By a Biometrica staffer
Are consumers being treated fairly if manufacturers of products they’ve bought impose repair restrictions? That’s the question that the Federal Trade Commission (FTC) aims to answer in a comprehensive 56-page report. The conclusion, basically, is that the treatment is not fair. In the report, the FTC evaluates all explanations that companies have given for why they limit the right of Americans to repair products they’ve legally purchased, a post on Extreme Tech says on the report.
“Although manufacturers have offered numerous explanations for their repair restrictions, the majority are not supported by the record. The auto industry has shown that in certain contexts, self-regulation can significantly increase consumers’ repair options. But other industries have not adopted similar self-regulation,” the FTC concludes in its report. Many of the arguments manufacturers make for why citizens shouldn’t be allowed to repair products they legally purchased, are based on problems the manufacturers themselves create, the report says. But manufacturers can choose to make products safer to repair right at the design stage, it adds.
Many consumer products have become harder to fix and maintain. Repairs today often require specialized tools, difficult-to-obtain parts, and access to proprietary diagnostic software. Consumers whose products break then have limited choices. The financial burden of repair restrictions may also be heavier on communities of color and lower income groups, the report says, adding that many Black-owned small businesses are in the repair and maintenance industries, and difficulties facing small businesses can disproportionately affect small businesses owned by people of color.
The MMWA And Anti-Tying Provisions
We’ve given away the conclusion of the report, but there are a lot of nuances to take away it. Let’s start with the Magnuson-Moss Warranty Act (MMWA) of 1975. This is the act that governs warranties on consumer products. “To prevail under Magnuson-Moss, a plaintiff must show there is a valid warranty, the product was presented for repair during the warranty period, and the manufacturer failed to conform the product to the provisions of the warranty within a reasonable amount of time or number of repair attempts,” a post on Lexology says on the Act.
Under the MMWA, the anti-tying provision, Section 102(c) of the MMWA, prohibits a warrantor of a consumer product from conditioning its warranty on the consumer’s using any article or service which is identified by brand name unless the article or service is provided for free or the warrantor obtains a waiver from the Commission. For instance, this provision would bar an automobile manufacturer from voiding a warranty if a consumer has scheduled maintenance performed by someone other than the dealer, or forbid a smartphone manufacturer from voiding a warranty when a consumer has a new battery installed at a kiosk at the mall.
The anti-tying provision prevents manufacturers from using access to warranty coverage as a way of obstructing consumers’ ability to have products maintained or repaired using third-party replacement parts and independent repair shops. Companies may seek a waiver of this prohibition if:
(1) the warrantor satisfies the FTC that the manufacturers’ parts or services are necessary for the product to function, and
(2) the waiver is in public interest
Since 1975, only three waiver requests have been made to the FTC, and all of them were denied.
Tying And Aftermarkets
Tying is the sale by a firm of one product (the tying product) only on the condition that the customer also purchase a second product (the tied product) from the same firm. Manufacturer restrictions on aftermarket parts or services may give rise to a claim of illegal tying. For example, a tying claim might allege that a manufacturer unlawfully tied the availability of replacement parts to the purchase of its repair service. The tie can be explicit (you must buy Product A in order to get Product B), with the manufacturer refusing to sell the products separately, or implied, such as when products are offered only as part of a bundle and not independently.
In antitrust parlance, repair restrictions concern aftermarkets — markets for parts or services that are used after the initial purchase of a product. Those can be anything from a razor or razor blades to software and software updates. A manufacturer’s explanations for aftermarket restrictions are almost always relevant to a court’s assessment of the overall competitive impact of a particular practice, the report says.
For example, manufacturers may assert that restrictions on competition in aftermarkets are necessary for privacy, data security, efficient design, manufacture, distribution, and safety reasons, and are thus procompetitive. Manufacturers may specifically restrict the options of consumers to repair a product, based on certain asserted explanations, such as enhancing efficiency; quality control; protecting intellectual property rights; or preventing injuries, reputational harms, or other negative consequences resulting from improper repairs.
How Can Manufacturers Restrict Repairs?
While the FTC said it has actively enforced the anti-tying provision of MMWA and will continue to do so, it added that it’s time to consider if the provision has kept pace with technological advancements. Even when a warranty does not explicitly require that repairs be performed by the original equipment manufacturer (OEM) using OEM parts, many manufacturers restrict independent repair and repair by consumers. The report says that can be done in the following ways.
Physical restrictions: These limit the ability to open devices or physically remove and replace component parts. Repair advocates have identified different ways that manufactures build physical restrictions into their products. Such restrictions include highly specialized nuts and bolts that require unique screw heads to open a device or machine.
Unavailability of parts, manuals, and diagnostic software/tools: Repairs may be made more difficult or impossible to perform by individuals or independent repairs shops due to their inability to access parts, manuals, and diagnostic software and tools.
Designs that make independent repairs less safe: The primary safety concern of independent repair raised by manufacturers and right to repair advocates relates in particular to the challenges of replacing lithium ion cells.
Steering consumers to manufacturers’ repair networks using telematics system: Many modern vehicles come equipped with telematics that monitor the status of the car and relay that information to a central location. Numerous commenters asserted that these telematics systems serve as a relatively new way of limiting independent repair access and consumer choice in the auto repair industry. As LKQ Corp. and MEMA described in their submissions at a workshop, according to the FTC report, telematics systems, which “provide remote, real-time communications between a vehicle and a remote third party,” are currently only accessible by the vehicle manufacturers.
Application of Patent Rights and enforcement of trademarks: Intellectual property rights foster innovation by protecting significant investments in research and development. Two commenters raised intellectual property laws as lessening competition or creating restrictions in the repair marketplace, the report said.
Software locks, Digital Rights Management, and Technological Protection measures: Software locks, digital rights management (DRM) tools or technological protection measures (TPMs) are access control technologies implemented by OEMs. While manufacturers argue that these measures are necessary to protect proprietary hardware and copyrighted technologies, repair advocates argue such tactics lock independent service organizations (ISOs) and consumers out of basic repairs.
End User License Agreements: Both manufacturers and right to repair advocates acknowledge that many products now consist of physical goods and embedded software that the manufacturer licenses to the consumer under the terms of an End User License Agreement (EULA). “Basically, 100% of manufacturers have restrictions on repair in every one of their [EULAs],” the report said, citing a study done by the Repair Association. For the study, it reviewed the EULAs of 52 products, including mobile phones, enterprise and personal computers, smart TVs, and agricultural equipment. The study found that the EULAs restrict repairs by prohibiting modifications of software for any purpose, prohibiting de-compiling or reverse engineering of software.
On their part, manufacturers typically offer one of the following explanations for repair restrictions:
- Protecting intellectual property
- Liability and reputational harm
- Consumer demand and design choices to service that demand drive the ability to repair devices
- Service quality
For a detailed version of these, and to understand what the right to repair advocates say on the timings of repairs, price of repairs, environmental harm, small business and employment, etc we’d urge you to read the FTC report.
“The debate around repair restrictions illustrates the limitations of MMWA’s anti-tying provision in repair markets. While the anti-tying provision gives consumers the right to make repairs on their own or through an independent repair shop without voiding a product’s warranty, repair restrictions have made it difficult for consumers to exercise this right,” the FTC report says, in closing.