Legislation Aims to Bring Product Warranties Into the Internet Age

The process of “checking the fine print” always has been an important aspect of consumer behavior. For product manufacturers, providing important transaction information to consumers also has been a challenging part of business operations.

Take the fine print of warranty information, for example. In the world of e-commerce, how should sellers and buyers approach the issue of an appropriate way to transmit warranty information vital to concluding a sale?

The U.S. Senate has addressed that issue by passing S. 1359, the E-Warranty Act of 2015. The bill, which was approved in the Senate last month, is designed to facilitate the use of electronic media for product warranties covered by Federal Trade Commission regulations.

The House Energy and Commerce subcommittee on commerce, manufacturing and trade later in the month advanced a similar e-warranty bill by a unanimous vote.

The sponsors of the Senate bill, U.S. Sens. Deb Fischer, R-Neb., and Bill Nelson, D-Fla., say the measure would modernize current requirements and allow manufacturers to save paper and printing costs by posting warranties online.

“This bipartisan bill would provide manufacturers with the option of posting their warranty information online and encourage greater flexibility for job creators, while offering better tools for consumers. The world is changing, and our technology is getting smaller, faster and more efficient. Our laws must follow suit,” said Fischer.

“We’re one step closer to giving consumers and businesses the ability to take advantage of new and improving online technologies to help with their commerce,” observed Nelson.

Existing Regulations Are Outmoded

There are no federal mandates that require manufacturers to provide warranties for their products, according to the Senate’s report on the bill.

However, if manufacturers choose to provide warranties, the Magnuson-Moss Warranty Act and the FTC’s warranty rules “require sellers and warrantors to disclose specific terms and to make the terms available to consumers prior to sale,” the report says.

However, “the FTC has not updated these provisions to reflect modern methods of communication,” it continues.

Under current regulations, manufacturers are able to comply with presale requirements by providing materials to retailers in a number of ways, including the following: providing copies of the warranties to be placed in a binder; providing warranty stickers, tags, signs or posters; or printing warranties on product packaging.

The FTC has interpreted the presale rule to permit the use of electronic versions of consumer product warranties at the point of sale, on CDs and DVDs, or on the internal drives of warranted products.

However, manufacturers cannot satisfy the warranty disclosure requirements by making applicable warranty information available “only online,” according to the Senate report.

A “plain reading of the rule contains no mention of electronic warranties satisfying its requirements,” the report says.

An Electronic Fix

The E-Warranty Act of 2015 allows manufacturers and sellers to satisfy applicable warranty obligations by posting warranties online, while retaining consumers’ rights to obtain paper copies at the point of sale or by other means.

Specifically, the bill allows manufacturers to comply with warranty disclosure requirements by “making available such terms in an accessible digital format on the Internet website of the manufacturer of the consumer product in a clear and conspicuous manner.”

In addition manufacturers must meet the following requirements:

• Provide information “with respect to how to obtain and review such terms” by indicating on the product, packaging or in a product manual “the Internet website of the manufacturer where such terms can be obtained and reviewed.”
• Provide the phone number of the manufacturer, the postal mailing address of the manufacturer, or another reasonable non-Internet based means of contacting the manufacturer to obtain and review such terms.

The FTC would have one year to revise its rules to be in compliance with the provisions of the bill.

Support From Industry

Industry groups were quick to support the legislation.

“The E-Warranty Act is a win-win for consumers and producers,” said Scott Belcher, CEO of the Telecommunications Industry Association.

The legislation is a “common sense” approach to the issue “to better communicate product warranty information to consumers in an increasingly digital world,” said James Reid, senior vice president of government affairs at TIA.

“No matter if a consumer is making an online purchase or buying from a brick-and-mortar retailer, this bill will ease access to important information while improving production efficiencies for manufacturers. TIA is fully supportive of the E-Warranty Act as passed by the Senate and urges the House to move quickly to pass this important bill,” he told the E-Commerce Times.

The bill “modernizes warranty requirements by directing the Federal Trade Commission to give manufacturers the option to meet legal notice requirements by posting warranties on their companies’ websites,” noted Veronica O’Connell, vice president of congressional affairs at the Consumer Electronics Association.

The legislation “will reduce paper usage, help our environment, and provide easy access to product warranties,” she told the E-Commerce Times.

The bill’s impact likely would not be limited to online purchases.

“If required, the prepurchase notice would continue to be provided online for online sales,” said O’Connell.

With advances in technology, consumers now can “access warranty information electronically, either directly on a device or through a manufacturer’s website,” wrote Meredith Attwell Baker, president of CTIA — The Wireless Association, in a letter sent earlier this year to the bill’s sponsors.

“Because the Federal Trade Commission rules do not specify that the Magnuson-Moss Act’s ‘written’ warranty requirements can be satisfied electronically, the E-Warranty Act appropriately clarifies the law and requires the FTC to amend its rules accordingly, she added.

The FTC is “pleased by the Senate’s efforts to make warranty information more accessible for all consumers,” it says in a statement spokesperson Frank Dorman provided to the E-Commerce Times. END

The FTC is dealing with a range of issues regarding electronic disclosures and online consumer activities.