IT Web Feature – The Truth Behind Vendor Warranties

How often have you been pressurised by a vendor into buying their branded optics?

“As a distributor of compatible SFPs/transceivers, we very often hear that a network equipment vendor’s sales rep has threatened a customer (which could be an end-user, re-seller or system integrator, etc) that if they install third-party transceivers in their networking or server equipment, this will then void the system manufacturer’s or OEM’s warranty,” says Wayne Nel, Product Manager at local ProLabs distributor, HardwareDistribution.

Nel continues: “In this way, the manufacturer tries to coerce customers into purchasing branded transceiver modules from them, usually at much higher prices than ProLabs charges. Someone may use 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.”

According to US law, in legal terms, this tactic 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.

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/switch) to force the buyer into the purchase of a tied product (here, the transceiver module sold by the vendor) that the buyer either did not want at all, or might have preferred by buy compatible, more cost-effective products elsewhere. When such forcing is present, competition on the merits in the market for the transceiver module is restrained and the Sherman Act is violated.

“The key point is that, regardless of their legality, these types of techniques are intended to intimidate and put pressure on uninformed purchasers into spending substantially more than they should for transceiver installations and/or upgrades,” says Nel.

The Magnuson-Moss Act protects consumers. This Act, passed in 1975 (USA), states tie-in sales provisions are not allowed in consumer warranties. Manufacturers cannot require consumers to purchase items or services in order to keep their warranty valid.

Essentially, the Act states a warrantor cannot require the consumer of its product (a switch, for example) to buy an additional product or service (OEM transceivers) to be used with the original product in order to maintain the original product warranty.

In other words, you cannot be required to add the switch manufacturer’s transceivers to maintain the warranty on the system. Also, the switch manufacturer cannot state that the system warranty is void if other ‘brands’ of peripherals are used.

For example, if you purchased ABC switch but chose to use ProLabs-compatible SFPs, ABC company cannot void the warranty or refuse to provide service on your ABC switch. In addition to the Magnuson-Moss Act, any manufacturer that makes its warranty conditional on the purchase of its own equipment may violate antitrust laws.

The Magnuson-Moss Act does not allow implied warranties, “tie-in sales” provisions, and deceptive or misleading warranty terms.

According to the European law, an explicit or implicit ‘warranty tie’ by an OEM manufacturer would amount to illegal tying under Act 101 and 102 of the TFEU (Treaty of Functioning of the European Union), and equivalent laws in each member state, where:

  • There is a brand-specific aftermarket for replacement parts for that OEM’s products; the OEM has a high share of supply in that market; and the OEM is illegally seeking to protect that position by dissuading ‘captive’ customers of its primary products from sourcing more cost-effective, quality products from anyone else; and/or
  • Even if there is a broader aftermarket for supply of replacement transceivers, if the cumulative effect of practices adopted by OEMs meant that third-party suppliers of replacement components and businesses specialising in fitting such components find it difficult to penetrate the market.
    HardwareDistribution strongly support the possibility for customers to choose freely and believes consumers should be free to purchase compatible transceiver modules without being subject to pressure and misinformation.

Nel continues: “ProLabs has always placed extreme importance on reliability, designing its modules to meet the specific requirements of the system or class of systems into which the module will be installed. ProLabs transceivers are 100% tested to be reliable and compatible. In addition, all ProLabs transceiver modules are backed by a lifetime warranty, while most OEMs only provide limited warranties.”

“In general terms, most OEMs outsource their transceiver manufacturing to third-party companies, so they are not ‘original’ anyway! The bottom line is that purchasing ProLabs transceivers/SFPs cannot void the warranty of the switch,” concludes Nel.

Adapted from a ProLabs whitepaper: Discovering the Truth Behind Transceiver Warranties.

This article originally appeared in IT Web.