/>iIn her September 20, 2022 statement before the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights, Federal Trade Commission (“FTC”) Chairwoman Lina Kahn emphasized the FTC’s continued work combating repair restrictions that allegedly harm consumers, explaining that the FTC is “prioritizing action against business practices that unlawfully restrict consumers’ ability to repair their products, costing them more over the long term.”[1]
The Chairwoman’s comments come at the heels of a trio of enforcement actions targeting repair restrictions this summer resulting in settlements with three companies: Harley-Davidson; Westinghouse; and Weber.[2] The FTC alleged that the defendants in each case were imposing illegal warranty terms that voided customers’ warranties if they used anyone other than the companies and their authorized dealers to get parts or repairs for their products. According to the FTC, these terms harmed consumers and competition by: (1) restricting consumer choice; (2) costing consumers more money; (3) undercutting independent dealers; and (4) reducing resiliency by limiting access to replacement parts when needed.
As part of the settlements all three companies are prohibited from telling consumers that their warranties will be void if they use third-party parts or that consumers should only use branded parts, with any violations resulting in civil penalties for the companies. The FTC also required the companies to specify in their warranties that servicing products at a third-party repair shop or with third-party parts will not void the warranty and, further, to alert consumers of this change. Finally, the FTC required Harley-Davidson and Westinghouse to direct their authorized dealers to not promote branded parts and services over those of third parties.
These enforcement actions are part of larger FTC effort to target supposedly anticompetitive repair restrictions which gained significant momentum last year. In May 2021 the FTC issued a report, Nixing the Fix: An FTC Report to Congress on Repair Restrictions, outlining, among other things, a number of typical justifications for repair restrictions, regarding them with skepticism. It ultimately concluded that “[a]lthough manufacturers have offered numerous explanations for their repair restrictions, the majority are not supported by the record.”[3] Two months later, the FTC issued a policy statement stating that, while repair restrictions had generally not been an enforcement priority, “the Commission has determined that it will devote more enforcement resources to combat these practices. Accordingly, the Commission will now prioritize investigations into unlawful repair restrictions.”[4]
The Chairwoman’s recent remarks suggest that the FTC continues to view combating allegedly unlawful repair restrictions as a priority and that the FTC’s enforcement efforts in this arena are not likely to abate anytime soon. As the FTC’s recent enforcement actions illustrate, the FTC may target fairly commonplace warranty practices intended to promote consumer safety and limit liability and reputational harm to companies and their brands. Companies with such policies should be prepared for scrutiny from the FTC as well as, potentially, private plaintiffs. Proactive review of and, if necessary, modifications to warranty policies could save companies the headache of an FTC investigation and potential negative publicity.
FOOTNOTES
[1] Lina Khan, Chairwoman, Fed. Trade Comm’n, Prepared Statement of the Federal Trade Commission Before the United States Senate Committee on the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, Oversight of the Enforcement of the Antitrust Laws (Sep. 20, 2022)
[2] Press Release, Fed. Trade Comm’n, FTC Takes Action Against Harley-Davidson and Westinghouse for Illegally Restricting Customers’ Right to Repair (June 23, 2022); Press Release, Fed. Trade Comm’n, FTC Takes Action Against Weber for Illegally Restricting Customers’ Right to Repair (July 7, 2022)
[3] Fed. Trade Comm’n, Nixing the Fix: An FTC Report to Congress on Repair Restrictions (May 2021)
[4] Policy Statement, Fed. Trade Comm’n, Policy Statement of the Federal Trade Commission on Repair Restrictions Imposed by Manufacturers and Sellers (July 21, 2021).
