The US Federal Trade Commission is acting against motorcycle manufacturer Harley-Davidson Motor Company Group for illegally restricting customers’ right to repair their purchased products.
The FTC’s complaints allege the company’s warranties included terms that declared the warranty void if customers use independent dealers for parts or repairs. The FTC has ordered Harley-Davidson to fix warranties by removing illegal terms and recognising the right to repair, “come clean” with customers, and ensure dealers compete fairly with independent third parties.
“Consumers deserve choices when it comes to repairing their products, and independent dealers deserve a chance to compete,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, adding other companies “that squelch consumers’ right to repair should take notice.”
According to the FTC’s complaints, Harley-Davidson imposed illegal warranty terms that voided customers’ warranties if they used entities other than the company and its authorised dealers to obtain parts or repairs. The FTC also alleged Harley-Davidson failed to fully disclose all of the terms of its warranty in a single document, requiring consumers to contact an authorised dealership for full details. The FTC further alleged these terms harm consumers and competition in multiple ways, including:
- Restricting consumers’ choices: The company improperly implied that as a condition of maintaining warranty coverage, consumers had to use its part or services for any repairs.
- Costing consumers more money: By telling consumers their warranties will be voided if they choose third-party parts or repair services, the companies force consumers to use potentially more expensive options provided by the manufacturer. This violates the Warranty Act, which prohibits these clauses unless a manufacturer provides the required parts or services for free under the warranty or is granted an exception from the FTC.
- Undercutting independent dealers: By conditioning warranties on the use of authorised service providers and branded parts, the company infringed the right of independent repairers and manufacturers to compete on a level playing field.
- Reducing resiliency: Robust competition from aftermarket part manufacturers is critical to ensuring that consumers get the replacement parts they need when they need them and are not at the mercy of branded part supply chains.
Under the FTC Act and the Warranty Act, the FTC has the authority to act against companies violating consumer protection laws, including those engaging in unfair or deceptive acts or practices. The FTC’s orders in this case are:
- Prohibit further violations: The company will be prohibited from further violations of the Warranty Act and the Disclosure Rule. It will also be prohibited from telling consumers that their warranties will be void if they use third-party services or parts, or that they should only use branded parts or authorised service providers. If the company violates these terms, the FTC will be able to seek civil penalties of up to US$46,517 per violation in federal court.
- Recognise consumers’ right to repair: The company will be required to add specific language to their warranties saying, “Taking your product to be serviced by a repair shop that is not affiliated with or an authorised dealer of [Company] will not void this warranty. Also, using third-party parts will not void this warranty.”
- “Come clean” with consumers: The company must send and post notices informing customers that their warranties will remain in effect even if they buy aftermarket parts or patronise independent repairers.
- Alert dealers to compete fairly: The company is required to direct authorised dealers to remove deceptive display materials, train and monitor employees, and not promote branded parts and dealers over third parties.