16
May
2018

FTC warns console makers about warranty restrictions (update)

Six unnamed companies, including ones “that market and sell … video gaming systems” have been warned by the Federal Trade Commission that they cannot condition warranty coverage of their products on the consumers’ use of certain parts or service providers.

The FTC noted the warning in a news release on Tuesday. It did not say what specific practices or whether consumer complaints led to the notice. It was also sent to companies who market and sell automobiles and “cellular devices.”

The upshot is that a company cannot void a warranty or deny a consumer warranty coverage because they use a third-party part in its operation, or because it’s been serviced by someone not on a company’s list of authorized providers.

Those conditions, the FTC said, are a violation of the Magnuson-Moss Warranty Act, a 1975 law setting forth the obligations of a manufacturer that offers a warranty on a product. The FTC, again not naming any company, provided three examples of “questionable provisions” it had found:

• “The use of [company name] parts is required to keep your . . . manufacturer’s warranties and any extended warranties intact.”

• “This warranty shall not apply if this product . . . is used with products not sold or licensed by [company name].”

• “This warranty does not apply if this product . . . has had the warranty seal on the [product] altered, defaced, or removed.”

“Provisions that tie warranty coverage to the use of particular products or services harm both consumers who pay more for them as well as the small businesses who offer competing products and services,” Thomas B. Pahl, the acting director of the FTC’s Bureau of Consumer Protection, said in a statement.

Console manufacturers are among those whose warranties specify that only approved service providers can carry out repairs on a system under warranty. They’re hardly the only industry who does so; John Deere, the makers of tractors and farm equipment, puts software in its vehicles that effectively make it impossible to repair the vehicle anywhere but at a dealership. That led to one of now 18 “right to repair” bills introduced in state legislatures across the United States.

As Kotaku noted last year, the Entertainment Software Association has lobbied against “right to repair” legislation, arguing that it would undercut copyright protections console makers depend upon.

The FTC asked each company to review its warranty and promotional materials to make sure that their language does not say or imply that warranty coverage is conditioned on the use of specific parts or services. The FTC said it would check these materials after 30 days and, if potential violations have not been corrected, law enforcement action may result.

Polygon reached out to representatives of Microsoft, Nintendo, Sony and the ESA for comment.

Update (May 17, 2018): Sony and Nintendo have updated their warranties (in the U.S.) to comply with the FTC’s notice. Sony’s new warranty language now says that the company will only refuse to repair a console if it is clear that damage to the console was caused by a third party peripheral, or if it’s obvious that the user has removed a sticker, open the console, and caused damage to it themselves. This effectively means that the use of third party peripherals (such as hard drives) or third-party repairs will not void the warranty except in extreme cases.

Nintendo’s updated warranty language in the U.S. is somewhat the same, saying only that the warranty is void if it’s clear that the use of a non-Nintendo product caused damage to the console. Microsoft’s warranty exclusions for the Xbox One, however, still say it the warranty is invalidated if it is “repaired by anyone other than Microsoft.” For more, see:

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