The New Frontier of Investor Lawsuits and Private Company D&O Insurance Coverage: Theranos and Other “Unicorn” Lawsuits
CFPB Continues to Pursue Investigations Amid Questions About its Future

E-Warranty Act Brings Warranty Disclosures into the Digital Era

Network_iStock_000005265503LargeBy Benjamin R. Mulcahy

As a result of the recently-enacted E-Warranty Act (Public Law 114-51 [Sept 24, 2015), 16 CFR Parts 701 and 702), companies that issue written consumer warranties can now migrate their warranty disclosures from the paper formats that have been used in the past to the Internet. 

The Magnuson-Moss Warranty Act (15 U.S.C. § 2301 – 2312) (the “MMWA”) and the implementing regulations promulgated pursuant to the MMWA by the Federal Trade Commission (“FTC”) apply to written warranties on the sale of consumer products and establish two disclosure requirements: (1) the “Pre-Sale Availability Rule,” which requires warrantors and sellers of consumer products to provide warranty terms to consumers before the sale of the warranted product; and (2) the “Disclosure Rule,” which provides that (i) written warranties on consumer products costing more than $15.00 be disclosed in simple, concise and easy to understand language in a single document, and (ii) any limitations on the duration of implied warranties must appear “on the face of the warranty.”

The E-Warranty Act amends the MMWA to allow warranty providers to comply with the Pre-Sale Availability Rule and the Disclosure Rule under certain circumstances by posting warranty terms on the Internet.  The E-Warranty Act requires that warrantors who choose to disseminate their warranty terms online must, in a clear and conspicuous manner: (1) provide consumers with the URL where the specific product’s warranty terms can be reviewed; and (2) provide a phone number or mailing address or other non-Internet based method that consumers and sellers can use to request a written copy of the full warranty terms promptly and free of charge.

For context, the seller of the product has its own independent obligation under the MMWA to furnish the warranty terms to consumers upon request prior to sale, but the obligation placed on the seller requires only that the seller make the warranty terms available for review at the place of sale.  If the warrantor has elected to provide consumers with its warranties via the online method, the seller can choose between providing the consumer with the warranty terms through electronic means or through other means, such as furnishing a hard copy.  The E-Warranty Act relieves warrantors who choose to provide consumers with its warranties via the online method from providing printed warranty materials to sellers, leaving the affected sellers free to provide them to consumers for review at the point of sale, either by accessing the warrantor’s website or by requesting a hard copy from the warrantor using the non-Internet based method for requesting a copy.

It is important to recognize that not all products fall within the scope of the MMWA. Significantly, if a product or transaction falls outside the scope of the MMWA, then state law governs the format, substance and availability of the warranty, including any state laws requiring warranties to be provided in paper format rather than online.  But for companies that issue warranties that do fall within the scope of the MMWA, the E-Warranty Act provides an opportunity to save money on printing costs and should be welcome news.