Advisory opinion letter to Mr. Thomas

the Act that could be interpreted to allow the course of action you have proposed. é Section 108(b) would thus not except the proposed course of action from the general prohibition against disclaimer or limitation of implied warranties in Section 108(a) of the Act.

By direction of the Commission.
Supplemental Request Letter
October 18, 1978
Dear Mr. Thomas:

Earlier this month I submitted a request for a formal Commission Advisory Opinion under the Magnuson-Moss Warranty Act (the “Act”). The question was whether Section 108 of the Act would allow an automobile dealer to limit the duration of implied warranties when a service contract is entered into at the time the vehicle is sold. Mr. Jeffrey Karp of your office has asked me whether our clients are offering any type of warranties in connection with the sale of the vehicle and the service contract. I did not include this information in my earlier letter since it was my understanding that the Commission . believed that the sale of a service contract precluded the limitation of the duration of implied warranties regardless of what type of written warranty was offered.

Our clients inform me that the person who buys the car receives the usual manufacturer’s warranty and does not receive any type of warranty, either full or limited, from the dealer selling the vehicle and service contract.

T understand that in this case the Commission feels it is “clear on the face of the statute” that no limitation may be made on the duration of an implied warranty. More specifically, the Commission states that such a limitation may be made only if the supplier offers only a limited warranty and does not offer a service contract as well. Although a statement to that effect does appear in the 1974 House Committee Report, there is nothing in the statute itself which even arguably supports this position. Indeed, the words “only” and “limited warranty” do not even appear in the text of Section 108 asit . was finally adopted.

We again renew our request for a formal Commission Advisory

Opinion on this matter.
Thank you for your consideration. |
Very truly yours,
/s/ Cathleen Chandler Stevenson
(Mrs.) Cathleen Chandler Stevenson

1052 FEDERAL TRADE COMMISSION DECISIONS
92 F.T.C.
Letter of Request
October 4, 1978
Dear Mr. Tobin:

Pursuant to the Federal Trade Commission Rules of Practice, I am writing to request a formal Commission Advisory Opinion under the Magnuson-Moss Warranty Act (the “Act”).

We represent several automobile dealers who offer an extended service contract to persons purchasing new or used automobiles. These extended service contracts are purchased at the time the vehicle is sold. It is our understanding that the Commission’s present interpretation of Section 108 of the Act precludes the limitation of the duration of implied warranties when a service contract is entered into at the time of the sale. Accordingly, we have so advised our clients, and they are presently not limiting the duration of implied warranties when a service contract is entered into at the time the vehicle is sold. To the best of our knowledge, none of these automobile dealers is currently the subject of any type of investigation by your office. Our clients have inquired if they may limit the duration of implied warranties to the duration of the extended service contract. We have advised them to refrain from this course of action until we have received an Advisory Opinion from the Commission. This question has already been the subject of several letters from the Commission Staff. Mr. Alan Rubin and Mr. Jeffrey Carp of the Bureau of Consumer Protection each drafted a response to this question when it was raised initially by the National Automobile Dealers Association (the “NASD”). An extensive brief on the issue was filed with the Commission by the NASD on April 3, 1978. From my review of the Commission’s previous letter, it is my understanding that the Commission interprets subsection (b) of Section 108. of the Act as permitting limitations on implied warranties when the only agreement offered by the supplier is a limited warranty. However, the text of subsection (b) does not specify that it applies solely in cases where the supplier offers only a limited warranty. Moreover, such interpretation would effectively read out the “‘except:as provided in subsection (b)” exception clause in the general rule of subsection (a).

Last week I attended a seminar in Dallas and visited with Mr. Christian 8. White, Assistant to the Chairman, about the procedure for requesting this Advisory Opinion. Mr. White advised me that it would not be necessary for me to file a memorandum or brief along with this request. However, please feel free to contact me if you

should desire any additional information.
Thank you for your consideration.
Very truly yours,
/s/ Cathleen Chandler Stevenson
(Mrs.) Cathleen Chandler Stevenson
277-685 O—79-—-—68