Pub. 56 2015-2016 Issue 1

36 Magnuson-Moss Warranty Act In 1975, Congress passed the Magnuson-Moss Warranty Act (Act) governing warranties on consumer products. 40 If offering a warranted consumer product for sale, the Act requires a manufac- turer and a seller of a consumer product to provide the purchaser with information about the warranty coverage. The Act also requires that a written warranty on a consumer product that costs more than $15 be available to a consumer before they buy, a/k/a the “Pre-Sale Availability Rule.” 41 As a motor vehicle dealer selling to consumers, the written warranty must be available to a prospective purchaser by displaying it in close proximity to the vehicle or by furnishing a copy upon re- quest prior to sale and posting prominent signs to let a customer know that a warranty can be reviewed upon request. For an online sale, the requirement to make a warranty available at the point of purchase can be accomplished by using a clearly-labeled hyperlink, in close proximity to the description of the warranted product, such as “get warranty information here” to lead to the full text of the warranty. 42 The advertising of a warranty is also within the scope of Section 5 of the FTCAct prohibiting “unfair or deceptive acts or practices in or affecting commerce.” The FTC’s enforcement of the Act was recently brought to bear in an agreement with BMW and its MINI Division. 43 BMW of- fered a 4-year or 50,000 mile warranty on its MINI Cooper. The vehicle owner was required to take care of routine maintenance for warranty coverage. The routine maintenance, such as an oil change, was required to be performed by a MINI dealer and the use of MINI parts. 44 The maintenance was free at a BMW dealership only for the first three years of ownership–leaving the owner to pay for the work for the fourth year or suffer a void warranty. According to the complaint, there is one year during the warranty period in which a consumer must pay for their maintenance and repair work while being required to use a MINI dealer and MINI parts to retain warranty coverage. The Consent Order prohibits BMW, in connection with the sale of any MINI good or service, from stating that in order to operate safely or maintain value, the vehicle must have maintenance work performed by a MINI dealer. In addition, BMW must notify each affected consumer that their warranty is not conditioned on repair work being performed by a MINI dealer or on the use of a genuine MINI part. The Act generally does not allow “tie-in sales” requiring a purchaser of the warranted product to buy an item or service from a particular company to use with the warranted product in order to be eligible to receive a remedy under the warranty. A “tie-in” may be included in the warranty if it is demonstrated to the FTC that the product will not work properly without a specified item or service. TheMagnuson-MossWarranty Act ensures a consumer may be informed about a product’s warranty prior to purchase; promotes competition on the basis of warranty coverage; and strengthens incentives for performance. State Action Doctrine The FTC takes umbrage regarding the “state action” doctrine. In a recent speech by FTCCommissioner Maureen K. Ohlhausen, given at “The Antitrust Enforcement Symposium 2015, The Jour- nal of Antitrust Enforcement” in Oxford, England, June 27, 2015, she allows: . . .the agency’s work rests on two predicates: First, when a state government imposes a public restraint it must take full political accountability for it and demonstrate a clear public intent to supplant competition with regulation. Second, a free market economy with a robust competition enforcement regime generates greater consumer welfare than a system of government- directed industrial policy that principally favors entrenched or well-connected interests. The Commissioner continues in her remarks by panning “state licensure requirements to protect local businesses at the expense of free market competition. Finding the right boundary between federal antitrust enforcement and these state and local laws that are often motivated by industrial policy or protectionism is one of the most important competition law challenges being tackled by the FTC right now.” In the Commissioner’s opinion, state action immunity: . . .should only displace competition in situations where the state is willing to stand accountable for its policy–that is, where the state is doing more than just attempting to broadly disregard the federal antitrust laws. The agency has also been advocating against restrictive state laws and licensing requirements that unjustifiably protect inefficient local incumbents. . . Her remarks discuss a recent case upholding the FTC’s advo- cacy against state action by the North Carolina Board of Dental Examiners. In this case, the FTC sued the dental board alleging that its dentist-members colluded to exclude non-dentists from competing with dentists in teeth whitening services. The dental board determined that the service was the practice of dentistry and informed the non-dentist providers that they were unlawfully practicing dentistry without a license and to cease and desist. The FTC alleged that the dental board’s action excluding non- dentists is an anti-competitive and unfair method of competition under the Federal Trade Commission Act. An administrative law judge denied the dental board’s state-action immunity argument. The FTC sustained that ruling reasoning that even if the dental board acted pursuant to a state policy to displace competition, the dental board must be actively supervised by the State of North Carolina to claim immunity. The Supreme Court held that a state board that is controlled by decision-makers who are active market participants in the oc- cupation that the board regulates can invoke state-action antitrust immunity only if it is subject to active supervision by the State. 45 Here, the dental board did not receive active supervision of its anti-competitive conduct. FTC Commissioner Ohlhausen also mentions the automo- bile industry and distribution statutes that prohibit the sale of vehicles directly by the manufacturer to a consumer: These laws were originally intended to protect both the distributors of cars  FTC — CONTINUED ON PAGE 38  FTC — CONTINUED FROM PAGE 35