By David Meyer
Updated: April 11, 2018 10:22 AM ET

You know those “warranty void if removed” stickers in gadgets? They are a widespread practice, but are often a ploy to force people to use a particular company’s parts or services to fix the things they’ve bought—and the Federal Trade Commission (FTC) has had enough of such tactics.

As far as the U.S.’s top consumer protection agency is concerned, these warranty terms are anti-competitive, as they shut out companies that might offer cheaper parts, and force consumers to pay higher prices than they otherwise would.

The FTC said Tuesday that it has told six major companies it “has concerns” about their insistence on forcing consumers to use specified parts or services, with the threat of removing their warranties if they don’t comply.

It did not name the companies to which it sent those warning letters, but it said they operate in the car, mobile, and video-game industries.

The FTC said the companies may be breaking a 1975 piece of legislation called the Magnuson-Moss Warranty Act, which, as the name suggests, governs what can and can’t go into product warranties. It also said the practices could qualify as deceptive, which brings separate legal repercussions.

“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,” said Thomas Paul, the FTC’s acting consumer protection chief.

Although the FTC did not identify the companies it’s warned, it did quote text from their offending terms. And a simple search for that phrasing at least points to possible culprits.

For example, the FTC quotes the phrase “The use of [company name] parts is required to keep your…manufacturer’s warranties and any extended warranties intact.” That language matches the warning used by auto-maker Hyundai.

The phrase “This warranty shall not apply if this product…is used with products not sold or licensed by [company name]” matches the terms of video-game firm Nintendo.

And as for “This warranty does not apply if this product…has had the warranty seal on the [product] altered, defaced, or removed,” this is the same wording used for Sony’s PlayStation VR.

The six companies now need to review their websites and warranties to “ensure that such materials do not state or imply that warranty coverage is conditioned on the use of specific parts of services,” the FTC said. If they don’t comply, law enforcement will step in.

Fortune has contacted Sony, Hyundai and Nintendo to ask whether they were among the recipients of the FTC’s letters, and whether they intend to change their terms, but had not received any responses at the time of writing.

UPDATE (April 12)—Hyundai has provided the following statement: “Hyundai Motor America was made aware of concerns regarding warranty coverage language on hyundaiusa.com on April 10, 2018, by the U.S. Federal Trade Commission (FTC). Hyundai Motor America is currently revising the language on hyundaiusa.com to address the FTC’s concerns. The language on the website was part of a consumer awareness campaign to inform Hyundai vehicle owners of their rights after a collision to ensure that their vehicle is restored to its pre-collision condition. This language does not appear in Hyundai’s written warranty terms or anywhere else on hyundaiusa.com. Hyundai apologizes for any confusion this may have caused.”

SPONSORED FINANCIAL CONTENT

You May Like

EDIT POST