Honda statement rattles aftermarket retailers

The Federal Trade Commission is examining a complaint from the Automotive Aftermarket Industry Association (AAIA) alleging that a Honda threat not to honor auto warranties when aftermarket parts have been previously used violates the terms of the Magnuson-Moss Warranty-FTC Improvement Act.

The FTC has never ruled on a case like this one, according to Mitchell Katz, the FTC spokesman. All he would say is that the commission has received the complaint and is reviewing it. But he did pass along a copy of the commission's A Businessperson's Guide to Federal Warranty Law. He added we at Aftermarket Business World "might be interested in this."

The guide addresses "tie-in sales," which would require a purchaser of the warranted product to buy an item or service from a particular company to use with the warranted product in order to be eligible to receive a remedy under the warranty. It is clear that Honda cannot dictate use of Honda parts as a condition of maintaining a warranty. However, it can void a warranty if maintenance is done "improperly or incorrectly." Moreover, the FTC allows "tie-in sales" requirements if the manufacturer can demonstrate to the satisfaction of the FTC that its product will not work properly without a specified item or service.

Any FTC ruling would have implications beyond Honda. Aaron Lowe, vice president of government affairs for AAIA, mentions General Motors' upcoming marketing of its dexos™ specification motor oil. The 2011 Buick Lucerne owner's manual contains this warning: "Use only engine oil that is approved to the dexos specification or an equivalent engine oil of the appropriate viscosity grade. Engine oils approved to the dexos specification will show the dexos symbol on the container. Failure to use the recommended engine oil or equivalent can result in engine damage not covered by the vehicle warranty."

Greg Martin, director, policy and Washington communications, General Motors Corp., says if a GM car owner does not use motor oil that meets the dexos spec, GM would be free not to cover repairs for those issues under the new vehicle or parts limited warranties. "This is true across the industry," he adds. "This has been true for years. This is legal under Magnuson-Moss." 

The question here is, based on the Magnuson-Moss warranty exceptions, whether use of an American Petroleum Institute (API) spec oil damages the GM engine, or prevents it from working properly. Or is GM marketing dexos because of its environmental protection, increased product performance and product management properties? Martin points out that his company has always specified GM spec oils in its owner manuals. What is different here, compared to GM's past allusions in warranties to earlier GM spec oil, is that the dexos spec may be hard to meet for aftermarket vendors, and the spec will definitely result in much higher-priced motor oil, wherever it is sold. The per-quart price of dexos will likely be 40 to 60 percent higher than industry-standard motor oil currently licensed by the API.

Warranty questions aside, the Honda statement has also raised hackles in the aftermarket because of its apparent equating of aftermarket parts with counterfeit or gray market parts. Referring to all three categories, Honda says the "quality, performance and safety of these parts ... are unknown."

Lowe hypothesizes that plunging auto sales in the U.S. may be the motivating factor for Honda, which is doing its best to plump up its dealership repair revenue. Honda sales in August 2010 were down 33 percent over August 2009, a drop that is accentuated, perhaps, by the "Cash for Clunkers" program a year ago, which caused a spike in sales. Toyota dropped a similar percentage year-to-year in August, and General Motors fell 25 percent.

The Federal Trade Commission is examining a complaint from the Automotive Aftermarket Industry Association (AAIA) alleging that a Honda threat not to honor auto warranties when aftermarket parts have been previously used violates the terms of the Magnuson-Moss Warranty-FTC Improvement Act.

The FTC has never ruled on a case like this one, according to Mitchell Katz, the FTC spokesman. All he would say is that the commission has received the complaint and is reviewing it. But he did pass along a copy of the commission's A Businessperson's Guide to Federal Warranty Law. He added we at Aftermarket Business World "might be interested in this."

The guide addresses "tie-in sales," which would require a purchaser of the warranted product to buy an item or service from a particular company to use with the warranted product in order to be eligible to receive a remedy under the warranty. It is clear that Honda cannot dictate use of Honda parts as a condition of maintaining a warranty. However, it can void a warranty if maintenance is done "improperly or incorrectly." Moreover, the FTC allows "tie-in sales" requirements if the manufacturer can demonstrate to the satisfaction of the FTC that its product will not work properly without a specified item or service.

Any FTC ruling would have implications beyond Honda. Aaron Lowe, vice president of government affairs for AAIA, mentions General Motors' upcoming marketing of its dexos™ specification motor oil. The 2011 Buick Lucerne owner's manual contains this warning: "Use only engine oil that is approved to the dexos specification or an equivalent engine oil of the appropriate viscosity grade. Engine oils approved to the dexos specification will show the dexos symbol on the container. Failure to use the recommended engine oil or equivalent can result in engine damage not covered by the vehicle warranty."

Greg Martin, director, policy and Washington communications, General Motors Corp., says if a GM car owner does not use motor oil that meets the dexos spec, GM would be free not to cover repairs for those issues under the new vehicle or parts limited warranties. "This is true across the industry," he adds. "This has been true for years. This is legal under Magnuson-Moss." 

The question here is, based on the Magnuson-Moss warranty exceptions, whether use of an American Petroleum Institute (API) spec oil damages the GM engine, or prevents it from working properly. Or is GM marketing dexos because of its environmental protection, increased product performance and product management properties? Martin points out that his company has always specified GM spec oils in its owner manuals. What is different here, compared to GM's past allusions in warranties to earlier GM spec oil, is that the dexos spec may be hard to meet for aftermarket vendors, and the spec will definitely result in much higher-priced motor oil, wherever it is sold. The per-quart price of dexos will likely be 40 to 60 percent higher than industry-standard motor oil currently licensed by the API.

Warranty questions aside, the Honda statement has also raised hackles in the aftermarket because of its apparent equating of aftermarket parts with counterfeit or gray market parts. Referring to all three categories, Honda says the "quality, performance and safety of these parts ... are unknown."

Lowe hypothesizes that plunging auto sales in the U.S. may be the motivating factor for Honda, which is doing its best to plump up its dealership repair revenue. Honda sales in August 2010 were down 33 percent over August 2009, a drop that is accentuated, perhaps, by the "Cash for Clunkers" program a year ago, which caused a spike in sales. Toyota dropped a similar percentage year-to-year in August, and General Motors fell 25 percent.