By Natalie DeCoste
The Federal Trade Commission has submitted a report to Congress on anticompetitive practices related to repair markets.
The report, titled “Nixing the Fix: An FTC Report to Congress on Repair Restrictions,” identifies numerous types of repair restrictions and, at the request of Congress, includes recommendations as to how to address the ongoing issues. The report emphasizes issues with repair restrictions imposed by mobile phone and car manufacturers.
When Congress directed the FTC to deliver the report, it noted that it “is aware of the FTC’s ongoing review of how manufacturers—in particular mobile phone and car manufacturers—may limit repairs by consumers and repair shops, and how those limitations may increase costs, limit choice, and impact consumers’ rights under the Magnuson-Moss Warranty Act.”
The FTC found that repair restrictions generally fell into eight categories: physical restrictions; unavailability of parts, repair manuals, and diagnostic software and tools; designs that make independent repairs less safe; application of patent rights and enforcement of trademarks; disparagement of non-OEM parts and independent repair; software locks, Digital Rights Management, and Technical Protection Measures; End User License Agreements; and Telematics. Telematics is the information on the operation and status of a vehicle collected by the vehicles’ internal system and then wirelessly relayed to the manufacturer.
Some of the issues identified by the FTC include using adhesives that make parts challenging to replace, limiting the availability of spare parts, and making diagnostic software unavailable.
For example, companies use glue to close device cases or secure components within a device. Similar issues are seen when manufacturers solder on motherboards and other technical components. By soldering or gluing internal components, companies limit consumers’ ability to replace or upgrade individual parts of a product.
On the antitrust end of the report, the FTC found there may be some specific circumstances where the agency could address repair restrictions as violations of antitrust law. However, in many instances, repair restrictions may reduce consumers’ options for obtaining spare parts and repair services in the aftermarket without running afoul of antitrust law.
The report noted that the Supreme Court has cautioned against imposing antitrust liability on companies that would require them to do business with rivals or potential rivals. Additionally, the Court has been cautious in imposing antitrust liability on a defendant where competitors are denied access to an input that is deemed essential or critical to competition.
The report is timely as consumer products today have become harder to fix and maintain. These repairs require specialized tools, difficult-to-obtain parts, and access to proprietary diagnostic software giving consumers limited choices for obtaining repairs.
“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. To address unlawful repair restrictions, the FTC will pursue appropriate law enforcement and regulatory options, as well as consumer education, consistent with our statutory authority,” the FTC wrote in conclusion.
