The FTC has recently announced a settlement with BMW over the company’s MINI warranties. The FTC had alleged that BMW’s MINI Division had violated the Magnusson-Moss Warranty Act by “telling its consumers that BMW would void their warranty unless they used MINI Parts and MINI dealers to perform maintenance and repair work.” Under the Magnusson-Moss Warranty Act, companies are not allowed to require customers to only go to certain repair or service shops or use specific parts unless the company provides them for free. The law has existed since 1975, and contains a variety of consumer protections governing written warranties including the requirement to conspicuously detail the terms of the deal in plain language.
According to the FTC’s administrative complaint, BMW, by way of its MINI Division, violated the Magnusson-Moss Warranty Act by requiring their customers, in order to maintain their warranties, to have service or repairs performed at the dealership with certain parts. Jessica Rich, the Director of the FTC’s Bureau of Consumer Protection was quoted as saying, ““It’s against the law for a dealer to refuse to honor a warranty just because someone else did maintenance or repairs on the car. As a result of this order, BMW will change its practices and give MINI owners information about their rights.”
Under the proposed settlement order, BMW is prohibited from violating the Magnusson-Moss Warranty Act and the FTC ACT in connection with its MINI Division goods and services. BMW is also barred from requiring their customers to have maintenance performed at dealerships and with certain parts in order to maintain a vehicle’s warranty, and must inform affected MINI owners with information about their right to use third-party parts and service with voiding warranty coverage.
The FTC’s settlement with BMW reminds companies to take a fresh look at the Magnusson-Moss Warranty Act to ensure that their warranties in compliance. In fact, the FTC has had a renewed focus on warranty compliance recently. During the holiday season of 2013, the FTC sent warning letters to a number of major retailers reminding them about the pre-sale warranty rule that requires retailers to make available warranties for review prior to sale. The warning letter reminded retailers that the pre-sale availability rule applied to online sales as well and gave retailers notice and a limited amount of time to come into compliance. Given the FTC’s renewed focus on warranty claims, companies making warranties about their goods or services would do well to dust of their copy of the Magnusson-Moss Warranty Act and reexamine the ins and outs of the law.