A recent Federal Trade Commission ("FTC") settlement with BMW serves as a good reminder to take a fresh look at Mag-Moss compliance for all companies offering warranties. The FTC's business guidance provides a helpful checklist to make sure your warranty program is all tuned up.
BMW for its MINI Coopers offered a 4-year or 50,000-mileage warranty. The car owner needed to take care of routine maintenance in order to enjoy the warranty coverage. For the first three years of car ownership, routine maintenance was free at BMW dealers. After that, the owner needed to pay for such work on his/her own. The warranty said that routine maintenance had to be done at the dealer or the warranty would be voided. Mag-Moss has an anti-tying provision that says you cannot condition a warranty on the customer using your own parts and service unless you provide those parts and service for free. Because in year 4 a MINI owner had to pay for his/her own oil changes, BMW allegedly violated Mag-Moss to say that such paid for maintenance had to be done at the dealer. The settlement requires BMW to send notice to its customers telling them they can use other providers for routine maintenance.
The FTC has had a renewed focus on warranty compliance recently. About a year ago, 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.
Mag-Moss has a number of highly technical requirements and now is a good time for companies offering warranties to review for compliance to avoid the next enforcement roadblock.
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