• In September, consumer groups including Consumer Reports and the U.S. Public Interest Resource Group released a letter to the Director of the Bureau of Consumer Protection at the Federal Trade Commission (“FTC”) urging the FTC to act on an issue of increasing relevance to consumers in the age of “smart” devices: software tethering.
• The consumer groups argue that software tethering occurs when a manufacturer exercises post-purchase control over a device’s software to impair its functionality, often to the surprise and frustration of the device’s owners. In the letter, the consumer groups argue software tethering constitutes an “unfair and deceptive practice” that harms consumers. The consumer groups urge the FTC to draft formal rules or issue informal guidance to address their concerns, but the FTC is unlikely to act before the presidential transition in January.
• Companies that market “smart” consumer products should carefully review if and how their products’ functionality depends on future software updates, and how that dependence is communicated to consumers, in order to reduce the likelihood of future FTC enforcement.

In September, multiple consumer groups, including Consumer Reports and the U.S. Public Interest Resource Group, released a letter to the Director of the Bureau of Consumer Protection at the Federal Trade Commission (“FTC”), urging the FTC to act on an issue of increasing relevance in the age of “smart” devices: software tethering.

The consumer groups argue that software tethering occurs when a manufacturer exercises control over a device’s software in a way that impairs its functionality, often to the surprise and frustration of the device’s owners. For example, according to the consumer groups, a manufacturer may suddenly lock desirable software features behind a paywall after a consumer has purchased a device or limit the transferability of software features on the secondary market unless the new owner pays fees directly to the manufacturer. At the extreme end, a manufacturer may unilaterally discontinue or terminate the software needed to operate a smart device, rendering it non-functional, or a “brick.”

In the letter, the consumer groups argue software tethering and bricking constitute “unfair and deceptive practices” that improperly give manufacturers “post-purchase control” of a device. These practices hurt consumers, they allege, because “consumers are spending their hard-earned money on products without a clear understanding of when or how these products will fail.” 

The consumer groups urge the FTC to draft new formal rules or issue informal guidance to address software tethering. The FTC is unlikely to take any steps before the presidential transition in January and, under a second Trump administration, significant changes are expected at the FTC. Although the potential impact of the Trump administration on FTC antitrust policy has garnered much of the attention, the future Republican majority is expected to swiftly advance its own policy priorities at the FTC’s Bureau of Consumer Protection as well.

The FTC’s policy priorities will impact the likelihood of new rulemaking or guidance addressing software tethering. Nonetheless, companies marketing consumer products with associated software should recognize the FTC may move forward with an individual enforcement action at any time if a company’s practices are allegedly unfair or deceptive. Companies should therefore carefully review how their products and software interact to reduce the likelihood of future FTC enforcement.

Software Tethering as an “Unfair” or “Deceptive” Practice

In the letter, the consumer groups urge the FTC to combat software tethering using Section 5 of the Federal Trade Commission Act (“FTCA”), which prohibits “unfair or deceptive acts or practices.” Cases brought by the FTC under the FTCA may be predicated on deception or unfairness, or both.

The FTC defines “deception” as an act involving a “material” misrepresentation, omission, or practice that is likely to mislead reasonable consumers. Practices that have been found to be misleading or deceptive in previous FTC cases include false representations, misleading price claims, failure to perform promised services, and failure to meet warranty obligations, among many others. A representation, omission, or practice is “material” if it will likely affect a consumer’s decision to purchase a product or service.

Additionally, an act may be “unfair” under the FTCA if it: (1) causes or is likely to cause substantial injury to consumers, (2) is not reasonably avoidable by consumers themselves, and (3) is not outweighed by countervailing benefits to consumers or to competition. FTC precedent suggests that “substantial” injury requires more than theoretical harm to the consumer.

In the letter, the advocates argue that software tethering is an unfair and/or deceptive practice due to the lack of advance warning to consumers about the smart device’s potentially limited lifespan at the time of purchase.

Consumers, they claim, do not realize that the lifespan of a smart device may depend on the quality and frequency of software updates—not necessarily the strength of its physical parts—or that smart software can be altered or abandoned by the manufacturer at any time. “Knowledge of the expected lifespan and an understanding that the lifespan was reliant on software,” the letter claims, “would certainly change consumers’ purchasing decisions.” Additionally, when manufacturers unilaterally brick a device, the advocates argue that consumers “end up with a hunk of e-waste that could still function with the right software.” The risk of consumer harm is greatest, they allege, when consumers spend hundreds or thousands of dollars on connected home appliances, including smart ovens, refrigerators, or grills.

The letter cites research from Consumer Reports evaluating the policies of major appliance brands to assess how long they guarantee updates to their appliances’ software and applications. Of 21 major appliance brands evaluated by Consumer Reports, only three provide such information in their policies and an additional four say they will provide updates and will notify users of updates, but do not provide a specific timeframe over which they will provide updates. This failure to share crucial information, the letter alleges, makes it impossible for consumer to make informed purchasing decisions.

Consumer Advocates’ Recommendations & Potential Next Steps

To protect consumers from the alleged harms of software tethering, the consumer groups urge the FTC to draft new formal rules or issue informal guidance in five areas:

• Require disclosure of the minimum guaranteed length of time a product’s software will be supported and updated.

• Require companies to ensure the core functions of their products function even if an internet connection fails or the software is no longer updated.

• Encourage companies to incentivize consumers to repurpose or reuse products if software support ends.

• Protect “adversarial interoperability,” whereby products are enhanced or modified through the addition of a competitor’s third-party software or firmware update.

• Conduct an educational campaign to encourage manufacturers to build longevity into the design of their products.

Should the FTC choose to act, issuing a formal rule is one option, although the FTC does not often issue rules due to the complexity and difficulty of the rulemaking process. Under Section 18 of the FTCA, the FTC is authorized to prescribe “rules which define with specificity acts or practices which are unfair or deceptive acts or practices in or affecting commerce” within the meaning of Section 5 of the Act. To assert this formal rulemaking authority, the FTC must follow procedures mandated by Congress under the Magnuson-Moss Act. These procedures are arduous: since 1975, fewer than 10 Magnuson-Moss rules have been promulgated by the FTC and each has taken an average of six years to evaluate and approve. Notably, under Chair Lina Khan, the FTC has streamlined formal rulemaking procedures and proposed new rules pursuant to its statutory authority. A Republican-led commission, however, may be reluctant to use the rulemaking process as aggressively as the current commission.

Alternatively, the FTC could issue informal guidance addressing software tethering. As the name suggests, informal guidance does not have the force of law; it is merely advisory. Even if a practice plainly violates informal guidance, the FTC must still prove the practice is “deceptive” or “unfair” within the meaning of the FTCA.

A recent Supreme Court decision increases the likelihood that the FTC would issue informal guidance, rather than issue rules, to the extent the FTC decides to address the software tethering issue at all. In 2024, in Loper Bright, the Supreme Court overruled its landmark Chevron decision and held that federal courts need not defer to an agency’s interpretation of statutory language if a statute is ambiguous. Alleged violations of the FTCA premised on the “unfairness” standard will be particularly vulnerable to challenge given the vagueness of the relevant statutory language and the FTC’s ever-expanding definition of “unfair”—which certain parties may seek to restrain. As a result, the FTC will likely proceed cautiously when deciding whether and how to address software tethering. In fact, as noted, Loper Bright may lead the FTC to issue informal guidance as opposed to a formal rule, because a court may not consider informal guidance to be final agency action subject to challenge.

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Companies marketing consumer products with associated software, and technology companies more generally, should recognize that although a new administration may result in different priorities and policies for the FTC, enforcement within the FTC Bureau of Consumer Protection will continue. The new Republican-led commission will continue to confront issues like software tethering, although it is too soon to predict whether the FTC will move to address software tethering through rulemaking or guidance (or at all). Companies should recognize that even if the FTC ultimately decides to forgo rulemaking or guidance, the FTC Bureau of Consumer Protection will continue to bring individual enforcement actions alleging violations of Section 5 of the FTCA. Therefore, companies should consider taking proactive steps to reduce the likelihood of future FTC enforcement.

We will continue to monitor priorities and enforcement at the FTC Bureau of Consumer Protection and will provide updates as events unfold. Please do not hesitate to contact us with any questions.

This publication is for general information purposes only. It is not intended to provide, nor is it to be used as, a substitute for legal advice. In some jurisdictions it may be considered attorney advertising.