In a 5-0 vote, the Federal Trade Commission approved a not-yet-published consent agreement with Harley-Davidson, and issued administrative complaints relating to warranty issues on new motorcycles, and how the warranty is impacted when an owner installs third-party parts on the motorcycle. In in the FTC asserts Harley-Davidson owners’ right to repair and add aftermarket parts without voiding the warranty.
According to an FTC statement, “Harley-Davidson failed to fully disclose all of the terms of its warranty in a single document, requiring consumers to contact an authorized dealership for full details. [Harely-Davidson was] imposing illegal warranty terms that voided customers’ warranties if they used anyone other than the companies and their authorized dealers to get parts or repairs for their products.”
According to the FTC, here are the ways consumers were harmed:
- Restricting consumers’ choices. Consumers who buy a product covered by a warranty do so to protect their own interests, not the manufacturer’s. The companies’ warranties improperly implied that as a condition of maintaining warranty coverage, consumers had to use the company’s 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 [Magnuson Moss] 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. The Warranty Act’s tying prohibition protects not just consumers, but also independent repairers and the manufacturers of aftermarket parts. By conditioning their warranties on the use of authorized service providers and branded parts, the companies infringed the right of independent repairers and manufacturers to compete on a level playing field.
- Reducing resiliency. Consumers rely on the companies’ products for emergency power and transportation. 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. More resilient and repairable products also lead to less waste in the form of products that could otherwise be fixed.
“Consumers deserve choices when it comes to repairing their products, and independent dealers deserve a chance to compete,” according to the FTC Bureau of Consumer Protection Director Samuel Levine. “These orders require Harley…to fix their warranties, come clean with consumers, and ensure fair competition with independent providers. Other companies that squelch consumers’ right to repair should take notice.”
Using powers derived from the FTC Act and the Warranty Act, the FTC issued the following orders:
- Prohibit further violations/ The companies will be prohibited from further violations of the Warranty Act, and in Harley-Davidson’s case, the Disclosure Rule. They 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 authorized service providers. If the companies violate these terms, the FTC will be able to seek civil penalties of up to $46,517 per violation in federal court.
- Recognize consumers’ right to repair. [Harley-Davidson] will be required to add specific language to [its] warranties saying, “Taking your product to be serviced by a repair shop that is not affiliated with or an authorized dealer of [Company] will not void this warranty. Also, using third-party parts will not void this warranty.”
- Come clean with consumers. Both companies must send and post notices informing customers that their warranties will remain in effect even if they buy aftermarket parts or patronize independent repairers.
- Alert dealers to compete fairly: Both companies are being required to direct authorized dealers to remove deceptive display materials, train and monitor employees, and not promote branded parts and dealers over third parties.
Commonly, buyers of new Harley-Davidsons are told that their warranties will be voided if they install aftermarket parts, such as an exhaust.
“This action taken by the FTC is a huge win for motorcycle riders,” Vance & Hines President & CEO Mike Kennedy observed. “While we still need to see how this plays out, we anticipate that riders will have more choices in how they repair and update their motorcycles during the warranty period, which is clearly a big deal for companies in the motorcycle aftermarket, too. I hope that the ‘It will void your warranty’ threat for someone who just wants a better-sounding or smoother-running Harley is a thing of the past.”