16 C.F.R PART 700-Interpretations of Magnuson Moss Warranty Act

Sec.
700.1 Products covered.
700.2 Date of manufacture.
700.3 Written warranty.
700.4 Parties "actually making a written warranty.
700.5 Expressions of general policy.
700.6 Designations of warranties.
700.7 Use of warranty registration cards.
700.8 Warrantor’s decision as final.
700.9 Duty to install under a full warranty.
700.10 Written warranty, service contract, and insurance distinguished
for purposes of compliance under the Act.
AUTHORITY: 15 USC 2301
SOURCE: 42 FR 36114 (Jul. 13, 1977).

§ 700.1 Products covered.
(a) The Act applies to written warranties on tangible personal property
which is normally used for personal, family, or household purposes. This
definition includes property which is intended to be attached to or installed
in any real property without regard to whether it is so attached or installed.
This means that a product is a "consumer product" if the use
of that type of product is not uncommon. The percentage of sales or the
use to which a product is put by any individual buyer is not determinative.
For example, products such as automobiles and typewriters which are used
for both personal and commercial purposes come within the definition of
consumer product. Where it is unclear whether a particular product is
covered under the definition of consumer product, any ambiguity will be
resolved in favor of coverage.
(b) Agricultural products such as farm machinery, structures and implements
used in the business or occupation of farming are not covered by the Act
where their personal, family or household use is uncommon. However, those
agricultural products normally used for personal or household gardening
(for example, to produce goods for personal consumption, and not for resale)
are consumer products under the Act.
(c) The definition of "Consumer product" limits the applicability
of the Act to personal property, "including any such property intended
to be attached to or installed in any real property without regard to
whether it is so attached or installed." This provision brings under
the Act separate items of equipment attached to real property, such as
air conditioners, furnaces, and water heaters.
(d) The coverage of separate items of equipment attached to real property
includes, but is not limited to, appliances and other thermal, mechanical,
and electrical equipment. (It does not extend to the wiring, plumbing,
ducts, and other items which are integral component parts of the structure.)
State law would classify many such products as fixtures to, and therefore
a part of, realty. The statutory definition is designed to bring such
products under the Act regardless of whether they may be considered fixtures
under state law.
(e) The coverage of building materials which are not separate items of
equipment is based on the nature of the purchase transaction. An analysis
of the trans-action will determine whether the goods are real or personal
property. The numerous products which go into the construction of a consumer
dwelling are all consumer products when sold "over the counter,"
as by hardware and building supply retailers. This is also true where
a consumer contracts for the purchase of such materials in connection
with the improvement, repair, or modification of a home (for example,
paneling, dropped ceilings, siding, roofing, storm windows, remodeling).
However, where such products are at the time of sale integrated into the
structure of a dwelling they are not consumer products as they cannot
be practically distinguished from reality. Thus, for example, the beams,
wallboard, wiring, plumbing, windows, roofing, and other structural components
of a dwelling are not consumer products when they are sold as part of
real estate covered by a written warranty.
(f) In the case where a consumer contracts with a builder to construct
a home, a substantial addition to a home, or other realty (such as a garage
or an in-ground swimming pool) the building materials to be used are not
consumer products. Although the materials are separately identifiable
at the time the contract is made, it is the intention of the parties to
contract for the construction of reality which will integrate the component
materials. Of course, as noted above, any separate items of equipment
to be attached to such realty are consumer products under the Act.
(g) Certain provisions of the Act apply only to products actually costing
the consumer more than a specified amount. Section 103 applies to consumer
products actually costing the consumer more than $10, excluding tax. The
$10 minimum will be interpreted to include multiple-packaged items which
may individually sell for less than $10, but which have been packaged
in a manner that does not permit breaking the package to purchase an item
or items at a price less than $10. Thus a written warranty on a dozen
items packaged and priced for sale at $12 must be designated, even though
identical items may be offered in smaller quantities at under $10. This
interpretation applies in the same manner to the minimum dollar limits
in section 102 and rules promulgated under that section.
(h) Warranties on replacement parts and components used to repair consumer
products are covered; warranties on services are not covered. Therefore
warranties which apply solely to a repairer’s workmanship in performing
repairs are not subject to the Act. Where a written agreement warrants
both the parts provided to effect a repair and the workmanship in making
that repair, the warranty must comply with the Act and the rules thereunder.
(i) The Act covers written warranties on consumer products "distributed
in commerce" as that term is defined in section 101(3). Thus, by
its terms the Act arguably applies to products exported to foreign jurisdictions.
However, the public interest would not be served by the use of Commission
resources to enforce the Act with respect to such products. Moreover,
the legislative intent to apply the requirements of the Act to such products
is not sufficiently clear to justify such an extraordinary result. The
Commission does not contem-plate the enforcement of the Act with respect
to consumer products exported to foreign jurisdictions. Products exported
for sale at military post exchanges remain subject to the same enforcement
standards as products sold within in the United States, its territories
and possessions.

§ 700.2 Date of manufacture.
Section 112 of the Act provides that the Act shall apply only to those
consumer products manufactured after July 4, 1975. When a consumer purchases
repair of a consumer product the date of manufacture of any replacement
parts used is the measuring date for determining coverage under the Act.
The date of manufacture of the consumer product being repaired is in this
instance not relevant. Where a consumer purchases or obtains on an exchange
basis a rebuilt consumer product, the date that the rebuilding process
is completed determines the Act’s applicability.

§ 700.3 Written warranty.
(a) The Act imposes specific duties and liabilities on suppliers who offer
written warranties on consumer products. Certain representations, such
as energy efficiency ratings for electrical appliances, care labeling
of wearing apparel, and other product information disclosures may be express
warranties under the Uniform Commercial Code. However, these disclosures
alone are not written warranties under this Act. Section 101(6) provides
that a written affirmation of fact or a written promise of a specified
level of performance must relate to a specified period of time in order
to be considered a "written warranty."1 A product information
disclosure without a specified time period to which the disclosure relates
is therefore not a written warranty. In addition, section 111(d) exempts
from the Act (except section 102(c)) any written warranty the making or
content of which is required by federal law. The Commission encourages
the disclosure of product information which is not deceptive and which
may benefit consumers, and will not construe the Act to impede information
disclosure in product advertising or labeling.
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A "written warranty" is also created by a written affirmation
of fact or a written promise that the product is defect free, or by a
written undertaking of remedial action with the meaning of section 101(6)(B).

(b) Certain terms, or conditions of sale of a consumer product may not
be "written warranties" as that term is defined by 101(6), and
should not be offered or described in a manner that may deceive consumers
as to their enforceability under the Act. For example, a seller of consumer
products may give consumers an unconditional right to revoke acceptance
of goods within a certain number of days after delivery without regard
to defects or failure to meet a specified level of performance. Or a seller
may permit consumers to return products for any reason for credit toward
purchase of an another item. Such terms of sale taken alone are not written
warranties under the Act. Therefore, suppliers should avoid any characterization
of such terms of sale as warranties. The use of such terms as "free
trial period" and "trade-in credit policy" in this regard
would be appropriate. Furthermore, such terms of sale should be stated
separately from any written warranty. Of course, the offering and performance
of such terms of sale remain subject to section 5 of the Federal trade
Commission Act, 15 U.S.C. 45.
(c) The Magnuson-Moss Warranty Act generally applies to written warranties
covering consumer products. Many consumer products are covered by warranties
which are neither intended for, nor enforceable by, consumers. A common
example is a warranty given by a component supplier to a manufacturer
of consumer products. (The manufacturer may, in turn, warrant these components
to consumers.) The component supplier’s warranty is generally given solely
to the product manufacturer, and is neither intended to be conveyed to
the consumer nor brought to the consumer’s attention in connection with
the sale. Such warranties are not subject to the Act, since a written
warranty under section 101(6) of the Act must become "part of the
basis of the bargain between the a supplier and a buyer for purposes other
than resale." However, the Act applies to a component supplier’s
warranty in writing which is given to the consumer. An example is a supplier’s
written warranty to the consumer covering a refrigerator that is sold
installed in a boat and recreational vehicle. The supplier of the refrigerator
relies on the boat or vehicle assembler to convey th written agreement
to the consumer. In this case, the supplier’s written warranty is to a
consumer, and is covered by the Act.

§ 700.4 Parties "actually making" a written warranty.
Section 110(f) of the Act provides that only the supplier "actually
making" a written warranty is liable for purposes of FTC and private
enforcement of the Act. A supplier who does no more than distribute or
sell a consumer product covered by a written warranty offered by another
person or business and which identifies that person or business as the
warrantor is not liable for failure of the written warranty to comply
with the Act or rules thereunder. However, other actions and written and
oral representations of such a supplier in connection with the offer or
sale of a warranted product may obligate that supplier under the Act.
If under State law the supplier is deemed to have "adopted"
the written affirmation of fact, promise or undertaking, the supplier
is also obligated under the Act. Suppliers are advised to consult State
law to determine those actions and representations which may make them
co-warrantors, and therefore obligated under the warranty of the other
person or business.

§ 700.5 Expressions of general policy.
(a) Under Section 103(b), statements or representations of general policy
concerning customer satisfaction which are not subject to any specific
limitation need not be designated as full or limited warranties, and are
exempt from the requirements of sections 102, 103, and 104 of the Act
and rules thereunder. However, such statements remain subject to the enforcement
provisions of section 110 of the Act, and to section 5 of the Federal
Trade Commission Act, 15 U.S.C. 45.
(b) The section 103(b) exemption applies only to general policies, not
to those which are limited to specific consumer products manufactured
or sold by the supplier offering such a policy. In addition, to qualify
for an exemption under section 103(b) such policies may not be subject
to any specific limitations. For example, policies which have an express
limitation of duration or a limitation of the amount to be refunded are
not exempted. This does not preclude the imposition of reasonable limitations
based on the circumstances in each instance a consumer seeks to invoke
such an agreement. For instance, a warrantor may refuse to honor such
an expression of policy where a consumer has used a product for 10 years
without previously expressing any dissatisfaction with the product. Such
a refusal would not be a specific limitation under this provision.

§ 700.6 Designation of warranties.
(a) Section 103 of the Act provides that written warranties on consumer
products manufactured after July 4, 1975, and actually costing the consumer
more than $10, excluding tax, must be designated either "Full (statement
of duration) Warranty" or "Limited Warranty". Warrantors
may include a statement of duration in a limited warranty designation.
The designation or designations should appear clearly and conspicuously
as a caption, or prominent title, clearly separated from the text of the
warranty. The full (statement of duration) warranty and limited warranty
are the exclusive designations permitted under the Act, unless a specific
exception is created by rule.
(b) Section 104(b)(4) states that "the duties" under subsection
(a) (of section 104) extend from the warrantor to each person who is a
consumer with respect to the consumer product." Section 101(3) defines
a consumer as "a buyer (other than for purposes of resale) of any
consumer product, any person to whom such product is transferred during
the duration of an implied or written warranty (or service contract) applicable
to the product. ***." Therefore, a full warranty may not expressly
restrict the warranty rights of a transferee during its stated duration.
However, where the duration of a full warranty is defined solely in terms
of first purchaser ownership there can be no violation of section 104(b)4),
since the duration of the warranty expires, by definition, at the time
of transfer. No rights of a subsequent transferee are cut off as there
is no transfer of ownership "during the duration of (any) warranty."
Thus, these provisions do not preclude the offering of a full warranty
with its duration determined exclusively by the period during which the
first purchaser owns the product, or uses it in conjunction with another
product. For example, an automotive battery or muffler warranty may be
designated as "fully warranty for as long as you own your car."
Because this type of warranty leads the consumer to believe that proof
of purchase is not needed so long as he or she owns the product a duty
to furnish documentary proof may not be reasonably imposed on the consumer
under this type of warranty. The burden is on the warrantor to prove that
a particular claimant under this type of warranty is not the original
purchaser or owner of the product. Warrantors or their designated agents
may, however, ask consumers to state or affirm that they are the first
purchaser of the product.

§ 700.7 Use of warranty registration cards.
(a) Under Section 104(b)(1) of the Act, a warrantor offering a fully warranty
may not impose on consumers any duty other than notification of a defect
as a condition of securing remedy of the defect or malfunction, unless
additional duty can be demonstrated by the warrantor to be reasonable.
Warrantors have in the past in the past stipulated the return of a "warranty
registration" or similar card" the Commission means a card which
must be returned by the consumer shortly after purchase of the product
and which is stipulated or implied in the warranty to be a condition precedent
to warranty coverage and performance.
(b) A requirement that the consumer return a warranty registration card
or a similar notice as a condition of performance under a full warranty
is an unreasonable duty. Thus, a provision such as, "This warranty
is void unless the warranty registration card is returned to the warrantor"
is not permissible in a full warranty, nor is it permissible to imply
such a condition in a full warranty.
(c) This does not prohibit the use of such registration cards where a
warrantor suggests use of the card as one possible means of proof of the
date the product was purchased. For example, it is permissible to provide
in a full warranty that a consumer may fill out and return a card to place
on file proof of the date the product was purchased. Any such suggestion
to the consumer must include notice that failure to return the card will
not affect rights under the warranty, so long as the consumer can show
in a reasonable manner the date the product was purchased. Nor does this
interpretation prohibit a seller from obtaining from purchasers at the
time of sale information requested by the warrantor.

§ 700.8 Warrantor’s decision as final.
A warrantor shall not indicate in any written warranty or service contract
either directly or indirectly that the decision of the warrantor, service
contractor, or any designated third party is final or binding any dispute
concerning the warranty or service contract. Nor shall a warrantor or
service contractor state that it alone shall determine what is a defect
under the agreement. Such statements are deceptive since section 110(d)
of the Act gives state and federal courts jurisdiction over suits for
breach of warranty and service contract.

§ 700.9 Duty to install under a full warranty.
Under Section 104(a)(1) of the Act, the remedy under a full warranty must
be provided to the consumer without charge. If the warranted product has
utility only when installed, a full warranty must provide such installation
without charge regardless of whether or not the consumer originally paid
for installation by the warrantor or his agent. However, this does not
preclude the warrantor from imposing on the consumer a duty to remove,
return, or reinstall where such duty can be demonstrated by the warrantor
to meet the standard of reasonableness under section 104(b)(1).

§ 700.10 Section 102(c).
(a) Section 102(c) prohibits tying arrangements that condition coverage
under a written warranty on the consumer’s use of an article or service
identified by brand, trade, or corporate name unless that article or service
is provided without charge to the consumer.
(b) Under a limited warranty that provides only for replacement of defective
parts and no portion of labor charges, section 102(c) prohibits a condition
that the consumer use only service (labor) identified by the warrantor
to install the replacement parts. A warrantor or his designated representative
may not provide parts under the warranty in a manner which impedes or
precludes the choice by the consumer of the person or business to perform
necessary labor to install such parts.
(c) No warrantor may condition the continued validity of a warranty on
the use of only authorized repair service and/or authorized replacement
parts for non-warranty service and maintenance. For example, provisions
such as, "This warranty is void if service is performance by anyone
other than an authorized ‘ABC’ dealer and all replacement parts must be
genuine ‘ABC’ parts," and the like, are prohibited where the service
or parts are not covered by the warranty. These provisions violate the
Act in two ways. First, they violate the section 102(c) ban against tying
arrangements. Second, such provisions are deceptive under section 110
of the Act, because a warrantor cannot, as a matter of law, avoid liability
under a written warranty where a defect is unrelated to the use by a consumer
of "unauthorized" articles or service. This does not preclude
a warrantor from expressly excluding liability for defects or damage caused
by such "unauthorized" articles or service; nor does it preclude
the warrantor from denying liability where the warrantor can demonstrate
that the defect or damage was so caused.

§ 700.11 Written warranty, service contract, and insurance distinguished
for purposes of compliance under the Act.
(a) The Act recognizes two types of agreements which may provide similar
coverage of consumer products, the written warranty, and the service contract.
In addition, other agreements may meet the statutory definitions of either
"written warranty" or "service contract," but are
sold and regulated under state law as contracts of insurance. One example
is the automobile breakdown insurance policies sold in many jurisdictions
and regulated by the state as a form of casualty insurance. the McCarran-Ferguson
Act, 15 U.S.C. 1011 et seq., precludes jurisdiction under federal law
over "the business of insurance" to the extent an agreement
is regulated by state law as insurance. Thus, such agreements are subject
to the Magnuson-Moss Warranty Act only to the extent they are not regulated
in a particular state as the business of insurance.
(b) "Written warranty" and "service contract" are
defined in sections 101(6) and 101(8) of the Act, respectively. A written
warranty must be "part of the basis of the bargain." This means
that it must be conveyed at the time of sale of the consumer product and
the consumer must not give any consideration beyond the purchase price
of the consumer product in order to benefit from the agreement. It is
not a requirement of the Act that an agreement obligate a supplier of
the consumer product to a written warranty, but merely that it be part
of the basis of the bargain between a supplier and a consumer. This contemplates
written warranties by third-party non-suppliers.
(c) A service contract under the Act must meet the definitions of section
101(8). An agreement which would meet the definition of written warranty
in section 101(6)(A) or (B) but for its failure to satisfy the basis of
the bargain test is a service contract. For example, an agreement which
calls for some consideration in addition to the purchase price of the
consumer product, or which is entered into at some date after the purchase
of the consumer product to which it applies, is a service contract. An
agreement which relates only to the performance of maintenance and/or
inspection services and which is not an undertaking, promise, or affirmation
with respect to a specified level of performance, or that the product
is free of defects in materials or workmanship, is a service contract.
An agreement to perform periodic cleaning and inspection of a product
over a specified period of time, even when offered at the time of sale
and without charge to the consumer, is an example of such a service contract.

§ 700.12 Effective date of 16 CFR Parts 701 and 702.
The Statement of Basis and Purpose of the final rules promulgated on December
31, 1975, provides that Parts 701 and 702 of this chapter will become
effective one year after the date of promulgation, December 31, 1976.
The Commission intends this to mean that these rules apply only to written
warranties manufactured after December 31, 1976.