Urge Strong Enforcement of the Magnuson-Moss Warranty Act

URGE STRONG ENFORCEMENT OF THE MAGNUSON-MOSS WARRANTY ACT

TIA POSITION PAPER

With new car sales waning, the car companies and their franchised dealers have been pursuing an increasingly aggressive strategy aimed at growing the sales of their original equipment replacement parts and repair services. However, despite calls by TIA and other aftermarket trade groups, the Federal Trade Commission has taken little action to ensure consumers receive accurate information regarding their rights under new car warranties.

The Magnuson-Moss Warranty Act, which was enacted by Congress in 1975, prohibits the conditioning of consumer warranties by product manufacturers on the use of any original equipment part or service. Under the statute, a manufacturer can only deny warranty coverage if the manufacturer, not the consumer, can demonstrate that it was the use of a non-original equipment part or service that created the warranty related defect.

In 2010, Honda issued a release in which the Japanese automaker stated: “other parts – whether aftermarket, counterfeit or gray market – are not recommended. The quality, performance, and safety of these parts and whether they are compatible with a particular Honda vehicle are unknown.” The release further states that “American Honda will not be responsible for any subsequent repair costs associated with vehicle or part failures caused by the use of parts other than Honda Genuine parts purchased from an authorized US Honda dealer.”

One year later, Mazda issued a release which alleged: “aftermarket parts are generally made to a lower standard in order to cut costs and lack the testing required to determine their effectiveness in vehicle performance and safety… Mazda also recommends that car owners use original equipment replacement parts in repairs in order to ensure the validity of their warranty.” The release goes on to emphasize that “only Genuine Mazda Parts purchased from an authorized Mazda dealer are specifically covered by the Mazda warranty. The original warranty could become invalid if aftermarket parts contribute to the damage of original parts.”

TIA along with other aftermarket groups have filed complaints regarding both releases with the FTC, taking issue with the unsubstantiated claims made by car companies regarding the quality of aftermarket parts. TIA further contends that the releases violate the Magnuson-Moss Warranty Act since they clearly mislead consumers to believe that they must use dealer service and original equipment in order to ensure the integrity of their new car warranties.

While the FTC has failed to take formal action against car manufacturers, the Commission last year issued a “Consumer Alert” informing consumers of their right to have their vehicle serviced or maintained at a repair shop of their own choosing or perform the service themselves without any concern that their warranty would be voided by their vehicle manufacturer. That alert can be viewed at the FTC web site at: http://ftc.gov/bcp/edu/pubs/consumer/alerts/alt192.shtm

On August 23, 2011, the FTC issued a Request for Comment on its warranty-related Interpretations, Rules, and Guides (“Interpretations”) under the Magnuson-Moss Warranty Act (the “Act”). In submitting comments to the Commission, TIA along with other aftermarket groups, called on the Agency to provide for better consumer disclosure of their rights under the warranty and for requiring substantiation be provided with any claims made by the car companies that non-original equipment parts are substandard. The FTC has yet to respond to these comments.

TIA urges legislators to call on the FTC to protect consumers and the aftermarket by aggressively enforcing its rules governing unfair marketing practices and new car warranties as specified in the Magnuson-Moss Warranty Act.

Car companies are taking aggressive action to misinform consumers regarding their rights under the warranty and as to the quality of aftermarket parts.

Aftermarket parts are of a similar or even greater quality than the original equipment parts that they replace. In fact, many of these parts are made by the same company but may come in different packaging. Furthermore, aftermarket companies have the benefit of observing a part’s performance and can then correct problems that are discovered only after the part has been in-use for some time.

The FTC must:

  • Conduct greater oversight and enforcement on vehicle manufacturers who do not comply with the Magnuson-Moss Warranty Act and who seek to discredit aftermarket products;
  • Aggressively enforce requirements that vehicle manufacturers must substantiate all claims that use of non-original equipment parts could jeopardize a vehicle warranty; and,
  • Require better consumer disclosure by car companies regarding their rights under the warranty. This might entail compelling the car companies to:
  • Include in their warranty booklets a prominently places statement that, as a motor vehicle manufacturer, they are prohibited from conditioning the warranty on the use of any non-original equipment part or service; or,
  • Inform consumers of their rights with a written statement of reasons when a warranty is denied due to the use of a non-original equipment service or part.