[Federal Register Volume 81, Number 179 (Thursday, September 15, 2016)]
[Rules and Regulations]
[Pages 63664-63670]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-21853]



[[Page 63663]]

Vol. 81

Thursday,

No. 179

September 15, 2016

Part IV





Federal Trade Commission





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16 CFR Parts 701 and 702





Disclosure of Written Consumer Product Warranty Terms and Conditions; 
Pre-Sale Availability of Written Warranty Terms; Final Rule

  Federal Register / Vol. 81 , No. 179 / Thursday, September 15, 2016 / 
Rules and Regulations  

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FEDERAL TRADE COMMISSION

16 CFR Parts 701 and 702

RIN 3084-AB24 and AB25


Disclosure of Written Consumer Product Warranty Terms and 
Conditions; Pre-Sale Availability of Written Warranty Terms

ACTION: Final rule.

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SUMMARY: In this document, the Federal Trade Commission (FTC or 
Commission) adopts amendments to the rules on Disclosure of Written 
Consumer Product Warranty Terms and Conditions (Disclosure Rule) and 
Pre-Sale Availability of Written Warranty Terms (Pre-Sale Availability 
Rule) to give effect to the E-Warranty Act, which allows for the use of 
Internet Web sites to disseminate warranty terms to consumers in some 
circumstances.

DATES: Effective on October 17, 2016.

ADDRESSES: This document is available on the Internet at the 
Commission's Web site at www.ftc.gov. The complete record of this 
proceeding, including the final amendments to the Disclosure Rule and 
the Pre-Sale Availability Rule and the Statement of Basis and Purpose, 
is available at www.ftc.gov.

FOR FURTHER INFORMATION CONTACT: Gary Ivens, (202) 326-2330, Attorney, 
Division of Marketing Practices, Federal Trade Commission, 600 
Pennsylvania Ave. NW., Washington, DC 20580.

SUPPLEMENTARY INFORMATION: This document states the basis and purpose 
for the Commission's decision to adopt amendments to the Disclosure 
Rule and the Pre-Sale Availability Rule that were proposed and 
published for public comment in the Federal Register on May 24, 
2016.\1\ After careful review and consideration of the entire record on 
the issues presented in this rulemaking proceeding, including seven 
public comments submitted by a variety of interested parties,\2\ the 
Commission has decided to adopt, with some modifications, the proposed 
amendments to the Disclosure Rule and the Pre-Sale Availability Rule 
intended to implement the E-Warranty Act and effectuate its purpose. 
Beginning on October 17, 2016, warrantors and sellers will be required 
to comply with the amended Disclosure Rule and the amended Pre-Sale 
Availability Rule.
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    \1\ 81 FR 32680 (May 24, 2016).
    \2\ Comments are available at https://www.ftc.gov/policy/public-comments/initiative-652.
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Background

I. The Magnuson-Moss Warranty Act and the E-Warranty Act

    The Magnuson-Moss Warranty Act (MMWA) authorizes the Commission to 
prescribe rules requiring disclosure of warranty terms and requiring 
that the terms of any written warranty on a consumer product be made 
available to the prospective purchaser prior to the sale of the 
product.\3\ In 1975, the Commission issued both the Disclosure Rule, 
which establishes disclosure requirements for written warranties, and 
the Pre-Sale Availability Rule, which includes requirements for sellers 
and warrantors to make the text of any warranty on a consumer product 
available to the consumer prior to sale. Among other things, the Pre-
Sale Availability Rule requires most sellers to make warranties readily 
available either by: (1) Displaying the warranty document in close 
proximity to the product or (2) furnishing the warranty document on 
request and posting signs in prominent locations advising consumers 
that warranties are available. The Pre-Sale Availability Rule requires 
warrantors to provide materials to enable sellers to comply with the 
Rule's requirements. The Rule also sets out how sellers should make 
warranty information available pre-sale if selling the product at 
retail locations, through catalogs, mail order, or door-to-door sales.
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    \3\ 15 U.S.C. 2302.
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    The E-Warranty Act \4\ (E-Warranty or the Act) amends the MMWA to 
allow, under certain circumstances, the posting of warranties on 
warrantors' Internet Web sites as an alternative method of complying 
with the Pre-Sale Availability Rule, and to permit sellers to make 
warranty terms available to consumers pre-sale via electronic means 
where the warrantor has chosen the online method. E-Warranty charges 
the Commission with promulgating consistent changes to the Disclosure 
Rule and the Pre-Sale Availability Rule within one year of the Act's 
passage.\5\
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    \4\ E-Warranty Act, Public Law 114-51 (Sept. 24, 2015).
    \5\ Under the E-Warranty Act, the Commission must issue the 
final amended rules by September 24, 2016.
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II. Amending the Disclosure Rule and the Pre-Sale Availability Rule in 
Accordance With E-Warranty

A. The Disclosure Rule

    The Disclosure Rule \6\ establishes disclosure requirements for 
written warranties on consumer products that cost more than $15.00.\7\ 
In 1975, the Commission issued the Disclosure Rule as authorized by 
Congress in the MMWA.\8\
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    \6\ 16 CFR part 701.
    \7\ 40 FR 60171-60172 (Dec. 31, 1975)
    \8\ 15 U.S.C. 2302.
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    The Disclosure Rule also specifies the aspects of warranty coverage 
that must be disclosed in written warranties, as well as the exact 
language that must be used for certain disclosures with respect to 
state law regarding the duration of implied warranties and the 
availability of consequential or incidental damages. Under the 
Disclosure Rule, warranty information must be disclosed in simple, 
easily understandable, and concise language in a single document. 
Similarly, the warrantor must disclose any limitations on the duration 
of implied warranties ``on the face of the warranty,'' as mandated by 
MMWA.\9\ In promulgating the Disclosure Rule, the Commission determined 
that certain material facts about product warranties must be disclosed 
because the failure to do so would be deceptive or misleading.
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    \9\ See 15 U.S.C. 2308(b).
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    To comply with E-Warranty, the Commission revises the Disclosure 
Rule to specify that, for a warranty posted on an Internet Web site or 
displayed electronically, disclosures statutorily mandated to appear 
``on the face of the warranty'' must be placed in close proximity to 
the location where the text of the warranty terms begins.

B. The Pre-Sale Availability Rule

    The Pre-Sale Availability Rule \10\ details the methods by which 
warrantors and sellers must provide warranty terms to consumers prior 
to sale of the warranted item. The Commission issued the Pre-Sale 
Availability Rule in 1975 in response to a mandate from Congress as set 
forth in the MMWA.
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    \10\ 16 CFR part 702.
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    In accordance with the mandate in E-Warranty, the Commission 
revises the Pre-Sale Availability Rule to allow warrantors to post 
warranty terms on Internet Web sites if they also provide a non-
Internet based method for consumers to obtain the warranty terms and 
satisfy certain other conditions, and to allow certain sellers to 
display warranty terms pre-sale in an electronic format if the 
warrantor has used the online method of disseminating warranty terms.
    As discussed more fully below, these rule revisions are required by 
E-Warranty.

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III. The Commission's Rule Changes and Analysis of Comments

    The existing version of the Pre-Sale Availability Rule requires 
sellers to provide warranty terms pre-sale to consumers and allows them 
to choose among a variety of methods for doing so, including displaying 
the warranty terms in close proximity to the warranted products, 
furnishing them upon request prior to sale and posting prominent signs 
to let customers know that warranties can be examined upon request, 
printing them in a catalog in close conjunction to the warranted 
product, or having them available for consumers' review in a door-to-
door sales presentation. The amendments will allow sellers the 
additional option of using an electronic method to make warranty terms 
available to consumers at the point of sale for warranted products 
where the warrantor has chosen the online method of disseminating the 
warranty terms.
    Warrantors currently must provide sellers the warranty materials 
sellers need to meet their requirements under the Pre-Sale Availability 
Rule, such as providing copies of the warranty, providing warranty 
stickers, tags, signs, or posters, or printing the warranty on the 
product's packaging. The amendments do not alter the duties of 
warrantors who do not choose to employ an online method to supply 
warranty terms. E-Warranty provides that warrantors who choose the 
online method of disseminating warranty terms must provide consumers 
the address of the Internet Web site where the specific product's 
warranty terms can be reviewed and also supply a non-Internet method, 
such as a phone number or mailing address, for consumers to request the 
warranty terms. Under the amendments, if a consumer or seller \11\ 
makes such a request, the warrantor must provide the warranty terms 
promptly and free of charge.
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    \11\ The revised rule gives sellers the option of requesting the 
warranty terms free of charge from the warrantor because not all 
sellers have the ability to provide warranty terms pre-sale using 
electronic means when the warrantor has chosen the online method to 
supply warranty terms. For example, a small seller may not have 
Internet access or electronic devices to download and display 
warranty terms for consumers' review at the point of sale. Those 
sellers' duties to have warranty terms available pre-sale, however, 
have not changed under E-Warranty. The Commission believes that 
requiring warrantors to supply sellers with a hard copy of warranty 
terms upon request, in order to allow sellers to make them available 
for consumers' review at the point of sale, effectuates Congress's 
desire to ensure the continued availability of pre-sale warranty 
terms.
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    The first rule revision alters Sec.  701.1 to add a definition of 
the term ``manufacturer'' at Sec.  701.1(g) (defining manufacturer as 
``any person engaged in the business of making a consumer product''), 
add that term in the definition of ``warrantor,'' and re-letter the 
paragraphs in Sec.  701.1 to account for the additional definition. The 
Commission makes these revisions in light of E-Warranty's use of the 
term ``manufacturer.'' \12\
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    \12\ The Retail Industry Leaders Association (RILA) suggests 
adding the term ``manufacturer'' to the definition of ``warrantor'' 
in Sec.  701.1, to match the proposed revised definition of 
``warrantor'' in Sec.  702.1. Comment of RILA (available at https://www.ftc.gov/policy/public-comments/2016/06/17/comment-00005) at 2. 
The Commission proposed this revision in the original NPRM, as noted 
in the description of the Commission's Proposed Rule Changes. See 81 
FR at 32681. However, a scrivener's error led to the deletion of the 
related rule text in the amendatory instructions.
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    The next revision adds a new Sec.  701.1(j)(3) to specify that, in 
conjunction with warranty terms posted on an Internet Web site or 
displayed electronically, the phrase ``on the face'' means in close 
proximity to the location where the warranty terms begin. Although the 
Disclosure Rule does not explicitly mention online commerce, it applies 
to the sale of warranted consumer products online.\13\ Commission staff 
recently updated the .Com Disclosures to provide additional guidance on 
disclosure obligations in the online context. As stated in the updated 
.Com Disclosures, warranties disseminated online are no different from 
paper versions and the same rules apply.\14\
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    \13\ One commenter suggests that the Commission also consider 
amending Sec.  701.3(a) to define the term ``document'' or ``single 
document'' to clarify how a warrantor can provide required 
information electronically in a ``single document'' pursuant to that 
paragraph. See Comment of the National Automobile Dealers 
Association (NADA) (available at https://www.ftc.gov/policy/public-comments/2016/06/17/comment-00007) at 2. The Commission believes 
that these terms have sufficiently understood common meanings and 
declines to make the suggested amendment.
    \14\ See FTC, .Com Disclosures: How to Make Effective 
Disclosures in Digital Advertising (2013), at 3, fn.7, available at 
https://ftc.gov/os/2013/03/130312dotcomdisclosures.pdf. The RILA 
comment at 2 asks the Commission to clarify whether and how 
Internet-only or omni-channel retailers have to comply with the Pre-
Sale Availability Rule. These sellers' obligations remain the same 
under E-Warranty--they must make the warranty terms available to 
consumers pre-sale. The requirement to make warranties available at 
the point of purchase can be accomplished easily with respect to 
online sales by, for example, using a clearly-labeled hyperlink, in 
close proximity to the description of the warranted product, such as 
``get warranty information here'' to lead to the full text of the 
warranty, and presenting the warranty in a way that it can be 
preserved, either by downloading or printing, so consumers can refer 
to it after purchase. Id. However, sellers at brick-and-mortar 
locations could not comply with the seller's Pre-Sale Availability 
Rule obligations simply by referring the consumer to a Web site 
where the warranty could be found, as this would conflict with 
Congress's mandate that the online method not supplant the seller's 
duty to provide warranty terms at the point of sale.
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    The next revision is to Sec.  702.1(d) to include the manufacturer 
in the definition of ``warrantor.'' The Commission makes this revision 
to comport with E-Warranty's use of the term ``manufacturer.'' The next 
revision adds a new Sec.  702.1(g) to define a ``manufacturer,'' in 
accordance with the addition of the term ``manufacturer'' in Sec.  
701.1(g), as ``any person engaged in the business of making a consumer 
product.''
    The revisions to Sec.  702.3(a) allow sellers to provide warranty 
terms pre-sale through electronic means if the warrantor of the product 
has chosen the online method.\15\ If a seller uses an electronic means 
of displaying the warranty terms, that seller must still make the 
warranty text readily available for consumers' examination prior to 
sale. The changes to Sec.  702.3(b)(1)(i) will remove superfluous 
instances of the term ``and/or'' and ``and'' in that paragraph, as the 
prefatory language already notes that the warrantor must use one or 
more of the methods described in that paragraph to provide sellers with 
the prescribed warranty materials.
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    \15\ NADA asks whether a dealer may provide a physical copy of 
the manufacturer's warranty upon request, even if the manufacturer 
has elected the online method. See NADA comment at 3. If the 
warrantor has elected the online method, the seller can choose 
between providing the warranty terms through electronic means or 
through other means (such as furnishing a hard copy).
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    The next revision adds a new Sec.  702.3(b)(2) to reflect that, as 
an alternative method of compliance with the Pre-Sale Availability 
Rule, a warrantor may refer consumers to an accessible online copy of 
the warranty by providing to the consumer the Internet address where 
the specific product's warranty has been posted in a clear and 
conspicuous manner. To employ this option, the warrantor, among other 
duties, must supply in the product manual, or on the product or product 
packaging, the Internet address where the consumer can review and 
obtain the specific product's warranty terms, as well as the phone 
number, postal mailing address, or other reasonable non-Internet based 
means for the consumer or seller to request a free copy of the warranty 
terms.
    Revised Sec.  702.3(b)(2)(iv) requires any warrantor utilizing the 
online method to provide sufficient information with the consumer 
product or on the Internet Web site so that the consumer can readily 
locate the specific product's warranty terms. The Commission believes 
that this requirement comports

[[Page 63666]]

with Congress's directive that online warranties be available to 
consumers ``in a clear and conspicuous manner.'' \16\ Similarly, if a 
consumer or seller requests via phone, mail, or other reasonable non-
Internet-based means, that the warrantor provide a hard copy of the 
warranty, revised Sec.  702.3(b)(2)(ii) requires the warrantor to 
provide it promptly and free of charge, which comports with existing 
pre-sale requirements for catalog and mail order sales.\17\
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    \16\ See 15 U.S.C. 2302(b)(4)(A)(i).
    \17\ NADA asks how the warrantor's duty under Sec.  
702.3(b)(2)(ii) to provide a hard copy of the warranty upon request 
interacts with the seller's duty under Sec.  702.3(a)(2) to furnish 
the warranty terms upon request prior to sale. See NADA comment at 
3-4. The seller's duty to furnish warranty terms for the consumer to 
review pre-sale in Sec.  702.3(a)(2) requires only that the seller 
make the warranty terms available for review at the place of sale; 
the warrantor's duty to provide a hard copy of the warranty upon 
request (where the warrantor has elected the online method for 
providing warranty terms) ensures that consumers without the ability 
to obtain warranty terms from a Web site have the ability to secure 
a hard copy of the warranty terms. The warrantor's duty under Sec.  
702.3(b)(2)(ii) stems from E-Warranty's requirement that consumers 
have a ``reasonable non-Internet based means of contacting the 
manufacturer to obtain and review'' warranty terms. 15 U.S.C. 
2302(b)(4)(A)(ii)(II) (emphasis added). The Commission interprets 
this statutory language to mean that, if a warrantor chooses the 
online method and a consumer uses the non-Internet based means to 
contact the warrantor and request a copy of the warranty, the 
warrantor must provide the warranty terms to the consumer. This new 
requirement under the E-Warranty Act is independent of the existing 
requirement under the MMWA and current Sec.  702.3(a)(2) that 
sellers must furnish the warranty terms upon request prior to sale.
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    The next revision alters Sec.  702.3(c)(2)(i)(B) to reflect that a 
mail-order or catalog seller must provide the address of the Internet 
Web site of the warrantor where the warranty terms can be reviewed (if 
such Internet Web site exists), as well as either a phone number or 
address that the consumer can use to request a free copy of the 
warranty, and notes that the seller may provide the copy electronically 
if the product's warrantor has used the online method.
    Finally, the next revision alters Sec.  702.3(d)(2) to reflect that 
a door-to-door seller may supply the warranty terms for the consumer's 
pre-sale review through an electronic option if the product's warrantor 
has employed the online method.
    The Commission received seven comments in response to the Notice of 
Proposed Rulemaking. In response to one comment, the Commission makes 
one change in the final version of the Pre-Sale Availability Rule, as 
discussed below.
    Comments generally supported the Commission's proposals.\18\ One 
commenter requests the Commission to clarify whether MMWA applies to 
all warranties required by other federal laws.\19\ The Commission notes 
that Sec.  700.1(a) of the Interpretations of Magnuson-Moss Warranty 
Act defines the scope of the MMWA and states it ``applies to written 
warranties on tangible personal property which is normally used for 
personal, family, or household purposes.'' \20\ The MMWA covers 
warranties required by other federal laws only to the extent such 
warranties fall within the scope of Sec.  700.1(a).
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    \18\ See comments of Linda Gibson (available at https://www.ftc.gov/policy/public-comments/2016/05/19/comment-00001), 
Catherine Corn (available at https://www.ftc.gov/policy/public-comments/2016/06/15/comment-00002), Alliance of Automobile 
Manufacturers (available at https://www.ftc.gov/policy/public-comments/2016/06/17/comment-00003), RILA.
    \19\ Comment of Erin Ashcroft (available at https://www.ftc.gov/policy/public-comments/2016/06/17/comment-00006). See also 42 U.S.C. 
7541 and 40 CFR 1054.120.
    \20\ See 16 CFR 700.1(a).
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    Another commenter suggests that the Commission provide guidance as 
to the meaning of the term ``accessible digital format,'' and urges the 
Commission to be reasonable in interpreting how warranty terms remain 
accessible on Web sites, how hard copies of warranties are to be 
provided, and the means by which the addresses of warranty Web sites 
may be accessed.\21\ The Commission agrees that providing an electronic 
warranty in an ``accessible digital format'' generally means the 
electronic warranty should be readily available to consumers on the 
warrantor's Web site. Given the speed of technological innovation, the 
Commission believes defining the term might impose unnecessary 
limitations on the ability of companies to comply with E-Warranty using 
future digital innovations.\22\ The commenter's remaining comments 
about the need for practical and flexible interpretations of the Rule 
raise issues that the Commission will consider when determining whether 
to bring an enforcement action for potential violations of E-Warranty 
and the related rules.
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    \21\ Comment of the Consumer Technology Association (CTA) 
(available at https://www.ftc.gov/policy/public-comments/2016/06/17/comment-00004).
    \22\ The CTA comment at 3-4 also suggests that the Commission 
permit display, in addition to the URL of the warranty terms, of 
machine-readable symbols, such as bar codes or QR codes, for 
consumers to access and review warranty terms. The Commission agrees 
that inclusion of these symbols with the URL could assist consumers 
seeking to access and review warranty terms, but declines, at this 
time, to permit such additional methods to replace the display of 
the URL containing the warranty terms for warrantors relying on the 
option set forth in Sec.  702.3(b)(2). Warrantors, however, may 
display such symbols in addition to displaying the URL containing 
the warranty terms.
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    Two commenters urge the Commission to adopt a rule that would allow 
sellers to refer consumers to an Internet Web site where the warrantor 
has posted warranty terms to satisfy sellers' obligations under the 
Pre-Sale Availability Rule.\23\ The Commission declines to do so. 
Congress's intention in enacting E-Warranty was not to disturb 
prospective purchasers' ability to obtain the full warranty terms at 
the point of sale, as envisioned by the Pre-Sale Availability Rule.\24\ 
While consumers with electronic devices and Internet connectivity may 
be able to review warranty terms at the point of sale by visiting the 
Web site that contains the warranty terms, not all consumers have such 
devices and Internet connectivity.
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    \23\ RILA comment at 2; NADA comment at 3 (questioning whether a 
seller could comply by referring a prospective buyer to the warranty 
Web site).
    \24\ See, e.g., H. Rpt. 114-243 (Sept. 8, 2015) at 2-3 (``H.R. 
3154 would require the FTC to update the warranty rules to allow 
manufacturers to fulfill their obligations by making warranty 
information available online or through other electronic means while 
ensuring that consumers[] and prospective consumers remain able to 
obtain copies of warranties at the point of sale . . . .'').
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    NADA comments that use of the past tense in the phrase ``specific 
product purchased by the consumer'' in Sec.  702.3(b)(2)(iv) may cause 
confusion in the Pre-Sale Availability Rule,\25\ because consumers 
could choose to review these warranty terms both before and after a 
sale. To remove any confusion, the Commission will alter the language 
for

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the final rule, replacing the phrase ``specific product purchased by 
the consumer'' with ``specific warranted product.''
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    \25\ NADA comment at 2. The NADA comment raises several other 
issues. For example, NADA asks whether a seller can fulfill its 
obligation under Sec.  702.3(a) by merely supplying the prospective 
purchaser with the URL of the warranty terms' Web site (e.g., a URL 
printed on a sign displayed in close proximity to the vehicle or 
printed in the owner's manual). See NADA comment at 3-4. Such an 
approach would be inconsistent with Congress's intent in passing E-
Warranty. As noted in the foregoing footnote and accompanying text, 
Congress's passage of E-Warranty did not alter the requirement that 
warranty terms be available at the point of sale. If the warrantor 
has opted to use the online method and the seller cannot or chooses 
not to use an electronic method to display the warranty text upon 
consumers' request, the seller can ask the warrantor to supply a 
hard copy of the warranty terms to the seller, as provided in Sec.  
702.3(b)(2)(ii). NADA also asks for guidance on how dealers who 
offer their own warranties can refer to warranty information in the 
Buyers Guide that must accompany every used vehicle pursuant to the 
Used Car Rule. The Commission notes that there is no conflict 
between the language in the Buyers Guide, which requires the dealer 
merely to inform a prospective purchaser whether the automobile for 
sale has a warranty, and the obligations of dealers who offer their 
own warranties and choose the online method in Sec.  702.3(b)(2).
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IV. Regulatory Flexibility Act

    The Regulatory Flexibility Act \26\ (RFA) requires each agency 
either to provide an Initial Regulatory Flexibility Analysis (IRFA) 
\27\ with a proposed rule and a Final Regulatory Flexibility Analysis 
(FRFA) \28\ with the final rule, or certify that the proposed rule will 
not have a significant economic impact on a substantial number of small 
entities.\29\ The FTC does not expect that the rule revisions 
necessitated by E-Warranty will have a significant economic impact on 
small sellers and warrantors. As discussed above, the revisions will 
relieve those warrantors who choose the online method from providing 
warranty materials to certain sellers. Affected sellers, however, 
should be able easily to obtain the warranties and provide them to 
consumers for review at the point of sale, either by obtaining the 
warranties from the warrantor's Web site or by requesting a hard copy 
from the warrantor. Also, the amendments allow sellers of goods whose 
warrantors have employed the online method the ability to provide pre-
sale warranty terms electronically. Thus, under the revised Rule, a 
small seller that is in compliance with current law would need to take 
only minimal additional action to remain compliant.
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    \26\ 5 U.S.C. 601-612.
    \27\ 5 U.S.C. 603.
    \28\ 5 U.S.C. 604.
    \29\ 5 U.S.C. 605.
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    The small warrantor that does not choose the online method to 
supply warranty terms can remain compliant simply by continuing with 
its existing practices. If a small warrantor has previously been 
including the entire warranty with the warranted product and supplying 
warranty materials so that sellers can meet Pre-Sale Availability Rule 
obligations, but instead elects the online method under the amendments, 
the small warrantor will have a smaller overall compliance burden 
because it will be able to provide the warranty terms solely on an 
Internet Web site. That small warrantor, however, will likely incur 
some costs to establish a phone number, address, or other non-Internet 
based method that consumers and sellers can use to request a free hard 
copy of warranty terms.
    With respect to the amendments to the Disclosure Rule, a small 
entity that is in compliance with current law need not take any 
different or additional action under the revised rule, as the revisions 
merely explain how the ``on the face of the warranty'' requirement 
applies to online warranty terms.
    Accordingly, this document serves as notice to the Small Business 
Administration of the FTC's continued certification that the amendments 
will not have a significant economic impact on a substantial number of 
small entities.\30\ To ensure the accuracy of this certification, the 
Commission sought comment on whether the proposed amendments would have 
a significant impact on a substantial number of small entities, 
including specific information on the number of entities that would be 
covered by the proposed amendments, the number of these companies that 
are small entities, and the average annual burden for each entity. 
Although the Commission certified under the RFA that the proposed 
amendments would not, if promulgated, have a significant impact on a 
substantial number of small entities, it included an IRFA in the NPRM 
and solicited public comment on it. None of the public comments 
received addressed the IRFA. The Commission continues to believe that 
the amendments it is adopting will not have a significant economic 
impact upon small entities, but nonetheless in the interest of caution 
is providing this FRFA.
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    \30\ The Commission's estimate of the number of small entities 
potentially affected by the rule amendments is set forth infra.
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A. Need for, and Objectives of, the Rule Amendments

    As outlined in Sections II through III above, the amendments to the 
Disclosure Rule and Pre-Sale Availability Rule are made in connection 
with Congress's passage of E-Warranty. E-Warranty allows, under certain 
circumstances, the posting of warranties on manufacturers' Web sites as 
an alternative method of complying with the Pre-Sale Availability Rule, 
and allows certain sellers to use an electronic method to supply pre-
sale warranty terms.
    The objective of the rule amendments is to provide warrantors an 
online method of complying with the Disclosure Rule and the Pre-Sale 
Availability Rule, allow certain sellers to use an electronic method to 
provide pre-sale warranty terms to consumers, and to define what ``on 
the face'' of an online warranty means in the Disclosure Rule.

B. Significant Issues Raised by Comments in Response to the Proposed 
Rule Amendments

    The Commission's responses to issues raised by commenters are 
discussed above in Section III, including issues about (1) the 
interaction between a warrantor's duty to provide a hard copy of an 
online warranty upon request to either a seller or a prospective 
purchaser of a warranted product, and a seller's duty to furnish the 
warranty terms upon request prior to sale, and (2) whether sellers may 
satisfy their obligations under the Pre-Sale Availability Rule simply 
by referring consumers to an Internet Web site where the warrantor has 
posted warranty terms.
    The Commission notes that the Chief Counsel for Advocacy of the 
Small Business Administration did not submit comments on the revisions.

C. Description and Estimate of the Number of Small Entities to Which 
the Rule Amendments Will Apply

    The small entities to which the Disclosure Rule applies are 
warrantors. The small entities to which the Pre-Sale Availability Rule 
applies are warrantors and sellers of warranted consumer products 
costing more than fifteen dollars. The Disclosure Rule and the Pre-Sale 
Availability Rule currently define a ``warrantor'' as ``any supplier or 
other person who gives or offers to give a written warranty.'' The Pre-
Sale Availability Rule defines a ``seller'' as ``any person who sells 
or offers for sale for purposes other than resale or use in the 
ordinary course of the buyer's business any consumer product.'' The 
amendments add ``manufacturers'' to both Rules' definitions of 
``warrantor.'' Sellers include retailers, catalog and mail order 
sellers, and door-to-door sellers.
    In 2014, the Commission estimated that there were 13,395 small 
manufacturers (warrantors) and 452,553 small retailers (sellers) 
impacted by the Rules.\31\
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    \31\ See 79 FR 8185 (Feb. 11, 2014), which relates to the Pre-
Sale Availability Rule, but should also apply to the Disclosure 
Rule.
---------------------------------------------------------------------------

D. Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements

    The amendments to the Disclosure Rule do not impose any new 
reporting, recordkeeping, or other compliance requirements (e.g., new 
disclosures). Rather, the amendments merely explain how the existing 
``on the face of the warranty'' requirement for disclosures applies to 
online and electronic warranty terms (i.e., the required

[[Page 63668]]

disclosures must be in close proximity to the warranty terms).
    The Pre-Sale Availability Rule imposes disclosure obligations on 
sellers and warrantors of warranted consumer goods actually costing 
more than fifteen dollars. Specifically, sellers must make warranty 
terms available prior to sale. Under the rule amendments, if the 
warrantor has chosen the online method, sellers may incur minimal 
additional costs if they need to request the warranty terms from the 
warrantor to provide them to consumers, but sellers will also have 
additional flexibility to make pre-sale warranty terms available to 
consumers electronically. Warrantors must either continue to provide 
sellers with warranty materials for sellers' use at the point of sale 
as they do under the current rule, or, under the revision, provide the 
address of the warrantor's Internet Web site where consumers can review 
and obtain warranty terms in the product manual or on the product or 
product packaging, and the warrantor's contact information for the 
consumer to obtain the warranty terms via a non-Internet method.
    Neither the existing Pre-Sale Availability Rule nor the amendments 
require sellers or warrantors to retain more records than may be 
necessary to provide consumers the warranty terms. The small entities 
potentially covered by these amendments will include all such entities 
subject to the Rules, including suppliers, manufacturers and others who 
warrant consumer goods costing more than fifteen dollars and retailers, 
catalog and mail-order sellers, and door-to-door sellers who offer the 
warranted products. The professional skills necessary for compliance 
with the Rules as modified by the amendments would include (1) 
warrantors' office and administrative support staff to receive 
consumers' and sellers' requests for warranty terms using a non-
Internet based method and (2) sellers' office and administrative 
support staff to request warranty terms for pre-sale availability to 
consumers for warranted goods where the warrantor has elected only the 
online method and the seller cannot or chooses not to display the 
warranty terms electronically.

E. Steps Taken by the Agency To Minimize the Significant Impact, If 
Any, on Small Entities, Consistent With the Stated Objectives of 
Applicable Statute(s)

    Commenters urged the Commission to adopt a rule that would allow 
sellers to comply with their obligations under the Pre-Sale 
Availability Rule simply by referring consumers to an Internet Web site 
where the warrantor has posted warranty terms. In a recent rule review 
of the Pre-Sale Availability Rule, the Commission considered and 
declined to adopt similar suggestions by commenters that offline 
sellers be allowed to comply with the Rule by advising buyers of the 
availability of the warranty at a particular Web site.\32\ The 
Commission noted that, because the intent of the Rule is to make 
warranty information available at the point of sale, a seller could not 
comply with its Pre-Sale Availability Rule obligations simply by 
referring the consumer to a Web site where the warranty could be 
found.\33\ Those same considerations still apply in the present 
rulemaking proceeding. The final rule amendments comport with 
Congress's desire to allow warrantors the option of providing warranty 
terms online, as long as warrantors offer a non-Internet based method 
for consumers to obtain the warranty terms, as well as with Congress's 
mandate that the online method not supplant the seller's duty to 
provide warranty terms at the point of sale.
---------------------------------------------------------------------------

    \32\ 80 FR 42710, 42717 (July 20, 2015).
    \33\ Id.
---------------------------------------------------------------------------

    Because the rule amendments provide an alternative means of 
compliance that is available to businesses of all sizes, it is not 
necessary to provide a specific small entity exemption.
    The Commission believes the final rule amendments will be minimally 
burdensome for small businesses and that they comply with Congress's 
mandate to allow warrantors to post warranty terms on an Internet Web 
site and certain sellers to employ a pre-sale electronic display 
option, while ensuring pre-sale availability of warranty terms at the 
point of sale.

V. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA),\34\ federal 
agencies are generally required to seek Office of Management and Budget 
(OMB) approval for information collection requirements prior to 
implementation. Under the PRA, the Commission may not conduct or 
sponsor, and, notwithstanding any other provision of law, a person is 
not required to respond to an information collection, unless the 
information displays a valid control number assigned by OMB.
---------------------------------------------------------------------------

    \34\ 44 U.S.C. 3501-3520.
---------------------------------------------------------------------------

    These amendments revise 16 CFR parts 701 and 702. The collection of 
information related to the Disclosure Rule has been previously reviewed 
and approved by OMB in accordance with the PRA under OMB Control Number 
3084-0111. The collection of information related to the Pre-Sale 
Availability Rule has been previously reviewed and approved by OMB in 
accordance with the PRA under OMB Control Number 3084-0112. As 
explained below, the amendments only slightly modify or add to 
information collection requirements that were previously approved by 
OMB. Under these amendments, a warrantor will be permitted, but not 
required, to use an online method for supplying warranty terms. The 
Commission does not believe that these amendments would impose any new 
or substantively revised collections of information as defined by the 
PRA. None of the public comments received addressed the PRA.
    Under the most recent proposed clearance for the Pre-Sale 
Availability Rule, FTC staff estimated total annual hours burden to be 
2,446,610. This figure represented a 20% reduction from the 2010 
estimate based in large part on the growth of online sales and the 
online posting of warranty terms related to those sales. The most 
recent estimate included 2,315,608 hours for retailers and 131,002 
hours for manufacturers. Staff estimated the total annual labor cost in 
2014 to be $51,379,000 (rounded to the nearest thousand).\35\
---------------------------------------------------------------------------

    \35\ See 79 FR 8185 (Feb. 11, 2014).
---------------------------------------------------------------------------

    In the most recently proposed clearance for the Pre-Sale 
Availability Rule, Commission staff also stated its belief that total 
annual capital or other non-labor costs are de minimis because the vast 
majority of sellers and warrantors already have developed systems to 
provide the information the rule requires. Compliance by sellers 
typically entails keeping warranties on file, in binders or otherwise, 
and posting an inexpensive sign indicating warranty availability. 
Warrantor compliance under the revisions entails providing sellers with 
a copy of the warranties together with the product or providing with 
the warranted good the address of the warrantor's Internet Web site 
where the consumer can review and obtain the warranty terms, along with 
the contact information where the consumer may use a non-Internet based 
method to obtain a free copy of the warranty terms. Sellers of 
warranted goods for which the warrantor has chosen the online method 
may incur a slightly increased burden because the seller will have to 
ensure it provides consumers a method of reviewing the warranty terms 
at the point of sale, prior to sale. That burden, however, should be 
minimal, given that the warrantor will have to make the warranty terms 
available on an Internet Web site, and given the provision

[[Page 63669]]

requiring the warrantor to supply a hard copy of the warranty terms, 
promptly and free of charge, in response to a seller's request. In 
addition, any burden on sellers will be offset by sellers having 
additional flexibility to make pre-sale warranty terms available to 
consumers electronically. Commission staff believes that, in light of 
the amendment, annual capital or other non-labor costs will remain de 
minimis.

List of Subjects

16 CFR Part 701

    Trade practices, Warranties.

16 CFR Part 702

    Trade practices, Warranties.

Authority and Issuance

    For the reasons set forth in the preamble, the Commission amends 16 
CFR parts 701 and 702 as follows:

PART 701--DISCLOSURE OF WRITTEN CONSUMER PRODUCT WARRANTY TERMS AND 
CONDITIONS

0
 1. The authority citation for part 701 continues to read as follows:

    Authority:  15 U.S.C. 2302 and 2309.


0
 2. Amend Sec.  701.1 by redesignating paragraphs (g) through (i) as 
paragraphs (h) through (j), adding new paragraph (g), revising 
paragraph (h), and revising redesignated paragraph (j) to read as 
follows:


Sec.  701.1  Definitions.

* * * * *
    (g) Manufacturer means any person engaged in the business of making 
a consumer product.
    (h) Warrantor means any supplier, manufacturer, or other person who 
gives or offers to give a written warranty.
* * * * *
    (j) On the face of the warranty means:
    (1) Where the warranty is a single sheet with printing on both 
sides of the sheet or where the warranty is comprised of more than one 
sheet, the page on which the warranty text begins;
    (2) Where the warranty is included as part of a larger document, 
such as a use and care manual, the page in such document on which the 
warranty text begins;
    (3) Where the warranty is on an Internet Web site or displayed 
electronically, in close proximity to the location where the warranty 
text begins.

PART 702--PRE-SALE AVAILABILITY OF WRITTEN WARRANTY TERMS

0
 3. The authority for part 702 continues to read as follows:

    Authority:  15 U.S.C. 2302 and 2309.

0
 4. Amend Sec.  702.1 by revising paragraph (d) and adding paragraph 
(g) to read as follows:


Sec.  702.1  Definitions.

* * * * *
    (d) Warrantor means any supplier, manufacturer, or other person who 
gives or offers to give a written warranty.
* * * * *
    (g) Manufacturer means any person engaged in the business of making 
a consumer product.

0
 5. Revise Sec.  702.3 to read as follows:


Sec.  702.3  Pre-sale availability of written warranty terms.

    The following requirements apply to consumer products actually 
costing the consumer more than $15.00:
    (a) Duties of seller. Except as provided in paragraphs (c) through 
(d) of this section, the seller of a consumer product with a written 
warranty shall make a text of the warranty readily available for 
examination by the prospective buyer by:
    (1) Displaying it in close proximity to the warranted product 
(including through electronic or other means, if the warrantor has 
elected the option described in paragraph (b)(2) of this section), or
    (2) Furnishing it upon request prior to sale (including through 
electronic or other means, if the warrantor has elected the option 
described in paragraph (b)(2) of this section) and placing signs 
reasonably calculated to elicit the prospective buyer's attention in 
prominent locations in the store or department advising such 
prospective buyers of the availability of warranties upon request.
    (b) Duties of the warrantor. (1) A warrantor who gives a written 
warranty warranting to a consumer a consumer product actually costing 
the consumer more than $15.00 shall:
    (i) Provide sellers with warranty materials necessary for such 
sellers to comply with the requirements set forth in paragraph (a) of 
this section, by the use of one or more of the following means:
    (A) Providing a copy of the written warranty with every warranted 
consumer product;
    (B) Providing a tag, sign, sticker, label, decal or other 
attachment to the product, which contains the full text of the written 
warranty;
    (C) Printing on or otherwise attaching the text of the written 
warranty to the package, carton, or other container if that package, 
carton or other container is normally used for display purposes. If the 
warrantor elects this option a copy of the written warranty must also 
accompany the warranted product; or
    (D) Providing a notice, sign, or poster disclosing the text of a 
consumer product warranty. If the warrantor elects this option, a copy 
of the written warranty must also accompany each warranted product.
    (ii) Provide catalog, mail order, and door-to-door sellers with 
copies of written warranties necessary for such sellers to comply with 
the requirements set forth in paragraphs (c) and (d) of this section.
    (2) As an alternative method of compliance with paragraph (b)(1) of 
this section, a warrantor may provide the warranty terms in an 
accessible digital format on the warrantor's Internet Web site. If the 
warrantor elects this option, the warrantor must:
    (i) Provide information to the consumer that will inform the 
consumer how to obtain warranty terms by indicating, in a clear and 
conspicuous manner, in the product manual or on the product or product 
packaging:
    (A) The Internet Web site of the warrantor where such warranty 
terms can be reviewed, and
    (B) The phone number, the postal mailing address of the warrantor, 
or other reasonable non-Internet based means for the consumer to 
request a copy of the warranty terms;
    (ii) Provide a hard copy of the warranty terms promptly and free of 
charge upon request by a consumer or seller made pursuant to paragraph 
(b)(2)(i)(B) of this section;
    (iii) Ensure that warranty terms are posted in a clear and 
conspicuous manner and remain accessible to the consumer on the 
Internet Web site of the warrantor; and
    (iv) Provide information with the consumer product or on the 
Internet Web site of the warrantor sufficient to allow the consumer to 
readily identify on such Internet Web sites the warranty terms that 
apply to the specific warranted product.
    (3) Paragraph (a)(1) of this section shall not be applicable with 
respect to statements of general policy on emblems, seals or insignias 
issued by third parties promising replacement or refund if a consumer 
product is defective, which statements contain no representation or 
assurance of the quality or performance characteristics of the product; 
provided that
    (i) The disclosures required by Sec.  701.3(a)(1) through (9) of 
this chapter are published by such third parties in each issue of a 
publication with a general circulation, and

[[Page 63670]]

    (ii) Such disclosures are provided free of charge to any consumer 
upon written request.
    (c) Catalog and mail order sales. (1) For purposes of this 
paragraph:
    (i) Catalog or mail order sales means any offer for sale, or any 
solicitation for an order for a consumer product with a written 
warranty, which includes instructions for ordering the product which do 
not require a personal visit to the seller's establishment.
    (ii) Close conjunction means on the page containing the description 
of the warranted product, or on the page facing that page.
    (2) Any seller who offers for sale to consumers consumer products 
with written warranties by means of a catalog or mail order 
solicitation shall clearly and conspicuously disclose in such catalog 
or solicitation in close conjunction to the description of the 
warranted product, or in an information section of the catalog or 
solicitation clearly referenced, including a page number, in close 
conjunction to the description of the warranted product, either:
    (i) The full text of the written warranty; or
    (ii) The address of the Internet Web site of the warrantor where 
such warranty terms can be reviewed (if such Internet Web site exists), 
as well as that the written warranty can be obtained free upon specific 
request, and the address or phone number where such warranty can be 
requested. If this option is elected, such seller shall promptly 
provide a copy of any written warranty requested by the consumer (and 
may provide such copy through electronic or other means, if the 
warrantor has elected the option described in paragraph (b)(2) of this 
section).
    (d) Door-to-door sales. (1) For purposes of this paragraph:
    (i) Door-to-door sale means a sale of consumer products in which 
the seller or his representative personally solicits the sale, 
including those in response to or following an invitation by a buyer, 
and the buyer's agreement to offer to purchase is made at a place other 
than the place of business of the seller.
    (ii) Prospective buyer means an individual solicited by a door-to-
door seller to buy a consumer product who indicates sufficient interest 
in that consumer product or maintains sufficient contact with the 
seller for the seller reasonably to conclude that the person solicited 
is considering purchasing the product.
    (2) Any seller who offers for sale to consumers consumer products 
with written warranties by means of door-to-door sales shall, prior to 
the consummation of the sale, disclose the fact that the sales 
representative has copies of the warranties for the warranted products 
being offered for sale, which may be inspected by the prospective buyer 
at any time during the sales presentation. Such disclosure shall be 
made orally and shall be included in any written materials shown to 
prospective buyers. If the warrantor has elected the option described 
in paragraph (b)(2) of this section, the sales representative may 
provide a copy of the warranty through electronic or other means.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2016-21853 Filed 9-14-16; 8:45 am]
BILLING CODE 6750-01-P