Guarantee Clauses and Product Warranties
Warranties and guarantees are promises that a company stands behind its products. A "satisfaction guarantee" or "money back guarantee" indicates a company's commitment to provide a full refund if the customer asks for one, regardless of the reason. Although an advertiser is not required to mention a warranty or guarantee, many do. When an advertiser mentions a warranty or guarantee, the advertiser must:
- ensure that any representation made about a warranty or guarantee is true, not misleading, and substantiated before the ad is run;
- be prepared to promptly and fully honor its obligations under the warranty or guarantee; and if the ad relates to a consumer product that costs more than $15;
- clearly and conspicuously inform the consumer how to get a copy of the warranty before purchase.
Following are some highlights to bear in mind when you prepare an advertisement that will mention a warranty or guarantee.
Satisfaction Guaranteed, Money Back Guarantee, and Free Trial Offers
An advertiser should only use the terms "satisfaction guaranteed" or "money back guarantee" if s/he will promptly provide the buyer with a refund of the full product price at the buyer's request. When an ad campaign says, "satisfaction guaranteed," the customer is entitled to a full refund of the purchase price if he or she is not satisfied with the product after having had a chance to use it. If shipping and handling costs will not be refunded, the advertiser should include a disclosure to that effect (e.g. "We will refund your purchase price less shipping and handling if you are not completely satisfied").
Complete Product Warranty and Full Warranty
Any advertisement that mentions a full warranty relating to a consumer product (personal and household good) should disclose in a clear, easily understandable, and prominent statement: (1) that the consumer can review a written copy of the guarantee or warranty before purchase, and (2) where the consumer can obtain a written copy of the warranty (e.g. See our limited two-year warranty at the store nearest you").The warranty or guarantee should be stated in plain English, not legalese, because the average customer must be able to understand the terms (e.g. We guarantee your satisfaction. If not completely satisfied with our product, return it within 30 days for a full refund.").
More common than "full" or "complete" warranties are "limited warranties." Like, full warranties, a limited warranty or guarantee should be clearly stated in plain English. It should direct the consumer to a full copy of the warranty, use the word "limited", and clearly disclose all material limitations and conditions placed on the guarantee, such as a requirement that the product be unopened, returned in its original packaging, or returned within a certain number of days.
Any advertisement that says, "lifetime warranty," "guaranteed for life," or similar words should clearly indicate "the life" to which the term refers. Does the warranty apply to the life of the product, or the life of the purchaser? This must be made clear. For example, "Our product is backed by our lifetime guarantee. Good for as long as you own it."
Any ad that says "Money-Back Guaranteed", must clearly inform the consumer of the specifics of the "money-back guarantee". For example, an ad offering a money-back guarantee for dissatisfied purchasers should indicate whether that guarantee includes a refund of the shipping and handling costs incurred in sending the product back and forth.
Penalties and Fines for Non-Compliance
The FTC periodically joins with other law enforcement agencies to monitor the Internet for potentially false or deceptive online advertising claims. If an advertisement fails to comply with the law, the advertiser could face enforcement actions or civil lawsuits. For advertisers under the FTC's jurisdiction, that could mean: (1) orders to cease and desist, with fines up to $11,000 per violation should they occur; (2) injunctions by federal district courts; and (3) in some instances, refunds to consumers for actual damages in civil lawsuits.
As stated above, advertisements that mention a warranty or guarantee must contain certain required statements and/or explanations. Before creating your ad, consult the FTC guidelines relating to your product and warranty as well as any local or state rules and regulations. And before the ad is run, have it carefully reviewed by competent counsel.