We see them every evening on cable TV—infomercials or long-form ads that shout about how great their products are and then claim, “you’ll love our product—or we’ll completely refund the price of purchase!”
That’s called a guarantee. And many advertisers get into difficulties by offering guarantees without understanding Federal Trade Commission (FTC) requirements regarding advertised guarantees or warranties. So here is a refresher course.
Full Disclosure
The Director of Rights and Clearances at the law firm ReedSmith, writes that when advertisers include a guarantee or warranty in an ad, they must also provide to the media’s Broadcast Standards & Practices a complete, written copy of the warranty or guarantee. Equally important, advertisers must also disclose the warranty in the ad itself. These disclosures are found in the advertising “fine print”—footnotes explaining precisely what is covered by the guarantee or warranty heralded in the ad; or when it won’t apply, in teeny tiny “mouse-type” that even 20-20 eyeballs need a magnifying glass to read. In broadcast advertising, these details are spouted at lightning speed at the end of the ad by some anonymous voiceover announcer. Online, there are those ubiquitous “I have read and agreed to the terms and conditions”-style links that pretty much everyone clicks without reading, or links tagged on to the end of a product specification that customers seldom follow or download. By law, whether or not customers read these disclosures, advertisers must provide them in full.
If the full details of a guarantee or warranty can’t be included in the ad due to space or time restrictions, you must clearly direct the user/buyer how to obtain or view the full wording. Offering the full warranty for review gives advertisers some protection from customers who are unhappy with a product. However, the main goal of disclosure is defining the terms under which the guarantee or warranty will be honored.
Need to Know
TruthInAdvertising.org states that the FTC uses a 4-pronged test to determine whether the fine print in an ad covers what consumers need to know about a warranty or guarantee:
Prominence: is the fine print big enough for people to notice and read?
Presentation: is the wording and format easy for people to understand?
Placement: is the fine print where people will look?
Proximity: is the fine print near the claim it qualifies?
If consumer complaints cause the FTC to examine your clients’ ads, and the disclosures fail to meet these tests, your clients could face substantial fines.
What Information Is Required in a Warranty?
Warranties must describe five aspects of coverage under FTC disclosure rules:
- Scope of coverage – what is or is not covered.
- Duration of coverage.
- Remedy – what you will (and will not) do to correct a problem or defect.
- How customers can get warranty service
- Customer rights under state laws – a boiler-plate statement included in every product warranty: This warranty gives you specific legal rights, and you may also have other rights which vary from state to state.
Types of Guarantees/Warranties
Under the Magnuson-Moss Warranty Act of 1975, no business is required to offer a warranty on products or services. But if they do offer a warranty, they must comply with the Act. The Act only covers written (not oral) warranties; does not apply to warranties on service (except where a warranty covers parts used for repairs and the work of the installer); and covers only consumer products, not products for commercial purposes.
Implied warranties. Some warranties are deemed to not need explanation; they are inherently implied by the type of product or service offered. For instance, if a customer purchases a new oven, it is reasonable to assume the oven will perform the expected function of baking, broiling and heating. If it does not perform this function or performs it poorly, the implied warranty is in breach, and the FTC expects the manufacturer to speedily provide a remedy—in this case, probably an oven that works.
Another implied warranty is the product’s fitness for a particular use or purpose. If a manufacturer states a product will meet certain customer requirements, i.e., a washer will handle 15-pound loads, and then the customer finds it really doesn’t perform well with more than a 10-pound load, the implied warranty is again in breach and must be remedied.
Generally, in the US, state statutes for the duration of implied warranties cover four years from the date of purchase. This does not mean the product has to last for four years. It means the product must be of “normal durability” based on its price range and typical durability within its category. Essentially, consumers have four years to discover a flaw that existed at the time the product was purchased. Implied warranties may not cover problems caused by consumer abuse, misuse, ordinary wear and tear, failure to follow directions or improper maintenance.
Manufacturers wishing to disclaim implied warranties (i.e., they assume no responsibility for the product after purchase) must clearly disclose a product is “as is,” with no recourse for the consumer should they purchase it and then discover problems, except as might be covered under product liability laws; e.g., if a product proves defective or dangerous.
Several states do not allow sellers to avoid implied warranties, so check your state laws if clients want to move products without implied warranties. Also, if a written warranty or service contract is offered, companies may not disclaim implied warranties under federal law.
Full vs. Limited Warranties.
It’s easy to determine if your warranty is “full” or “limited.” If any of the following statements about your warranty are not true, your warranty is limited.
- You do not limit the duration of implied warranties.
- You provide warranty service to anyone who owns the product during the warranty period; that is, you do not limit coverage to first purchasers.
- You provide warranty service free of charge, including costs for returning the product or removing and reinstalling the product when necessary.
- You provide, at the consumer's choice, a replacement or full refund if, after a reasonable number of tries, you are unable to repair the product.
- You do not require consumers to perform any duty as a precondition for receiving service, except notifying you that service is needed, unless you can demonstrate that the duty is reasonable.
Some companies offer multiple warranties, or a combination of full and limited warranties on parts of a product, or the duration of coverage for some parts. You see this style of warranty frequently on automobiles, where certain parts have substantially different warranties than others.
Satisfaction Guaranteed. You’re confident that the product is a winner… so confident, you think it’s a great idea to offer guaranteed satisfaction. But remember the phrase that usually accompanies that guarantee: “or your money back.” That’s payment refunded in full if the customer is not “satisfied.” FTC guidelines on warranties and guarantees require full refund with such a guarantee. Most companies apply requirements, specifically that the product or its unused portion be returned in exchange for the full refund, and that the request for refund happen within a set time, e.g., “return the unused portion within 30 days.” Some even require the product be enclosed in the original packaging. All of these conditions must be plainly spelled out in ads, marketing materials and on the packaging.
Lifetime Warranties. Is that your lifetime? Mine? No, it is the lifetime of the product, which the seller is expected to define in its warranty or guarantee. For example, an auto part may be guaranteed for “as long as the car runs,” or the seller may want to only guarantee it for “as long as the purchaser owns the car on which the part was installed.” Again, how the seller defines “lifetime” must be clearly disclosed in ad and sales materials.
Some additional considerations with regard to warranties relate to “tie-in” provisions, where a company claims a product must only be used with another of its products (say, a specific Brand A sweeper filter with their Brand A vacuum cleaner) or the warranty is voided. Magnuson-Moss allows some flexibility in disclaimers; read the Act for clarification.
Regardless of where or how a product is purchased—online, through a catalog or directly at retail—sellers must make a full copy of the warranty available to customers, or explain how they can request a copy. And, sellers must promptly and completely comply if purchasers request a refund.
By offering a guarantee or warranty, you elevate consumers’ trust in a product or service. Make sure clients can deliver on their warranties, or that trust will erode and quickly create problems for your clients, and possibly for your agency.
