Warranty Evolution and Laws
When making a transaction there is an element of trust.
The buyer is trusting you are providing a product that lives up to the claims provided. Neither party wishes to be duped. Yet, we do enter into transactions. We buy stuff.
A few hundred years ago and prior most purchases were from someone you knew, and most likely knew well. It was in the craftsman’s best interest to maintain honest dealing and create quality products. If not, they would enjoy less business.
Today, we rarely know the person (or organization of people) that crafted the products we are about to purchase. Yet, we have to trust them to provide an honest deal. Due to deceptive practices or negligence, over time laws enforce the notion of fair transactions.
Let the buyer beware. This is the common refrain in commerce. You must exercise due diligence before buying. The US Supreme Court decision in Laidlaw v. Organ https://law.resource.org/pub/us/case/reporter/US/15/15.US.178.html established caveat emptor as a foundational element of the US legal system. This case was decided in 1817.
Laidlaw v. Organ highlighted the need to be fair and honest in business dealings. Neither party should conceal or hide material information. You don’t need to reveal everything that both parties have equal access to learn know, yet one must not be deceptive.
This notion reinforces the need to do a little research about the product and the seller’s reputation.
US Federal Trade Commission and similar
In 1914 President Woodrow Wilson signed into US law the Federal Trade Commission Act. The commission’s mission is to protect consumers and promote competition. A part of this mission included enforcement of honest and fair advertising and product claims.
The basic idea is the seller will stand behind the products they produce. If it should work and it doesn’t there is an implied warranty that the seller has an obligation to remedy the situation. There are a wide range of codes, laws, and regulations governing many aspects of warranties. The basic idea is again to be fair and honest.
Most countries have some form of consumer protection laws, plus a range of warranty regulations. In the European Union, all consumer products sold as new include a two-year warranty, for example. Eric Arnum wrote a nice summary of warranty law in Warranty Week, dated August 2, 2005. http://www.warrantyweek.com/archive/ww20050802.html
In 1975, the Magnuson-Moss Act enactment created US federal law governing consumer product warranties. The law:
- Improves consumer’s access to warranty information.
- Enables consumers to comparison shop for warranties.
- Encourages warranty competition.
- Promotes timely and complete performance of warranty obligations.
Furthermore, the law does not:
- Compel you to give a written warranty.
- Apply to oral warranties.
- Apply to warranties on services.
- Apply to warranties on products sold for resale or for commercial purposes.
In short, the Magnuson-Moss Act requires consumer product businesses that provide a written warranty to honor it.
The THREAD Act
In 2000, the Transportation Recall Enhancement, Accountability and Documentation Act become US law.
It was motivated in large part by the Firestone tire failures on Ford Explorers that lead to fatalities. While focused on US vehicles with the aim improving passenger safety, it has become influential legislation in most industries.
The major elements of the law include:
- Reporting of safety recalls or other safety campaigns to the US National Highway & Transportation Safety Administration (NHTSA) by vehicle manufacturers.
- Reporting of information related to vehicles defects, reports of injury or death related to the manufacturer’s vehicles, and specific ‘early warning’ data requirements.
- Criminal liability for vehicle manufacturers that intentionally violate the new reporting requirements.
The Sarbanes-Oxley Act
In 2002, The Sarbanes-Oxley Act became US law.
It set new and expanded requirements for financial reporting in response to corporate and accounting scandals, including Enron and Worldcom. Public reporting of warranty information in part addressed one of the mechanisms related to the scandals.
Other countries have likewise enacted similar laws.
One result of this law is the ability of Eric Arnum to report on warranty data, primarily, for US publicly traded companies. See WarrantyWeek for weekly articles on the warranty industry and trends revealed in the reported warranty numbers.
Sure there are more laws, codes, regulations, etc. in force now than ever in history. Yet, we all still have to trust the other party in a transaction.
The vast majority of transactions are fair, honest, in good faith, and when something doesn’t perform as expected, it’s just good business to stand behind your product.