By SEMA Washington, D.C., Staff
The Federal Trade Commission (FTC) issued a report to Congress that is highly critical of anti-competitive repair restrictions employed by manufacturers that limit consumer choice. The U.S. Congress directed the FTC to prepare the report, which the agency based on research gathered at its “Nixing the Fix: A Workshop on Repair Restrictions” (July 16, 2019). The FTC considered a wide-range of products, from printers to computers, with a focus on automobiles and mobile phones. The report includes recommendations on how to best address these problems.
The FTC notes that the report is timely since consumer products are becoming harder to fix, and repairs often require specialized tools, difficult-to-obtain parts, and access to proprietary diagnostic software. Repair options decrease as a result, placing an increased financial burden on lower income and underserved populations.
The FTC observed “scant evidence” to support manufacturers’ justifications for repair restrictions. Manufacturer explanations for the restrictions were divided into six categories: protection of intellectual property, safety, cybersecurity, liability and reputational harm, consumer design choices, and quality of service. The report provides examples of how manufacturer restrictions can block repairs such as the use of access control technologies (ex: software locks or technological protection measures).
The Magnuson-Moss Warranty Act (MMWA) seeks to protect aftermarket competition by making it illegal for a manufacturer to void a warranty or deny coverage if a customer has a repair or maintenance performed by an independent repair shop or using a third-party replacement part (unless the original manufacturer provides the service or part for free). In fact, the MMWA’s anti-tying provision is not limited to service and repair issues. It also applies to specialty parts and modifications. For example, it is illegal for an auto dealership to void a warranty based on the mere presence of a specialty part. If there is a malfunction, the dealership must show that the aftermarket part caused the problem.
The FTC expressed concern over whether the MMWA’s anti-tying provision is keeping pace with technological challenges that have the potential effect of tying a repair to the OEM or their authorized dealers using OEM parts. Examples provided include: unavailability of parts and repair information, statements that steer consumers to manufacturer repair networks, application of patent rights and enforcement of trademarks, or disparagement of non-OEM parts and independent repair.
The report identified industry self-regulation as potentially beneficial while noting that only the auto industry has created and implemented this. In 2014, trade groups representing the automakers and independent repair shops and aftermarket replacement parts manufacturers entered into a Memorandum of Understanding after Massachusetts passed a motor vehicle “right to repair” law. Manufacturers agreed to sell the diagnostic and repair information made available to their dealers to car owners and independent repair shops.
In 2020, Massachusetts voters approved a new ballot initiative to essentially expand the existing right to repair law to telematics. Starting with model-year ’22, “manufacturers of motor vehicles sold in Massachusetts to equip any such vehicles that use telematics systems … with a standardized open access data platform,” that would enable vehicle owners to authorize independent repair facilities and dealerships “to retrieve mechanical data from and send commands to, the vehicle for repair maintenance, and diagnostic testing.” The ballot initiative is currently subject to a court lawsuit.
For more information, contact Stuart Gosswein at email@example.com.