[0.1] The Federal Trade Commission is charged with setting the rules of the consumer marketplace. The Commission is now addressing an area of consumer products which has to some extent been able to evade the rules applied to other consumer products. It is thus appropriate to suggest how the area of computer software can be brought into line with the general, well-established rules used for other products. Two specific proposals for accomplishing this follow.

1. VISIBILITY OF WARRANTY MARKINGS

[1.1] Hidden disclaimers of warranty have been a widespread problem in the computer software industry. It has become almost a standard business practice to conceal such disclaimers to the greatest extent permissable by law, and in many cases, further. Usually, warranty terms are not disclosed on the outside of packaging, and disclosure is sometimes deferred until after the software is actually installed. The facts in this area are beyond dispute. The question is what should be required by law.

[1.2] The FTC has dealt with this issue before, in the used car arena. It would be appropriate to apply many of the labelling standards of the FTC's Used Car Rule to software packaging. Placement on the outside of consumer packaging should be required. The large type and black color requirements of the Used Car Rule should be required for at least the words "AS-IS" or "LIMITED WARRANTY". Such high prominience of the markings is needed to establish clearly to consumers that simple, clear, understandable warranty rules do apply to software.

Failure to apply the required marking should of course imply a full warranty as defined in the Magnusson-Moss Warranty Act.

[1.3] Used cars have borne large, highly visible warranty markings since 1985, and this has not seriously impacted the used car industry. The FTC, in 1995 re-examination of the used car rule, chose to retain the Rule by a 5-0 vote. The auto industry has generally accepted the rule and the minor costs involved. Thus, objections from the computer software industry that such labelling requirements are unreasonable should be viewed as self-serving and disregarded.

[1.4] Rather than mandating warranties, this marking requirement makes it a consumer choice whether to buy software with reasonable warranties or products marked "AS-IS". It simply makes it an informed choice. This is consistent with the aims and history of Magnusson-Moss and with FTC policy in other areas.

2. MASS-MARKET SOFTWARE IS "GOODS IN COMMERCE"

[2.1] The software industry has tried to evade the usual regulations on goods in commerce by claiming that software is something else. In reference to the Commission's question 13A, "Is it appropriate that software be treated as a "consumer product" subject to the Act?", the answer is "Of course it is." Any other answer is a clear attempt to evade the legal obligations of a manufacturer. The FTC should act to clarify this point. Software has to be brought squarely under Magnusson-Moss, assuming it's not there already. It's time for the industry to grow up and accept the obligations of a consumer-products industry.

Thank you for your attention to this matter.

John Nagle
Animats
Menlo Park, California