[Federal Register Volume 65, Number 92 (Thursday, May 11, 2000)]
[Notices]
[Pages 30411-30413]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-11802]


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FEDERAL TRADE COMMISSION


Public Forum: Warranty Protection for High-Tech Products and 
Services

AGENCY: Federal Trade Commission.

ACTION: Initial notice requesting academic papers and public comment 
and announcing public forum.

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SUMMARY: The Federal Trade Commission plans to hold a public forum to 
examine warranty protection for software and other computer information 
products and services that are marketed to consumers, and seeks 
academic papers and public comment to inform this examination.

DATES: Papers and written comments are requested to be submitted on or 
before September 11, 2000. The forum will be held during the fall of 
2000.

ADDRESSES: Six hard copies of each paper and written comment should be 
submitted to: Secretary, Federal Trade Commission, Room H-159, 600 
Pennsylvania Ave., NW., Washington, DC 20580. Alternatively, the 
Commission will accept papers and comments submitted to the following 
e-mail address: ``[email protected].'' The content of any 
papers or comments submitted by e-mail should be organized in 
sequentially numbered paragraphs. All submissions should be captioned 
``High-Tech Warranty Project--Comment, P994413.''
    Form and Availability of Comments: To enable prompt review and 
accessibility to the public, papers and comments also should be 
submitted, if possible, in electronic form, on either a 5\1/4\ or 3\1/
2\ inch computer disk, with a disk label stating the name of the 
submitter and the name and version of the word processing program used 
to create the document. (Programs based on DOS or Windows are 
preferred. Files from other operating systems should be submitted in 
ASCII text format.)
    Papers and written comments will be available for public inspection 
in accordance with the Freedom of Information Act, 5 U.S.C. 552, and 
Commission regulations, 16 CFR Part 4.9, on normal business days 
between the hours of 8:30 a.m. and 5:00 p.m. at Room 130, Federal Trade 
Commission, 600 Pennsylvania Avenue, NW., Washington, DC 20580. The 
Commission will make this notice and, to the extent possible, all 
papers or comments received in electronic form in response to this 
notice available to the public through the Internet at the following 
address: http://www.ftc.gov.

FOR FURTHER INFORMATION CONTACT: The exact dates, location, and 
information about public participation in the forum will be announced 
later by Federal Register notice. For questions about this request for 
academic papers and comments, contact either:

Adam Cohn, Attorney, Division of Marketing Practice, Bureau of Consumer 
protection, Federal Trade Commission, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580, telephone 202-326-3411; or
Carole Danielson, Senior Investigator, Division of Marketing Practices, 
Bureau of Consumer Protection, Federal Trade Commission, 600 
Pennsylvania Avenue, NW., Washington, DC 20580, telephone (202) 326-
3115.

SUPPLEMENTARY INFORMATION:

Background: Magnuson-Moss Warranty Act

    In 1975, Congress passed the Magnuson-Moss Warranty Act (``Act'') 
\1\ in response to a number of widespread problems consumers 
encountered when the products they purchased were defective. First, 
warranties were often very vague or extremely technical and thus 
difficult to understand and interpret. Second, companies often gave a 
narrow written warranty, but then disclaimed all implied warranties in 
the same document, thus providing the consumer with little or no 
recourse if the product turned out to be defective. Third, some 
manufacturers restricted the warranty and limited its remedies to such 
an extent that the warranty proved to be useless to consumers. Finally, 
the lack of privity with a distant manufacturer often precluded the 
consumer from seeking a remedy in court.
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    \1\ 15 U.S.C. 2301 et seq.
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    In addressing these problems, the Congress did not mandate that 
manufacturers or sellers provide written warranties on consumer 
products, nor did it mandate substantive warranty terms for consumer 
products. Rather, Congress mandated that any company that chooses to 
give a written warranty on a consumer product must follow some basic 
ground rules. As set forth in the Magnuson-Moss Warranty Act and in the 
regulations promulgated under the Act,\2\ these basic ground rules were 
designed to ensure: that warranties for consumer products be clear and 
understandable; that warranties not become vehicles to disclaim or 
otherwise restrict substantive consumer rights provided by state law; 
that warranties be available prior to sale so consumers could know the 
warranty terms before buying the product and could compare the 
warranties of different sellers; and, that sellers and manufacturers 
honor the terms of their warranties. Finally, the Act gave consumers 
the right to sue for any violation of the Act, including breach of 
express or implied warranty.
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    \2\ 16 C.F.R. parts 701, 702 and 703.
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Software and Other Computer Information Products and Services

    Today, many of the issues that were important three decades ago in 
the context of written consumer product warranties are being debated in 
the context of mass market ``shrinkwrap'' or ``clickwrap'' software 
licenses. For example, software licenses may be written in technical, 
or otherwise complicated language that some consumers might find 
difficult to understand. Additionally, just as written warranties prior 
to 1975 were sometimes used to disclaim substantive implied warranty 
protections provided by state law, some of today's mass market software 
licenses contain provisions that seek to disclaim similar state-implied 
warranty protections (e.g., fitness, merchantability). Moreover, some 
mass market software licenses may not be available for consumers to 
review until after the consumer has paid for the software. Thus, 
consumers may be unaware of the terms and conditions until after the 
product is purchased.\3\
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    \3\ Many of these issues have recently been debated in the 
context of the drafting of a proposed state law, drafted by the 
National Conference of Commissioners on Uniform State Laws (NCCUSL). 
That proposed law, entitled the ``Uniform Computer Information 
Transaction Act'' (UCITA), would, among other things, affirm the 
enforceability of mass market software licenses. Many of the 
provisions of UCITA, including the provisions dealing with mass 
market licenses, have raised concern among some consumer groups and 
law enforcement officials, including the staff of the Federal Trade 
Commission. The FTC staff advocacy letters can be found on the 
Commission's web site at http://www.ftc.gov/be/v990010.htm and 
http://www.ftc.gov/be/v980032.htm.

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[[Page 30412]]

    In seeking public comment and holding a public forum, the 
Commission hopes to facilitate discussion of how government, private 
industry, and consumer advocates can work together to ensure that 
consumers receive adequate information when purchasing software and 
other computer information products and services. Additional concerns 
include how to ensure that consumers are able to retain existing 
protections afforded by state law and compare warranty protections when 
shopping for software and other computer information products and 
services.

Invitation To Comment

    The Commission requests that interested parties, including 
academics, industry members, consumer advocates, and government 
representatives, submit academic papers or written comments on any 
issue of fact, law, or policy that may inform the Commission's 
examination of warranty protection for software and other high-tech 
consumer goods and services. Please provide copies of any studies, 
surveys, research, or other empirical data referenced in responses.
    The questions set forth below are intended only as examples of the 
issues relevant to the Commission's examination. Commenters are invited 
to discuss any relevant issue, regardless of whether it is identified 
below.

General

    1. What warranty protections exist for consumers who purchase 
software and other computer information products and services?
    2. What expectations do consumers have about reliability of 
software and other computer information products and services? Are 
these expectations met?
    3. What remedies are typically available to consumers if software 
or another computer information product or service fails to perform as 
the consumer expected?
    a. What warranty remedies are available to purchasers of such 
products and services?
    b. What remedies are supplied by state or federal law?
    c. Do consumers seek to invoke these remedies, and if so, how often 
are they successful?
    4. Are consumers able to comparison shop for different computer 
information products or services based on the terms of warranty 
coverage? Are consumers interested in doing so? Do manufacturers or 
sellers of software and other computer information products and 
services compete with each other on the basis of warranty coverage?
    5. Do the current protections encourage efficiency in the timing, 
selection, and amount of detail in information conveyed to consumers?
    6. Do existing laws and industry practices protect consumers in the 
event that software and other computer information products or services 
are defective? How often does this occur?
    7. What developments are underway by private or public entities at 
the international, national, state, or local levels that would have an 
impact on consumer's rights in the context of transactions involving 
software or other computer information products and services?
    a. How would the proposed Uniform Computer Information Transactions 
Act (UCITA) affect consumers?
    b. What role, if any, would be appropriate for the federal 
government with respect to protecting consumers who purchase software 
or other computer information products and services? What role, if any, 
would be appropriate for state and local government? Consumer groups? 
Private industry?
    c. Are there international developments prompting uniformity of 
software or other computer information products and services?

Effect of Mass Market Licenses on Warranty Protection

    8. What is the impact of characterizing a mass-market software 
transaction as a license as opposed to a sale of goods?
    a. What is the rationale for such a characterization?
    b. What are the legal implications of this characterization?
    c. How does this affect consumers?
    d. To what extent, if any, should software transactions be treated 
differently from transactions involving other intellectual property, 
such as the sale of compact discs, videocassettes, and printed books?
    e. Are some types of products involving intellectual property 
better suited to be distributed to consumers in license transactions as 
opposed to a sale of goods? Why?
    9. To what extent, if any, do mass market licenses for software 
typically create express warranties?
    10. To what extent, if any, do implied warranties arise in the 
context of mass market licenses for software?
    11. To what extent, if any, do mass market licenses for software 
typically disclaim express or implied warranties?
    12. How are consumers affected by the use of ``shrinkwrap'' or 
``clickwrap'' licenses in mass market purchases of software?
    a. How are these licenses treated under existing law--that is, to 
what extent are these licenses enforceable?
    b. What types of terms are typically included in a software 
license?
    c. What types license of terms are beneficial to consumers? What 
types of terms may cause consumer harm? What legal recourse do 
consumers have in such circumstances?
    d. To what extent are the terms of shrinkwrap or clickwrap licenses 
currently available to interested consumers prior to purchase?
    e. What is the impact of license terms mandating certain types of 
alternative dispute resolution, such as arbitration? How frequently, if 
at all, are such terms enforced by licensors?
    f. Do shrinkwrap or clickwrap licenses discourage firms from 
competing on the basis of licensing terms? If so, which terms would be 
more likely to change if there were full prior sale disclosure? Why?
    13. What role, if any, does the Magnuson-Moss Warranty Act play in 
the marketing, sale, or licensing of software or other computer 
information products or services to consumers?
    a. Is it appropriate that software be treated as a ``consumer 
product'' subject to the Act?
    b. Is it appropriate that software be treated as ``tangible 
personal property'' subject to the Act?
    c. Is it appropriate for the typical consumer transaction to 
acquire software to be treated as a ``sale'' of software subject to the 
Act?
    d. Is it appropriate that software licenses be treated as a 
``warranties'' subject to the Act?

Future Trends: High-Tech Legal Theories in the Low-Tech Marketplace

    14. Recent proposed revisions to UCC Article 2 (sale of goods) 
suggest that post-sale disclosure of terms may become acceptable in the 
sale of goods content. What would be the costs and benefits of applying 
a licensing model to goods covered by UCC Article 2? Does this suggest 
the importation of a licensing model into such sales of goods? If so, 
what effect, if any, will this have on consumers?

Public Forum

    15. What should be the primary focus and scope of the Commission's 
initial public forum on ``Warranty Protection for High-Tech Products 
and Services?''
    16. Which interests should be represented at the Commission's 
initial

[[Page 30413]]

public forum on ``Warranty Protection for High-Tech Products and 
Services?''

    Authority: 15 U.S.C. 41 et seq.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 00-11802 Filed 5-10-00; 8:45 am]
BILLING CODE 6750-01-M