U.S. Federal Trade Commission Warns Automaker about Statements that Consumers Must Use Specified Parts or Service Providers to Keep Their Warranties

The U.S. Federal Trade Commission (FTC) staff sent warning letters to six major companies including Hyundai Motor America (Hyundai) that market and sell automobiles, cellular devices, and video gaming systems in the United States. The letters warn that FTC staff has concerns about the companies’ statements that consumers must use specified parts or service providers to keep their warranties intact. Unless warrantors provide the parts or services for free or receive a waiver from the FTC, such statements generally are prohibited by the Magnuson-Moss Warranty Act, a law that governs consumer product warranties. Similarly, such statements may be deceptive under the FTC Act.

ARA has long been on record with the FTC advocating that auto manufacturers be held accountable for misleading claims and any adverse impact on consumers. In June 2016, ARA requested that the FTC review an ongoing “consumer awareness” campaign of Hyundai that was launched in February of that year. ARA stated its belief that Hyundai was engaged in an improper campaign to restrict competition in the automotive parts market by promulgating deceptive statements to an unsophisticated consumer audience in an attempt to undermine the viability of recycled original equipment manufacturer (OEM) parts. ARA specifically included Hyundai background material on their dedicated campaign website entitled, “A Crash Curse on Your Collision Repair Rights”. The campaign includes statements such as:
 “Using 100% Hyundai Genuine Parts is also the only way to keep your Hyundai manufacturer’s warranties—and any applicable extended warranty—are intact and, in the process, help to preserve your vehicle’s value.”
 “When a repair center is allowed to use anything less than Hyundai Genuine Parts, you run the risk of having your vehicle’s appearance, performance, reliability—and even its safety—compromised. Not to mention voiding one or more warranties.”
 “PROTECTED WARRANTIES Using only Hyundai Genuine Parts keeps any applicable manufacturer’s and extended warranties intact. Other parts void these warranties.”

In an April 10, 2018 press release, Thomas B. Pahl, Acting Director of the FTC’s Bureau of Consumer Protection stated, “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.”

A Hyundai Motor America spokesperson acknowledged to the Automotive News that the company had received a letter from the FTC. According to a forwarded statement, the company stated, “The [service] marketing team took a little liberty with the language on the website…and this was really deep in the website,” the Hyundai spokesman said. “It wasn’t like a big national campaign or something.”

The FTC staff has requested that each company review its promotional and warranty materials to ensure that such materials do not state or imply that warranty coverage is conditioned on the use of specific parts of services. In addition, FTC staff requests that each company revise its practices to comply with the law. The letters state that FTC staff will review the companies’ websites after 30 days and that failure to correct any potential violations may result in law enforcement action. ARA applauds this action by the FTC.