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October 28, 2015

Volume 17 Issue 52

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FTC Approves Consent Order Against BMW

The Federal Trade Commission approved a final consent order against BMW of North America for hinging warranties for its Mini passenger cars on the use of Mini parts and Mini dealers for maintenance and repair work.

On March 19, the FTC issued an administrative complaint against the German automaker’s North American subsidiary. The agency alleged that BMW’s Mini Division violated the “tie-in provision” of the Magnus-Moss Warranty Act of 1975 by stating in Mini vehicle owner manuals, beginning with 2012 models, that “only Mini dealers are to perform oil changes,” lest the four-year, 50,000-mile limited warranty be rejected.

BMW of North America agreed to a settlement, saying it would discontinue the practice.

The FTC’s consent order, which remains in effect for 20 years, prohibits BMW from violating the Warranty Act regarding the Mini Division goods or services.

It bars BMW from claiming routine maintenance must be performed by Mini dealers or Mini centers in order to ensure safe operation, unless BMW can substantiate such claims with reliable scientific evidence. The order also bars the company from misrepresenting material facts about warranty or maintenance requirements.

In addition, the order requires BMW to notify affected Mini owners of their right to use third-party parts and service without voiding warranty coverage, unless BMW provides such parts or service for free. BMW is required to post the notice on its Mini USA web site.

The Automotive Oil Change Association, “applauds The Commission's decision to finalize the settlement with BMW over its egregious violations. It's a significant step forward in the fight to preserve Magnuson-Moss Warranty Act rights,” AOCA’s policy advisor, Joanna Johnson, told Lube Report.

FTC received comments from several groups and companies about the proposed consent agreement. The comment from AOCA, The Auto Care Association and The Tire Industry Association & Service Station Dealers of America supported initiation of the commission action and proposed two revisions to the proposed consent order.

One was to broaden the conduct relief to extend all requirements set forth in a final consent to BMW at large. In its Oct. 21 letter to the three organizations, FTC stated that, “although the terms of the complaint and order reference Mini, the commission believes the relief set forth in the proposed consent, coupled with the potential for civil penalties, is appropriate to remedy the violation alleged in the complaint and to deter future violations by BMW.”

According to FTC, the second request by the three organizations was to require BMW to take additional steps, including insertion in owner manuals of a plain English anti-tying disclosure, modeled on the commission’s consumer alert entitled, “Auto Warranties, Routine Maintenance and Repairs: Is Using the Dealer a Must?”

The commission asserted that the language in the notices that BMW sends to Mini owners will be plain enough.

The commission vote approving the final consent order and letters to commenters was 4-0.

The consent order and related documents may be viewed at the FTC web site.