DAVID B. McMAHON ATTORNEY AT LAW September 11, 2000 Secretary Re: High-Tech Warranty Project -- Comment, P994413 Dear Secretary, I am writing you to comment on the Project above as invited on your web site. Para. #1 I am an attorney with twenty-five year's experience representing low income people in legislative, administrative and judicial forums. I was an invited Observer on behalf of consumers to the redrafting of Article 9 of the Uniform Commercial Code by the National Conference of Commissioners on Uniform State Laws. The Business Law Section of the American Bar Association sponsors me as a Consumer Fellow to the activities of the Section. 2 More to the point, I am currently working on a grant from the California Consumer Protection Foundation through the National Consumer Law Center to oppose UCITA (Uniform Computer Information Transactions Act) in the fifty states. This fact is recited only to demonstrate my background in this area. This comment is outside the scope of that grant, so should be taken as my personal comment. 3 Our free market economy, with limitations preventing abuses, benefits consumers. The benefits of the free market economy depend on competition. Competition occurs on price, features, purchase terms, quality etc. The products complete, and consumers choose the product that wins the competition from the consumer's point of view. The product that has the combination of price, features, purchase terms, and quality that consumers choose becomes, by virtue of its characteristics, the successful product in the free marketplace. Those that do not, fall by the way. 4 For this competition to work, consumers must have information about the price, features, purchase terms quality, etc in order to make their choice. And they must have it at the time they make the choice. If not the information will not influence consumer's choice. The products will not compete on their true and important characteristics. The competitive free market will fail in its goals. 5 Consumers can get the information necessary to make choices among the competitors before the purchase from disclosures on the product, from advertising, from others who collect information about the product and publish it, and from others who try the product and publish reviews. 6 Take the purchase price of a VCR as an example. Consumers can go to the store and see the prices marked on the shelves. Consumers can see the prices advertised in the newspapers and on TV. After gathering the information, the consumer chooses. 7 One of the terms of purchase on which products compete for consumers' purchases is the warranty. The warranty is one of the terms of the sale. In the case of new cars for example, the warranty is displayed on the window, and there are vigorous advertisements on television and in other media. "5 Year, 50,000 mile warranty" is common. 8 What warranty would consumers get if consumers did not know what the warranty was until after the car was paid for, the consumer got in the car and started it up for the first time, and then for the first time learned what the warranty was by reading a display on the dashboard? It is competition over warranties with information given to consumers before the sale that causes good warranties to be offered in the competition among products for the consumers choice. 9 This warranty competition of course strongly influences quality. If the product has to compete by offering a good warranty, then the product must be a quality product, or the producer will go broke fixing the problems. 10 Sadly, this scenario of finding out the warranty on a car after first starting it up is in fact the current lay of the land for computer software etc. and the hardware it makes workable. The warranty is not disclosed until after the purchase, after the goods are taken home, after the product is unpacked, and after the consumer starts to use the software for the first time. The software producer knows that the consumer is not going to take the software and any goods it came with back to the store at that point. The result is that brand new software, software distributed by the most reputable of product producers, is sold "as is" with no warranty at all. Once the consumer acknowledges the "license" terms that flash onto the computer screen, the consumer is stuck legally. The consumer has no legal right to return the goods for a refund. If the software does not work right, if the software does not work at all, if the software loads a virus that wipes out the hard drive -- the consumer had no legal recourse. 11 Attached to this cover letter is a personal example of the "as is" total disclaimer of all warranties on the software printer drive etc that came with a brand new Canon computer printer. The printer works generally, but has some bugs that require one or two extra screens every time -- every time -- that a document is printed. Canon refuses to fix the bugs and blames the bugs on the manufacturer of another printer whose printer driver is no longer on my computer. I have no legal rights. 12 A description of the example of the software warranty disclaimer is attached, together with a number of documents scanned or copied from the software that show the box the computer came in that could have, but did not show the disclaimer of the warranty, all the steps that a consumer has to go through (and is unlikely to want to undo to take the printer back) before the consumer learns that the product has no warranty, and the exact screens and language disclaiming all warranties. 13 Also attached is a document prepared by the author of this letter describing another problem with UCITA. UCITA will permit the current practice of placing terms in licenses that say that magazines and newspapers may not review software products without permission of the publisher of the software -- which of course means that bad reviews will not be done. 14 The concerns over the current and potential state of the law for software warranties are not just the concerns of "personal, family and household" consumers. They are shared by businesses who are consumers of software. And they are shared by responsible businesses. Finally attached are articles by Business Week and Forbes illustrating the concerns that business consumers of software have with UCITA. 15 The Federal Trade Commission is urged to take whatever steps are within its powers to bring software under protections that consumers have for the purchase of goods. 16 Sincerely, David B. McMahon An example of current bad software warranty practices, practices which UCITA will plainly allow. Attachments to the "example":
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