Opinion ID: 613927
Heading Depth: 1
Heading Rank: 2

Heading: The FTC's regulatory authority under the MMWA

Text: The MMWA authorizes warrantors to create informal dispute settlement procedures called Mechanisms. Such Mechanisms are unique ADR procedures that prevent consumers from pursuing warranty claims in court without first exhausting the warrantor's Mechanism procedures. 15 U.S.C. § 2310(a). Recognizing Mechanisms and their potential benefits as an alternative to the judicial process, Congress made such exhaustion a prerequisite to filing suit to encourage warrantors to establish procedures whereby consumer disputes are fairly and expeditiously settled. Action Interpreting the MMWA, 64 Fed.Reg. 19700, 19701 (Apr. 22, 1999). Congress charged the FTC with exclusive authority to prescribe rules setting forth minimum requirements for any [IDSM], monitor compliance with IDSM regulations, investigate complaints, and take remedial measures against non-compliant IDSMs. Id. § 2310(a)(2), (4). Pursuant to this authority, the FTC promulgated Rule 703. Rule 703 provides the minimum requirements for IDSMs authorized under the MMWA. See Informal Dispute Settlement Procedures, 16 C.F.R. § 703 et seq. To qualify as an IDSM, a program must (1) be established by a warrantor, (2) comply with rules set forth by the FTC, and (3) be incorporated into a written warranty agreement as a prerequisite to litigation. 15 U.S.C. § 2310(a)(3). The FTC has also indicated that use of binding arbitration by IDSMs is prohibited by the MMWA and Rule 703, because [d]ecisions of the Mechanism shall not be legally binding on any person. Id. § 703.5(j). Addressing renewed requests that warrantors be permitted to use binding arbitration as an MMWA-approved Mechanism, the FTC explained: The Rule does not allow this for two reasons. First, . . . Congressional intent was that decisions of Section 110 Mechanisms not be legally binding. Second, even if binding Mechanisms were contemplated by Section 110 of the Act, the Commission is not prepared, at this point in time, to develop guidelines for a system in which consumers would commit themselves, at the time of product purchase, to resolve any difficulties in a binding, but non-judicial proceeding. 40 Fed.Reg. 60167, 60210 (Dec. 31, 1975).