The Federal Trade Commission has proposed easing its rule requiring retailers to make product warranties available to consumers prior to sale.
Under the present rule, adopted in 1975, retailers must prominently display the warranty text on or near the product. The proposed change also would allow retailers to eliminate the warranty displays as long as they provide warranty texts to customers upon request.
Requesting public comment on its proposal, the FTC said the new rule "would continue to require retailers to make warranties available to consumers before a sale, but seeks to reduce retailers' costs of complying with the rule by allowing them to choose any means of making the text readily available to customers upon request."
Consumer activists criticized the proposal for failing to improve customer use of warranties, while retailers said the proposal fails to reduce the costs of compliance.
The Magnuson-Moss Warranty Act requires the FTC to ensure that consumers have access to product warranties before making a purchase. The FTC's current rule specifies four ways a retailer can comply -- by placing the warranty text on or near the product, on the product package, on a sign, or in a loose-leaf binder.
FTC staff research found that most retailers comply by using a binder, "but that consumers rarely use the warranty binders."
The staff also concluded that the goals of the rule "could be attained with equal effectiveness at lower compliance costs by modifying retailers' obligations under the current rule." The modification would allow a retailer to keep a warranty binder in a drawer or a back room rather than requiring that it be displayed.
Consumers Union believes any change in the rule also should seek to improve the rule's effectiveness by increasing consumer use of warranties, said Mark Silbergeld, director of the organization's Washington office.
"The commission looks at the issue in terms of retailers' costs," Silbergeld said, "when the real question is how do we improve consumers' use" of warranties. Customers may not use the warranty binders because they may not know about them, he said.
The National Mass Retailing Institute had requested the FTC's review of warranty availability and had hoped to shift the costs of complying to manufacturers. The institute asked the FTC to amend the rule by requiring manufacturers to affix warranty texts to product packages.
The FTC proposal "really doesn't address our concerns at all," said Robert J. Verdisco, vice president of the institute. "The question we have raised with the FTC is not simply one of retail discretion, but rather of who is responsible for warranty information.
"We continue to believe the manufacturers of products who offer warranties have the primary responsibility and should bear the costs of providing presale warranty information to the consumer," Verdisco said.
The American Retail Federation said yesterday it backs the institute's proposal. The FTC proposal would "not reduce the paperwork burden at all," said Don White, vice president of the federation.
"We would still have to have a copy of the warranty for every piece of merchandise in the store," White said.