use of a specific service provider.

This policy statement flows from a two year process. As we have previously reported, in 2019, the FTC called for public comment and empirical research on repair restrictions, and in May 2021, the FTC released its “Nixing the Fix” report to Congress. Based on those results, the FTC issued this statement that it will now “prioritize investigations into unlawful repair restrictions under relevant statutes such as the Magnuson-Moss Warranty Act and Section 5 of the FTC Act.”

In her prepared remarks before the vote, Chair Lina Khan stated that repair restrictions “can significantly raise costs for consumers, stifle innovation, close off business opportunity for independent repair shops, create unnecessary electronic waste, delay timely repairs, and undermine resiliency.” She expressed that the FTC “has a range of tools it can use to root out unlawful repair restrictions” and called on the public to submit complaints about potential violations.

Commissioner Chopra echoed Khan’s sentiment and recommended that the Commission take steps in addition to reinvigorating enforcement: (1) engage the independent repair community, and conduct a close review on the user experience on; (2) work with other agencies to reform existing procurement policies that allow contractors to block government buyers from self-repair or seeking third-party repair services; and, (3) assist policymakers, including at the state level, to draft Right-to-Repair laws.

All companies offering a product warranty should review its terms, particularly any terms limiting repairs under the warranty. As we are bound to see more activity on the state and federal levels with right to repair legislation and enforcement, we will continue to monitor these developments.

Nixing the FixCompanies watching the “right to repair” legislation proposed in some states should not lose sight of the federal landscape. Last week the FTC released a bipartisan report concluding that there is “scant evidence to support manufacturers’ justifications for repair restrictions.” This will likely add momentum to groups pushing for legislation requiring companies, particularly electronics manufacturers, to create products that people can fix without extra costs or having to purchase special tools.

The report responds to a Congressional directive to report on anticompetitive practices related to repair markets. It reflects information provided in connection with a 2019 FTC workshop on repair restrictions,  empirical data, public responses, and independent research. In the report the FTC states that, as many consumer products have become harder to fix and maintain with repairs requiring specialized tools and other generally inaccessible materials such as proprietary diagnostic software, consumers have very limited choices when their products. The FTC also highlights  the burdens to communities of color and lower incomes, and the amplified effects in connection with COVID-19.

Congress and the FTC have addressed previous concerns about the potential for anticompetitive effects associated with warranty repairs. The Magnuson-Moss Warranty Act contains an anti-tying provision (Section 102(c)) that prohibits a warrantor from conditioning its warranty on the consumer’s using any article or service identified by brand name unless the article or service is provided for free or the warrantor obtains a waiver from the Commission. The FTC believes that a significant number of technological advancements and repair restrictions have “diluted” the anti-tying provision and “steered consumers into manufacturers’ repair networks or to replace products before the end of their useful lives.”

To address these concerns, the Commission will consider “reinvigorated” regulatory and law enforcement options and consumer education.

The FTC also expressed willingness to work closely with Congress on potential legislative options.

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Last week, the House Committee on Energy and Commerce held a Committee Hearing on the Oversight of the Federal Trade Commission. All five Commissioners attended and their message was largely the same: the FTC needs additional rulemaking and civil penalty authority to better protect consumers, especially as it applies to privacy and data security enforcement.

Privacy and data security were a focus of the Chairman’s opening statements, during which he noted that both were a top priority for the agency. Chairman Simons also discussed the need for the FTC to have jurisdiction over nonprofits and common carriers, imploring Congress to pass legislation giving the agency such authority, along with comprehensive data security legislation. Simons noted that the FTC was watching and assessing the EU’s implementation of its comprehensive privacy law, the General Privacy Data Protection Regulation (GDPR), to see how it may apply to the U.S. and he reaffirmed enforcement of the EU-U.S. Privacy Shield, which the FTC has enforced in the past.

Chairman Simons also referenced the hearings that the Commission will be holding in the fall, emphasizing that he anticipated the agency would benefit from participant input on a number of topics—from merger guidelines to privacy and data security. Simons, a former student of Chairman Pitofsky, noted that the agency held similar hearings during the Pitofsky era that resulted in agency action, such as amendments to the merger guidelines. The Chairman noted that he wanted this year’s hearings to be similarly effective in setting the agency’s future agenda. Continue Reading Big Government? FTC Advocates for More Authority in Congressional Hearing

We frequently help clients figure out how to deal with laws that are outdated, so it’s nice to see when one of those laws gets updated to reflect current technology. Last month, President Obama signed the E-Warranty Act of 2015, which is designed to modernize the Magnuson-Moss Warranty Act of 1975.

For 40 years, manufacturers of certain consumer products have been required to include warranty terms on a printed document. (Check your car’s glove compartment, for example.) The new law now permits manufacturers to post warranty information online, instead.  Manufacturers who do that will have to provide a URL to the warranty terms, either on the product, its package, or its manual. They must also provide a non-Internet based method of obtaining the terms, such as a phone number or mailing address.

The FTC’s Rule on Pre-Sale Availability of Written Warranty Terms still requires that written warranties on consumer products costing more than $15 be available to consumers before they buy. Now, this requirement can also be satisfied by providing electronic access to the terms prior to sale.

The new law requires the FTC to revise its rules within one year, so stay tuned for future developments.

The Federal Trade Commission  (“FTC”) announced last week that it reached a settlement with BMW of North America, LLC, (“BMW”) regarding the maintenance and repair warranty that BMW’s MINI Division provided consumers.

Under the Magnuson-Moss Warranty Act (“Act”), a company that provides a warranty cannot condition that warranty on the purchase of parts or services from a particular company.  According to the FTC’s complaint, the MINI Division warranty violated the Act because (1) it was conditioned on whether consumers used genuine MINI parts and dealers to perform maintenance and repair work and (2) there was a charge for the parts and services.

The proposed consent order prohibits BMW from requiring that car owners have maintenance performed by MINI Division dealers or with MINI parts as a condition of the warranty, unless BMW provides the part or service without charge. The agreement also prohibits BMW from indicating that car owners must have maintenance performed by MINI Division dealers or with MINI parts so that their vehicles operate safely or maintain their value.

This is the first auto warranty related enforcement action by the FTC in several years and a reminder to all companies offering a warranty to revisit their terms to ensure they do not impose similar conditions.

Yesterday morning, the House Energy & Commerce Committee’s Subcommittee on Commerce, Manufacturing, and Trade held a hearing, “The FTC at 100: Where Do We Go From Here?”  The Subcommittee, chaired by Rep. Lee Terry (R-NE), questioned the four FTC Commissioners – Chairwoman Ramirez and Commissioners Brill, Ohlhausen, and Wright – about the FTC’s role protecting consumers, focusing in particular on consumer privacy.  At the end of the hearing, Rep. Terry noted that an impressive 22 representatives were present for the hearing.

The Commissioners’ testimony described factors that have contributed to the FTC’s success in recent years, such as the Bureau of Economics’ collection and analysis of data that allows for targeted enforcement.  These data keep the agency attuned to fraud trends and have shifted its focus towards scams targeting vulnerable populations like seniors and military service members and their families.  Additionally, the Commission’s practice of analyzing the impact of its regulations to ensure that they remain cost-effective has resulted in the rescission of 13 trade rules over the last two decades, reducing the regulatory burden on industry.  Rep. Marsha Blackburn (R-TN) noted, however, that it has been almost two years since the FTC first released its request for comments on the Magnuson-Moss Warranty Act Rule review, and the Commission has taken no public action since.  When asked about the review’s anticipated timeline, Chairwoman Ramirez stated that the agency anticipates completing the review in the upcoming year.  While Rep. Terry expressed concern that the Consumer Financial Protection Bureau might be duplicating the FTC’s efforts, Chairwoman Ramirez stated that she had seen no duplication and that the agencies have an agreement to implement a process to ensure that they collaborate effectively and efficiently and without duplication.

Continue Reading Happy Birthday? FTC Commissioners Testify Before House Subcommittee as Commission Turns 100