Who has to make warranty text available before the sale?

The seller of a consumer product that costs more than $15 and is sold with a written warranty. The rule reaches both manufacturers and retailers. In an information-collection burden statement filed in January 2011, FTC staff estimated approximately 478 large manufacturers and 15,444 small manufacturers subject to the rule, and 6,892 large retailers and 452,553 small retailers impacted by it.

Does posting a warranty somewhere on a website satisfy the rule?

Only when the text is displayed in close proximity to the warranted product, or furnished on request before sale with signs advising buyers that it is available. The Vroom complaint applied those two methods to an online seller. It alleged that the violation continued even after the site began disclosing the warranty provider's name and address, because the warranty text still did not appear near the vehicle.

Is it enough to send the warranty with the closing paperwork?

The FTC treated that as a violation in its complaint against Vroom, where the warranty arrived only in the deal package sent after consumers had chosen a vehicle, supplied personal documents, and paid a deposit. The complaint tied the harm to timing. It alleged that the warranty's numerous limitations are ones consumers are unlikely to see or understand before embarking on the purchase process and paying a costly deposit.

Is this the same as the Disclosure Rule or the Used Car Rule’s Buyers Guide?

No, they are separate rules. Part 701 is the Disclosure Rule and Part 702 is the Pre-Sale Availability Rule. The Used Car Rule, at 16 C.F.R. Part 455, is a distinct rule as well, and the FTC brought its Vroom action under it and under the Pre-Sale Availability Rule as separate charges.

What happens if a seller misses the duty?

The failure is a violation of Section 5 of the FTC Act. In Vroom, the FTC sought a permanent injunction and monetary relief.

WarrantiesAct or rule

Pre-Sale Availability Rule

Berkeley Robinson, Managing Attorney at Robinson Law Firm PLLC

Author

Berkeley Robinson, Esq.

Managing Attorney, Robinson Law Firm PLLC

Berkeley has served as the go-to counsel for many scaling businesses in a transactional and litigation management capacity. Before becoming an attorney, Berkeley grew sales teams, ran online marketing campaigns, and did everything else an entrepreneur does—and still does today as the founder of two online businesses.

Definition

The Pre-Sale Availability Rule requires that the seller of a consumer product, costing more than $15, that is sold with a written warranty make the text of the warranty readily available for examination by prospective buyers. Source: Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC v. Vroom, Inc., No. 4:24-cv-2496 (S.D. Tex.) Congress directed the Federal Trade Commission to write it: the Magnuson-Moss Warranty Act required the Commission to prescribe rules requiring that the terms of any written warranty on a consumer product be made available to the prospective purchaser before the sale. Source: Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC v. Vroom, Inc., No. 4:24-cv-2496 (S.D. Tex.)

Key legal rules

The Pre-Sale Availability Rule places these primary duties on a business:

A seller can meet the duty by (1) displaying the text of the warranty in close proximity to the warranted product, or (2) furnishing it upon request prior to sale and placing signs reasonably calculated to elicit the prospective buyer’s attention in prominent locations in the store or department advising such prospective buyers of the availability of warranties upon request. Source: Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC v. Vroom, Inc., No. 4:24-cv-2496 (S.D. Tex.)
A seller that offers warranted consumer products by catalog or mail order solicitation must disclose, in the manner required by 16 C.F.R. § 702.3(c)(2)(I), either the full text of the written warranty or that the warranty can be obtained free upon specific written request, together with the address where it can be obtained. Source: In re Gateway 2000, Inc., Complaint (FTC)
The text of any written warranty on a consumer product must be readily available for examination by prospective buyers prior to sale through one or more of the means specified in 16 C.F.R. § 702.3(c). Source: In re Gateway 2000, Inc., Order (FTC)
As FTC staff describes it, the compliance work divides between manufacturer and retailer: at the manufacturing level, ensuring that the written warranty accompanies every consumer product or that the required warranty information otherwise gets to the retailer, and at the retail level, ensuring that the written warranty is made available to the consumer prior to sale. Source: Pre-Sale Availability Rule Burden Statement, FR Doc. 2011–929 (filed Jan. 14, 2011)
The duty attaches to products sold with a written warranty, a term the proposed consent order in MWE Investments defines to include any written affirmation of fact or written promise made in connection with the sale of a consumer product by a Supplier to a buyer that relates to the nature of the material or workmanship and affirms or promises that it is defect free or will meet a specified level of performance over a specified period of time. Source: In re MWE Investments, LLC, Agreement Containing Consent Order (FTC)

For the sake of space, this page lists only the primary rules related to this term that most businesses should follow. More may apply to your situation, and your unique facts affect how they apply.

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Why these rules exist

The Commission adopted the rule, codified at 16 C.F.R. § 702.1 et seq., to ensure that consumers have complete and accurate warranty information available prior to sale so that they can make fully informed purchasing decisions. Source: Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC v. Vroom, Inc., No. 4:24-cv-2496 (S.D. Tex.) The timing is what makes the duty work. A warranty can carry numerous limitations that consumers are unlikely to see or understand before they begin a time-consuming purchase process and pay a costly deposit, as the FTC alleged against Vroom, so a duty to make the text available beforehand puts those limits in front of the buyer while the choice is still open. Source: Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC v. Vroom, Inc., No. 4:24-cv-2496 (S.D. Tex.)

Enforcement examples

In re Gateway 2000, Inc. (catalog and mail-order computer sales)

In re Gateway 2000, Inc., Complaint and Order

Gateway 2000 was engaged in the direct marketing of personal computers throughout the United States. Source: In re Gateway 2000, Inc., Complaint (FTC) The complaint alleged that Gateway offered consumer products with written warranties by catalog or mail order solicitation but did not disclose, in the manner 16 C.F.R. § 702.3(c)(2)(I) requires, either the full text of the warranty or that the warranty could be obtained free on specific written request and where. Source: In re Gateway 2000, Inc., Complaint (FTC)

Outcome. The order barred Gateway from failing to make the warranty text readily available for examination by prospective buyers prior to sale through one or more of the means specified in 16 C.F.R. § 702.3(c). Source: In re Gateway 2000, Inc., Order (FTC) Within thirty days of service, Gateway also had to give written instructions on its obligations under the Magnuson-Moss Warranty Act and Rules 701 and 702 to managing employees, agents, and representatives with sales, advertising, customer service, or policy responsibility. Source: In re Gateway 2000, Inc., Order (FTC) For not less than five years from service, Gateway must keep those instructions, all warranties on consumer products costing more than $15 for which it is the warrantor, and exemplars of its advertising, and make them available to the FTC on request. Source: In re Gateway 2000, Inc., Order (FTC)

FTC v. Vroom, Inc. (online used-vehicle sales)

FTC v. Vroom, Inc., No. 4:24-cv-2496 (S.D. Tex.), Complaint and Stipulated Order

Vroom’s website advertised a limited warranty included with all Vroom vehicles and good for “90 days or 6,000 miles.” Source: Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC v. Vroom, Inc., No. 4:24-cv-2496 (S.D. Tex.) The complaint alleged that Vroom neither displayed the warranty text in close proximity to the warranted product on its website nor furnished it on request before sale with signs on the site advising buyers it was available. Source: Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC v. Vroom, Inc., No. 4:24-cv-2496 (S.D. Tex.) Instead, the complaint alleges, Vroom presented a copy of the warranty only in the deal package sent to finalize the transaction, after consumers had selected the vehicle, provided personal documents and information, and paid a deposit. Source: Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC v. Vroom, Inc., No. 4:24-cv-2496 (S.D. Tex.) After receiving the FTC’s CID, Vroom’s website began disclosing the name and address of the company that provides services under the warranty, but the complaint alleged it still did not provide the warranty text near the vehicles. Source: Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC v. Vroom, Inc., No. 4:24-cv-2496 (S.D. Tex.)

Outcome. Count IV of the complaint charged that Vroom’s acts or practices violate the Pre-Sale Availability Rule, 16 C.F.R. § 702.3(a). Source: Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC v. Vroom, Inc., No. 4:24-cv-2496 (S.D. Tex.) The findings in the stipulated order recited that the complaint charges a violation of the rule by failing to make the text of warranties offered readily available for examination by prospective buyers. Source: Stipulated Order, FTC v. Vroom, Inc. (S.D. Tex.)

In re MWE Investments, LLC (Westinghouse portable generators)

In re MWE Investments, LLC, Agreement Containing Consent Order

MWE marketed and sold portable generators bearing the Westinghouse brand with written warranties that required purchasers to use only genuine MWE/Westinghouse parts and authorized service providers to maintain warranty coverage. Source: In re MWE Investments, LLC, Agreement Containing Consent Order (FTC) The complaint also alleged that MWE failed to make its written warranties available to consumers prior to sale in the manner the Pre-Sale Availability Rule requires. Source: In re MWE Investments, LLC, Agreement Containing Consent Order (FTC)

Outcome. The proposed consent order included a provision barring MWE from violating any provision of the Magnuson-Moss Warranty Act or the rules under it, including 16 C.F.R. Part 702. Source: In re MWE Investments, LLC, Agreement Containing Consent Order (FTC) It also required MWE to keep the terms of its current warranty posted clearly and conspicuously on its website for at least three years after the order’s effective date. Source: In re MWE Investments, LLC, Agreement Containing Consent Order (FTC)

Exposure

Failing to comply with a rule promulgated under the Magnuson-Moss Warranty Act is itself a violation of Section 5 of the Federal Trade Commission Act, so a missed pre-sale availability duty exposes a seller to an FTC enforcement action. Source: In re Gateway 2000, Inc., Complaint (FTC) The Vroom complaint, which bundled the warranty-text count with other rule violations, showed what that can mean: the FTC sought a permanent injunction, monetary relief, and other relief. Source: Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC v. Vroom, Inc., No. 4:24-cv-2496 (S.D. Tex.) That complaint also alleged that the FTC had reason to believe the violations were continuing, because Vroom kept up its practices despite numerous complaints and changed some of them only after receiving a CID. Source: Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC v. Vroom, Inc., No. 4:24-cv-2496 (S.D. Tex.)

Orders in these matters added ongoing obligations. Gateway 2000’s order barred future failures to make warranty text available before sale through the means in 16 C.F.R. § 702.3(c). Source: In re Gateway 2000, Inc., Order (FTC) The same order required Gateway to deliver a copy of the order to its current directors and officers and to managing employees, agents, and representatives with sales, advertising, customer service, or policy responsibility, and to keep supplying it to new ones for three years. Source: In re Gateway 2000, Inc., Order (FTC) The MWE Investments proposed consent order was longer still, running for 20 years from the date of its issuance, a term specific to that order. Source: In re MWE Investments, LLC, Agreement Containing Consent Order (FTC)

FAQs

1.Complaint for Permanent Injunction, Monetary Judgment, and Other Relief. Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC v. Vroom, Inc., No. 4:24-cv-2496 (S.D. Tex.)
2.Complaint for Permanent Injunction, Monetary Judgment, and Other Relief. Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC v. Vroom, Inc., No. 4:24-cv-2496 (S.D. Tex.)
3.Complaint for Permanent Injunction, Monetary Judgment, and Other Relief. Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC v. Vroom, Inc., No. 4:24-cv-2496 (S.D. Tex.)