Harley-Davidson has sidestepped a proposed class action that accused it of using its warranty “to force Harley owners … to purchase Harley-Davidson-branded parts, instead of other available aftermarket parts.” In an order on June 5, Judge William Griesbach of the U.S. District Court for the Eastern District of Wisconsin sided with Harley-Davidson, finding that the high-end motorcycle-maker did not run afoul of U.S. federal law by basing the validity of its two-year limited warranty on owners’ adherence to certain conditions, and similarly did not violate other state antitrust and consumer protection laws.
Some Background: A number of plaintiffs filed since-consolidated lawsuits against Harley-Davidson, asserting that its limited warranty violates the Magnuson-Moss Warranty Act (“MMWA”)’s bar on tying, among other federal and state law statutes. The MMWA’s tying provision prohibits a warrantor from conditioning its written or implied warranty on the use of any specific brand of article or service unless that article/service is provided for free.
According to the plaintiffs, Harley-Davidson violated the MMWA by conditioning its two-year warranty on the use of authorized Harley-Davidson dealers and manufacturer replacement parts and accessories. Specifically, the plaintiffs claimed that the language in Harley-Davidson’s limited warranty and owner’s manuals forces “customers purchasing new Harley-Davidson motorcycles (bundled with warranties) … to buy Harley-Davidson parts” when their motorcycles need repairs and/or servicing or else they risk losing warranty coverage.
By “conditioning sales of motorcycles to the limited warranty’s restrictions,” the plaintiffs asserted that Harley-Davidson has not only made it “too expensive or burdensome to use a competitor product [or service]” but has also enabled authorized Harley-Davidson dealers to “sell warranty-related services, replacement parts, and accessories at a premium compared to other motorcycle repairers.” And at the same time, “Harley-Davidson is able to extract higher-than-usual profits from [its] repair business.”
Motion to Dismiss
In a newly-issued decision and order, Judge Griesbach dismissed the plaintiffs’ amended complaint – but granted them leave to file another one. At the heart of the court’s recent decision: The judge’s finding that Harley-Davidson “has not imposed tying conditions on the purchase of parts or forced buyers to promise not to buy parts from a competitor.”
While the plaintiffs argued that customers are forced to use authorized parts in order to keep their warranties intact, the court held that “the alleged risk of losing warranty coverage, in itself, is not the type of economic coercion or forcing that constitutes a tie under antitrust law.” In fact, Judge Griesbach stated that it is “‘well established that warranties that are not sold as a separate product do not result in consumer coercion if the warranty sets forth requirements’ of the warranty’s applicability” because limits to warranty protection “reflect a defendant’s unwillingness to extend free repair or replacement services to usage of its products that it cannot control.”
“In this case, new Harley-Davidson motorcycles are bundled with a two-year limited warranty that lists certain restrictions that may void the warranty,” according to Judge Griesbach, who stated that the restrictions are “a long way from requiring a buyer to purchase [a tied product] from defendant as a condition of purchasing [a tying product].” In other words, “even if buyers of Harley-Davidson motorcycles had to forego warranty coverage to buy a non-Harley-Davidson part, there is no illegal tying arrangement.”
Further weighing in Harley-Davidson’s favor, the court held that because the motorcycle-maker’s “limited warranty does not state that using non-Harley-Davidson parts will affect the warranty, it has not improperly tied the warranty to use of Harley-Davidson parts.” What the relevant provisions in Harley materials do say is that the company may void a warranty in the event that defects or damage is caused by the use of unauthorized parts or services. Such a condition is permissible, according to the court, as the MMWA allows a warrantor “to limit [coverage] for damage caused by unauthorized parts or modifications.”
Specifically, Section 700.10(c) of the MMWA “does not preclude a warrantor from expressly excluding liability for defects or damage caused by ‘unauthorized’ articles or service; nor does it preclude the warrantor from denying liability where the warrantor can demonstrate that the defect or damage was so caused,” Judge Griesbach stated.
> TLDR: “When the provisions [of Harley-Davidson’s warranty and owner’s manuals] are read in their entirety,” the court found that Harley-Davidson is simply “explain[ing] to buyers that the limited warranty does not cover damage caused by unauthorized modifications, which is authorized by the MMWA, and that modifications to improve performance voids the powertrain warranty.” Accordingly, the court held that the plaintiffs failed to state a claim that Harley-Davidson’s limited warranty violates the MMWA.
THE BIGGER PICTURE: The outcome before the district court in this case will be welcome news for other companies, including those in the luxury watch market, that are known to link the validity of their warranties to in-house repairs and the use of authorized parts. At the same time, it will be closely observed by companies in light of rising attention to the right to repair movement, which is gaining steam in the U.S. and internationally, with lawmakers and regulators like the Federal Trade Commission pushing companies to make it easier for consumers to repair their devices or to take them to independent repair shops.
The case is IN RE: Harley-Davidson Aftermarket Parts Marketing, Sales Practices and Antitrust Litigation, 2:23-md-03064 (E.D. Wis.).
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