What Are Warranty Stickers?
License agreement FAQ: What are warranty stickers? (Part 5)
The shibbolith identifying the post is slightly imprecise as it doesn’t, for example, mention vehicle systems at all. However it has become shorthand for this series of posts on the subject.
At least since the 1990s OEMs of new automobiles and a few other products have attached adhesive stickers to the product which are invalid if removed. These are known as warranty stickers or sometimes warranty void stickers. They are generally used to identify warranties which would exclude the warranty coverage for damage to components caused by tampering with the sticker. Thus if the audio system manufacturer attached its sticker over the back of the head unit and you attempt to remove it to gain access to the back of the head unit or simply peel it off without damaging it, you have voided the warranty. Generally, retailers may not resell products identifying them as new through the magic of protective adhesive material if the adhesive material has been removed. This provides the end-user with some assurance that the product has not been sold by a fraudster as "new" after being, for example , returned because of a manufacturing defect.
The warranty sticker may be the basis for an implied contract requiring the consumer to adhere to the terms and limitations attaching to the sticker if the consumer attempts to access or replace components under warranty. Through the use of adhesive adhesive material, without requiring the consumer to sign a license agreement or waiver, the vehicle manufacturer or other OEM can more easily control the warranty conditions and restrictions. It can prohibit a consumer from attempting to apply commercial software to the device or physically modifying or replacing components of the device in a way that might cause damage to the device.
The warranty sticker may also be used to protect the product against theft. In most cases, if the product is stolen, the warranty sticker will be damaged or removed and may be visible evidence that the product is stolen. The law assumes that property with a warranty sticker attached is owned by someone who put the sticker there and that they intended to keep the sticker opaque to protect the warranty and to prevent the vehicle’s theft. If the product is stolen, the thief might remove the sticker and attempt to resell the stolen product as legitimate in the market.
Legal Implications and Regulations
The legal framework surrounding warranty stickers varies by jurisdiction, but a few key laws are commonly referenced. One of the most important pieces of legislation in the United States is the Magnuson-Moss Warranty Act, a federal law that governs warranties on consumer products. The Act, which was introduced in 1975, has become a critical piece of consumer protection legislation and serves as the foundation for various warranty-related claims and actions.
One of the fundamental requirements of the Magnuson-Moss Warranty Act is that any warranty which is not "full" must be "designated as either a ‘full warranty’ or a ‘limited warranty.’" Specifically, 15 U.S.C. § 2302(a) prohibits suppliers from representing a warranty as "non-cumulative" or as being "$100 or greater" unless, in the respective cases, they meet both of the requisite criteria. If a warranty does not meet this criteria, the warranty must be called as such—should the supplier fail to designate the warranty correctly, they have violated the Magnuson-Moss Warranty Act.
In regard to warranty stickers, the Magnuson-Moss Warranty Act has been cited in numerous discussions on whether they are an extension of or part of a product’s warranty. A warranty sticker that is a part of a warranty, in violation of the Magnuson-Moss Warranty Act, can result in a breach of warranty claim or a lawsuit for an unfair trade practice or a deceptive practice; similarly, depending on the circumstances, ensuring a warranty sticker violates the Magnuson-Moss Warranty Act can even lead to a violation of the Magnuson-Moss Warranty Act, itself.
Suppliers may seek to avoid strict compliance with the Magnuson-Moss Warranty Act by relying on the "rule of reason." Under this rule, a court may hold an offending warranty sticker to be in violation of the statute, however, given the totality of the circumstances surrounding the warranty sticker, the failure to comply with the statute might be considered insubstantial. In effect, the violation would be ignored by the court. The rule of reason is intended to prevent unjust penalties for inadvertent mistakes.
The Magnuson-Moss Warranty Act is not the only law relevant to warranty stickers. There’s also the Fair Packaging and Labeling Act (FPLA), a non-tax statute dating back to 1966. The FPLA, as it is commonly called, dictates that the Federal Trade Commission ("FTC") shall "issue regulations to enable the consumer to obtain information as to: The FPLA also establishes additional requirements not specified above. For example, packaged products must have "distinctive names or identifying numbers for each individual item that will enable such items to be individually and accurately identified." 15 U.S.C. § 1453. Moreover, the FPLA "prohibits unfair or deceptive practices pertaining to standards of identity, quality of fill of container, and nutrient content and dietary supplements." 15 U.S.C. § 1451. Though quite old, the FPLA has been the foundation for litigation strategies in the context of warranty stickers. Here, warranty stickers were shown to include misleading enticements to purchase the product that mislead consumers about the product and are, therefore, false and misleading in violation of the FPLA.
Importantly, two necessary prerequisites must be satisfied for a warranty sticker to qualify for the FPLA’s general rule against misrepresentation. First, the warranty sticker must be "labeling on the package, or a tag affixed thereto, or a placard on the container, which is not required by law and which goes beyond the requirements of applicable Federal laws, regulations, and standards . . . ." 15 U.S.C. § 1452(2)(B) (emphasis added). Second, the warranty sticker must be "not required by law and which goes beyond the requirements of applicable Federal laws, regulations, and standards . . . ." 15 U.S.C. § 1452(3) (emphasis added).
Federal Trade Commission (FTC) Position
The Federal Trade Commission (FTC) decisively thinks that warranty disclaimers are an attempt to deny consumers their right to and benefit of warranty protection. The FTC is a federal agency that enforces consumer credit law, antitrust laws, and food and drug laws. In its initiatives, the FTC has addressed the use of warranty stickers. That is, a retail store or manufacturer placing a "Warranty Disclaimer" sticker on a product. It has deemed that a practice which is illegal. The FTC has issued a pamphlet entitled Buying Smart: Warranties in Canada.pdf. In this publication the FTC says the following: Warranties are part of the price of doing business in the U.S. and Canada. Consumers expect new merchandise to work properly. Retailers and manufacturers who sell defective merchandise, even accidentally, are expected to make the situation right. That means giving you a refund. If the product cannot be repaired, you have the right to choose between a refund and a replacement. If a store attempts to tell you that a dealer’s sticker that says in big letters "WARRANTY VOID IF REMOVED" is the dealer’s right to deny you your rights, it’s trying to trick you. Any sticker that some stores put on packages to alert you to ‘warranty void if sticker is removed’ violates the law." It goes further, telling the sellers: You cannot "contract around" the FTC’s rules by putting a sticker over the warranty or guarantee page. Nor can you put a sticker over a warranty that requires a dealer to perform service or repairs then sell the product "as is." In those cases, the sticker does not cancel the warranty requirements. If a retailer or a home appliance manufacturer or seller is trying to hide terms and conditions from you, it may mean that the retailer expects problems with the merchandise. If you are ever in doubt about warranties or guarantees, ask the store clerk before you buy.
Manufacturer and Consumer Implications
The legality of warranty stickers is an important issue for both manufacturers and consumers of consumer products. For manufacturers, complying with the Magnuson-Moss Warranty Act, which sets minimum disclosure requirements for all warranty terms, can help avoid future lawsuits by ensuring that existing warranty information is not contradicted by warranty disclaimers affixed to the products’ packaging. Additionally, manufacturers should consider whether their warranty stickers comply with state disclosure laws, such as California’s Consumer Legal Remedies Act, which require additional warranties and limitations and restrictions to be stated in specific language on a product label. Manufacturers who place warranty statements on the product’s packaging should also consider whether the sticker is appropriately conspicuous and placed so as to avoid potential arguments regarding whether it is adequately visible to the purchasing consumer.
For consumers, the presence or absence of warranty stickers on a consumer product, whether they comply with the Magnuson-Moss Warranty Act, and whether they are state-compliant, can mean the difference between recovery and no recovery under a warranty breach claim. To ease compliance, consumers can download a copy of the Magnuson-Moss Warranty Act from the Federal Trade Commission website and take photographs of all warranty stickers that may appear on any warranties purchased for a product in order to preserve evidence of the warranty sticker’s existence and language.
The uncertain and evolving state of the law regarding warranty stickers makes compliance more critical than ever for manufacturers and consumers alike.
Enforcement Issues
As discussed in the introductory notes to the article, consumer goods companies often are prohibited from voiding a warranty because a consumer purchases its product from an unauthorized seller. In part, these prohibitions are implemented through two different types of warranty stickers (sometimes with other language, for example, "Warranty void if removed" or "Warranty is only valid with products retailed by authorized sellers," and often with a "teardown" element to ensure the sticker would be damaged if an attempt were made to remove it). The reason many companies begin with warranty stickers is clear from the discussion of the general enforcement environment. When a company ignores these general rules and restrictions, the risk of investigation or enforcement actions (or worse, lawsuits) increases significantly. Misleading advertising is prohibited under state and federal law. Specifically, § 5 of the Federal Trade Commission Act (15 U.S.C. § 45), prevents unfair or deceptive acts or practices in commerce. It also grants the Federal Trade Commission (the "FTC") "power to prevent persons, partnerships, or corporations . . . from using unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce." State laws prohibit misleading advertising as well, such as the California Business & Professions Code §17500, which states: "It is unlawful for any person, firm, corporation or association, or any agent or employee thereof with intent, directly or indirectly, to induce the public to enter into any obligation . . . to acquire property . . . to make commercial bribes" to make for the purpose of "selling, contracting for sale of merchandise, . . . [or] inducing the public to enter into any agreement or contracts" by misrepresenting or concealing material facts, or making false or misleading statements of fact . Finally, if a product warranty or label, including a sticker, on a commercial product is false or misleading or, in fact, creates a false impression of being a "Canada Certified" product, CPSC could impose a civil fine on the manufacturer, importer, distributor or retailer. Having decided to use warranty stickers, companies must be careful to ensure that the sticker is consistent with industry standards. The risks otherwise can be significant, even if a company is ultimately able to satisfy the FTC or the CPSC (e.g., Volkwagen emissions issues). For example, in 2018, the FTC settled a complaint alleging that Record Town Store violated the Textile, Wool, and Fur Products Labeling Act and the FTC’s Care Label Rule. Record Town Store allegedly made false or misleading claims by placing Department of Transportation "certification" stickers on the CDs it sold, without qualifying authentication from a certifying entity. The order required the payment of a civil penalty of $60,000 and imposed a standard order. A standard order is a standard form of administrative order the FTC may require as part of its settlement agreement. The standard order requires the defendant to destroy any misleading materials in its possession and to stop misrepresenting its compliance with the law. The specific requirement regarding the certification stickers was a requirement to "stop misrepresenting or otherwise impeding or interfering with an independent organization’s ability to authenticate whether a product is certified by such organization or otherwise misrepresenting or otherwise impeding or interfering with consumers’ ability to verify or authenticate whether a product is "certified," "certification," "approved," "test," "tested," or "verified," or any similar claims to an independent organization’s authentication or approval."
Consumer Rights and Remedies
The primary consumer protection law against warranty sticker violations is known as the Magnusson-Moss Warranty Act. The Act requires companies to make warranties and guarantees freely available to consumers so that they can make cost-benefit decisions. Along with this, consumers have the right to enforce these promises, even through civil suit if necessary. Under the Act, if a warranty has been voided, a consumer may file a federal court action seeking damages of up to three times the original warrantied value.
Because warranty stickers are considered a misuse of the warranty system, in addition to certain state laws, the FTC has the power to prohibit or limit their use. The FTC’s Franchise Rule, for example, prohibits franchisors from requiring franchises to sell products of a particular condition or at a particular price, calling this a "vertical price fixing." This also extends to other requirements, such as no reselling, which would violate the rule.
If a consumer believes that a warranty sticker has been placed on a product that does not have such a requirement or will not meet the warranty requirements if removed, that consumer has a right to pursue legal recourse.
International Perspective on Warranty Stickers
In many parts of the world, warranty stickers are common. The question is – how do we know if a particular sticker is legal?
In countries with strict consumer protection legislation, there seems to be no problem getting rid of warranty stickers, especially in EU. In fact, the EU makes it clear that contractual warranty limiting provisions are illegal. They recently passed the Consumer Rights Directive (2011/83/EU) which requres sellers to not invalidate consumers’ rights by forcing them to use a particular service center.
In non-EU countries, for example, in Eastern Europe, references to the type of warranty, requirements for a warranty sticker on the product and requirements imposed on manufacturers, importers and sellers in relation to warranty stickers can be found in consumer protection or unfair competition legislation. Further, in some jurisdictions (e.g. Belarus, Ukraine), requirements for a warranty sticker (for example, having the full name of the product manufacturer, its address, phone number, fax number and e-mail address) are set out in special acts with detailed rules. Moreover, although warranty stickers are typically regulated by consumer protection laws, they have also been regulated by technical safety standards (e.g. in Moldova).
In other parts of the world, regulators still impose requirements which may cause a warranty sticker to be applied. For example, in Russia, it is a common practice that if a warranty sticker is missing , the warranty for the product will be canceled. This practice, however, was officially invalidated by a new Russian Government Resolution in May 2014 – although it remains to be seen how this regulation will be applied in practice.
In Asia, more countries are taking action. In China, the National Development and Reform Commission announced in July 2014 that any text such as "warranty sticker" or "warranty void if removed", regardless of the language, on the displaying side of a consumer good is banned. Sellers of consumer goods are thus required to block the viewing of the words "Warranty Void if Removed" or equivalent texts in any language to ensure that the warranty provided to consumers is always valid.
Further developments can also be expected in India. The Department of Consumer Affairs issued "Guidelines for Grievance Redressal Mechanism for E-commerce Companies" in late 2013. These guidelines include a prohibition on imposing any liability on customers for using packaged products except for the price of repair, return or replacement, and stipulate that a warranty must be provided to consumers in the event of a defective product.
However, despite these affirmative developments, many countries still allow the use of warranty stickers. Manufacturers therefore often employ a local legal entity to review their goods. Of course, if no local legal entity is available, the manufacturer or importer must decide on its own what action to take.