Misinformation Regarding Voided System Warranties
It is a common occurrence that a computer system manufacturer’s sales representative has told a customer (which could be an end user, reseller or integrator) that if the customer uses third party memory, transceivers, hard drives, etc. in the system manufacturer’s computer system, the system manufacturer’s warranty is voided. Through this ploy, the sales representative attempts to coerce customers into purchasing hardware from the system manufacturer, usually at much higher prices. A system manufacturer may resort to this type of warranty threat to spread fear, uncertainty and doubt in the minds of consumers, rather than to compete on the basis of quality and price (“FUD marketing”).
In legal terms, this type of ploy is referred to as a “tie-in sales provision.” In general, such provisions are illegal. They are specifically prohibited in the consumer market by section 102(c) of the Magnuson-Moss Warranty Act of 1975 (15 United States Code section 2302(c)). In the workstation and server markets, such ploys can violate sections 1 and 2 of the Sherman Antitrust Act (15 United States Code sections 1 and 2). As the United States Supreme Court has stated:
“The essential characteristic of an invalid tying arrangement lies in the seller’s exploitation of its control over the tying product [here, the computer system] to force the buyer into the purchase of a tied product [here, the memory, transceivers or hard drives sold by the system manufacturer] that the buyer either did not want at all, or might have preferred to purchase elsewhere on different terms. When such “forcing” is present, competition on the merits in the market for the [memory, transceivers or hard drives] is restrained and the Sherman Act is violated.”
Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2 (1984).
Companies and individuals that violate the antitrust laws are subject to a wide range of sanctions, including having triple damages imposed against them.
The important point is that, regardless of their legality, these types of sales ploys are intended to intimidate and pressure unsophisticated purchasers into spending substantially more than they should for memory upgrades.
For those in Europe
An explicit or implicit ‘warranty tie’ by a PC OEM manufacturer would amount to illegal tying under Art 101 of the TFEU (European Treaty), and equivalent laws in each Member State, where:
- There is a brand-specific aftermarket for replacement parts for that PC OEM’s products; the PC OEM has a high share of supply in that market; and the PC OEM is illegally seeking to protect that position by dissuading ‘captive’ customers of its primary products from sourcing more cost-effective, quality product from anyone else; and / or
- Even if there is a broader aftermarket for supply of replacement hardware, if the cumulative effect of practices adopted by PC OEMs meant that third-party suppliers of replacement components and businesses specializing in fitting such components find it difficult to penetrate the market.
Sole Source Technology, LLC strongly supports customer choice and believes that consumers – whether end user, reseller, or systems integrator – should be free to purchase compatible hardware without being subject to threats and misinformation. There have been multiple instances where our customers have been confronted with threats of voided warranties from a computer system manufacturer’s sales representative. We advise them to ask the sales representative making the threat to send an email with a single sentence stating “using Sole Source Technology, LLC products will void the warranty on your (brand name) computer.” The sales representative making the threat never sends the requested email and never will, because it’s simply not true. Putting it in writing is strictly forbidden by their employer.