17. What is the “Magnuson-Moss Warranty Act”?
The Magnuson-Moss Warranty Act (MMWA) was passed to protect consumers by regulating the use of warranty and disclaimer provisions by merchants. Generally, warranties are the subject of state contract law. The MMWA is a federal law administered by FTC; but it does not limit a consumer’s rights under any other state or federal consumer protection law. The provisions of the MMWA regulate how warranties are presented to purchasers of consumer products. It seeks to ascertain that warranties are presented in a manner that is “readily understood” by the consumer. It applies to full and limited warranties of goods, but warranties on services for repairs are not covered. While merchants are not required to provide a warranty on products, if a warranty is provided it must comply with the MMWA provisions.
• Note: States have consumer protection laws ranging from the application of warranties under state commercial codes to various antifraud statutes.
Requirements of the Act
The FTC requires that a merchant warranting a consumer product disclose, fully and conspicuously, in simple and readily understood language, the terms and conditions of the warranty. The disclosure provisions are most important when a merchant provides a limited warranty, as the consumer must understand all of the limitations associated with the warranty. When a merchant fully warrants a product against defect, the warrantor must comply with the following provisions:
• Repair or Replace – The merchant must fix or replace the product without charge, within a reasonable time. If, after reasonable effort is made to repair the item, the product or a component part still has a defect, the consumer can either receive a refund or free replacement of the item.
• Limitations on Implied Warranties – The merchant may not limit the time period for any implied warranties;
• Limitations on Damages – A merchant may only limit its liability for consequential damages arising from a breach of any written or implied warranties if that disclaimer is conspicuously written on the face of the warranty document.
• Branded Components – A merchant cannot tie the enforceability of warranty provisions to the use of branded parts or materials for repair.
• Exercise Warranty Rights – A merchant may not require that a consumer undertake any steps (other than notification of a defect or nonconformity and return to a place of repair) in order to enforce her warranty rights.
The above standards are not required if a merchant can demonstrate that the cause of a defect or malfunction is due to damage, failure to maintain, or misuse of the product while in the consumer’s possession.
The MMWA allows for civil actions by the FTC or by private parties. A civil action by private parties may seek damages in state or federal court. A federal court action must have an amount of damages in controversy of $50,000 or more or have 100 plaintiffs in a class. A successful plaintiff may recover actual damages, court costs, and attorney’s fees. An action by the FTC generally seeks injunction against a merchant barring the subject practice.
• Note: The Act also prescribes informal dispute-resolution procedures for resolving an alleged breach of warranty and violation of the MMWA. Merchants, in the sales contract, may require mediation or arbitration of disputes regarding full warranties.
• Discussion: Why do you think Congress established a federal standard for contract warranty protection? Do you think that federal law protection beyond state law protection is warranted? Why or why not? Do you think that the mandatory warranty provisions are adequate or excessive? Why or why not?
• Practice Question: Carly purchases a mobile generator to use at parties and tailgates. The dealer represents that the generator comes with a full warranty for 12 months. Just one month after purchasing the generator, Carly is using it to power the lights at a tailgate and it catches on fire. When Carly attempts to return the generator to the dealer, the dealer explains that she must complete extensive paperwork that must be sent to the manufacturer before the warranty is honored. Carly is not happy. What are her rights in this situation?