Weekly Legislative Update - July 22, 2019

TIA Takes Part in FTC's Magnuson-Moss Warranty Act Workshop; Efforts Renewed


Has a consumer turned down service at your shop because a manufacturer threatened that their warranty was voided?

It's a common misconception that only car dealers can perform the routine maintenance and repairs on a newer vehicle that is under warranty. In fact, it is law that consumers can patronize their neighborhood repair shop or do the work themselves without violating the manufacturer's warranty.

The law, known as the Magnuson-Moss Warranty Act, which was enacted by Congress in 1975, prohibits the conditioning of consumer warranties by product manufacturers on the use of any original equipment part or service.

Under the statute, a manufacturer can only deny warranty coverage if the manufacturer, not the consumer, can demonstrate that it was the use of a non-original equipment part or service that created the warranty related defect.

With new car sales waning, the car companies and their franchised dealers have been pursuing an increasingly aggressive strategy aimed at growing the sales of their original equipment replacement parts and repair services. However, despite calls by TIA and other aftermarket trade groups, the Federal Trade Commission (FTC) has taken little action to ensure consumers receive accurate information regarding their rights under new car warranties.

TIA along with other aftermarket groups have filed complaints in the past regarding both releases with the FTC, taking issue with the unsubstantiated claims made by car companies regarding the quality of aftermarket parts. TIA further contends that the releases violate the Magnuson-Moss Warranty Act since they clearly mislead consumers to believe that they must use dealer service and original equipment in order to ensure the integrity of their new car warranties.

While the FTC has failed to take formal action against car manufacturers, the Commission did issue a "Consumer Alert" informing consumers of their right to have their vehicle serviced or maintained at a repair shop of their own choosing or perform the service themselves without any concern that their warranty would be voided by their vehicle manufacturer.

The Magnuson-Moss Warranty Act impacts a variety of businesses across the economy and many are being impacted unfairly by a lack of action.

This topic is always on the minds of tire dealers who have lost service for this very reason.

With complaints continuing to flood the Federal Trade Commission, on July 16th, staff of the FTC hosted a workshop to examine ways in which manufacturers may limit third-party repairs. TIA took part in the workshop with other industry groups.

The workshop discussed some of the issues that arise when a manufacturer restricts or makes it impossible for a consumer or an independent repair shop to make product repairs and whether such restrictions undercut the Warranty Act's protections.

Topics at the workshop included: The prevalence of the certain types of repair restrictions, The effect of repair restrictions on the repair market in the United States, and the impact that manufacturers' repair restrictions have on small and local businesses, The effect repair restrictions have on prices for repairing goods, accessibility and timeliness of repairs, and the quality of repairs, The effect of repair restrictions on consumers' ability to repair warrantied products or to have the products repaired by independent repair shops, The relationship between repair restrictions and the sale of extended warranties by manufacturers, Manufacturers' justifications for repair restrictions and the factual basis for such justifications, The risks posed by repairs made by consumers or independent repair shops, The liability faced by manufacturers when consumers or independent repair workers are injured while repairing a product, The liability faced by manufacturers when consumers are injured after using or coming into contact with a product that has been repaired improperly by a consumer or independent repair shop, and Whether consumers understand the existence and the effects of repair restrictions.

At the workshop TIA heard a welcome and opening Remarks from Christine S. Wilson, Commissioner, Federal Trade Commission. This was followed by a panel that explored the technological and financial impact repair restrictions have on small businesses and consumers, as well as potential safety concerns surrounding uncertified product parts. 

The panel was led by Walter Alcorn, Vice President, Environmental Affairs and Industry Sustainability, Consumer Technology Association, George Borlase, Research Staff Member, Institute for Defense Analyses Science and Technology Policy Institute, Jennifer Larson, CEO, Vibrant Technologies, Eden Prairie, MN, Theresa McDonough, Owner, Tech Medic, Middlebury, VT, Nathan Proctor, Director, Campaign for the Right to Repair, U.S. PIRG, Claire Wack, Moderator, FTC Division of Marketing Practices.

The next panel discussed: What are the arguments for and against repair restrictions? This was led by Earl Crane, Security Advisor, Security Innovation Center, Gay Gordon-Byrne, Executive Director, The Repair Association, George Kerchner, Executive Director, PRBA - The Rechargeable Battery Association, Gary McGraw, Security Researcher, Securerepairs.org, Christine Todaro, Moderator, FTC Division of Marketing Practices.

The program concluded with a panel on proposed state legislation and industry initiatives. This was led by Aaron Lowe, Senior Vice President, Regulatory and Government Affairs, Auto Care Association, Hon. David Osmek, Minnesota State Senator, Hon. Chris Pearson, Vermont State Senator, Kyle Wiens, Co-founder and CEO, iFixit, Sarah Faye Pierce, Director, Government Relations, Association of Home Appliance Manufacturers, Dan Salsburg, Moderator, FTC Office of Technology Research & Investigation, and Lois C. Greisman Associate Director, Division of Marketing Practices.

It was clear in the program that Federal Law protects your right to choose between an Independent Shop, or a Dealership.

TIA urges legislators to call on the FTC to protect consumers and the aftermarket by aggressively enforcing its rules governing unfair marketing practices and new car warranties as specified in the Magnuson-Moss Warranty Act. Car companies are taking aggressive action to misinform consumers regarding their rights under the warranty and as to the quality of aftermarket parts. 

Aftermarket parts are of a similar or even greater quality than the original equipment parts that they replace. In fact, many of these parts are made by the same company but may come in different packaging.

Furthermore, aftermarket companies have the benefit of observing a part's performance and can then correct problems that are discovered only after the part has been in-use for some time.

TIA believes that the FTC must:

-Conduct greater oversight and enforcement on vehicle manufacturers who do not comply with the Magnuson-Moss Warranty Act and who seek to discredit aftermarket products;

-Aggressively enforce requirements that vehicle manufacturers must substantiate all claims that use of non-original equipment parts could jeopardize a vehicle warranty; and,

-Require better consumer disclosure by car companies regarding their rights under the warranty.

This might entail compelling the car companies to:

-Include in their warranty booklets a prominently placed statement that, as a motor vehicle manufacturer, they are prohibited from conditioning the warranty on the use of any non-original equipment part or service; or,

-Inform consumers of their rights with a written statement of reasons when a warranty is denied due to the use of a non-original equipment service or part.

We remind our members that the FTC works to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261.

After attending the FTC seminar on Magnuson-Moss we realized that we have a long way to go as an industry and we hope to make this topic a focal point for our lobby day in 2020.

TIA will continue to monitor this topic, let us know if you believe you have been wrongfully treated.





Proposed Senate Bill to Support both Hiring Military Spouses and Childcare Spending Options

Building on the success of the Work Opportunity Tax Credit (or WOTC), Senator Tim Kaine (D-VA) introduced a bill to expand employment opportunities for military spouses.

Expanding WOTC

Known as the Jobs and Childcare for Military Families Act of 2019, Senate Bill 1802 would recognize "Qualified Military Spouse" as a new WOTC program target group.

In its current form, the bill does not yet define the WOTC-qualifying characteristics of a military spouse. It also does not define the amount of tax credit an employer could earn when hiring a military spouse. These details will be ironed out if the bill progresses in the Senate.

Flexible Spending Accounts

Private sector employers commonly offer flexible spending accounts to help their employees pay for childcare. Senate Bill 1802 would create similarly accounts for members of the U.S. military. Soldiers could reduce their income tax by contributing pre-tax dollars to their account. They could then spend that money on childcare services.   

S.1802 has been referred to the U.S. Senate Finance Committee for consideration. Five senators have cosponsored the bill, including Senators John Boozman (R-AR), Jon Tester (D-MT), Thom Tillis (R-NC), Kyrsten Sinema (D-AZ), and Mike Rounds (R-SD).





House Votes to Repeal Cadillac Tax


On July 17th, the House, passed a fast-tracked bill (H.R. 748) to permanently repeal the "Cadillac Tax."  

The Cadillac Tax, which was part of the Affordable Care Act (ACA), was originally set to go into effect in 2018, but was twice delayed (most recently through 2022). 

The Cadillac Tax was intended as a revenue raiser for other parts of the ACA and, if it ever does goes into effect, will impose a 40% tax on premiums paid for generous high-cost employer health insurance plans that exceed certain limits.

As reflected by the multiple times that the effective date for the Cadillac Tax has been bumped back and the nearly unanimous vote in the House (419 to 6), the Cadillac Tax has become very unpopular on both sides of the aisle with both business groups and unions pushing hard for its repeal.  

Interestingly, the House Democrats were the driving force behind the latest repeal effort. 

Senate Majority Leader Mitch McConnell (R-KY) has not yet stated if and when he will bring the bill to the Senate floor. Given that that it was the Democrats who pushed through the House version of the bill, while there is bi-partisan support for the repeal, there is the potential that Senate Republicans will look to add other Republican tax priorities to the bill and send it back to the House. 

According to estimates from the Joint Committee on Taxation, if passed, the repeal would increase the deficit by $201 billion over the next ten years.