MONOPOLY MATTERS

At FTC Workshop, Advocates and Business Owners Say Manufacturers Monopolize Repair

by Claire Kelloway on Open Markets’ Food & Power

Do farmers truly own their tractors if they aren’t allowed to fix them? That’s the question posed by the growing Right to Repair campaign, as restrictive end-user agreements and proprietary software increasingly force farmers to use manufacturer-authorized repair services for even the most minor fixes.

These repair restrictions are part of an economy-wide problem that recently drew the attention of the Federal Trade Commission. Last month, the FTC hosted a workshop called “Nixing the Fix: A Workshop on Repair Restrictions” that brought together small business owners, state lawmakers, trade group representatives, and advocates to explain the different ways manufacturers prevent buyers from fixing their products, and whether or not they are justified.

The workshop marked one of the federal government’s first forays into a campaign that has mostly taken place on the state-level without much success. Twenty states have introduced various right-to-repair legislation, but none have passed except for a Massachusetts auto-specific law.

“As a right to repair advocate, we’ve been trying to raise the alarm and it feels like the people in charge of addressing [these issues] are starting to pay attention,” Nathan Proctor, a panelist and Director of the Campaign for the Right to Repair at the US Public Interest Research Group (US-PIRG), told Food & Power.

Democratic presidential candidates Elizabeth Warren and Bernie Sanders have also called for national Right to Repair laws for farm equipment.

Workshop participants explained the many ways manufacturers monopolize repair in virtually every industry, including medical devices, cell phones, cars, home appliances, and of course, farm equipment. Tactics span from fundamentally unfixable product designs and restrictive end-user agreements to illegally voiding warranties or charging for essential schematics and tools.

In agriculture, access to diagnostic software is particularly an issue. As the name would suggest, this software helps diagnose issues in computerized equipment. It also pairs new parts with the rest of a device.  In just the way you need diagnostic software to sync a new wireless keyboard to your laptop, farmers need it to pair a new baler with a tractor.

Without such software, farmers can end up paying thousands of dollars just to identify minor glitches or install new equipment. More critically, when farmers have a short window to plant seed, apply fertilizer, or harvest a crop, they cannot afford to wait for a technician or drive to a dealership that may be fifty or even one hundred miles away.

Monopolizing repair markets is incredibly profitable for manufacturers. IBISWorld estimates that Americans spent $39 billion repairing heavy machinery and $22 billion repairing cellphones, computers, and electronics. One analyst said John Deere dealerships’ margins on repairs are five times larger than margins on selling new equipment.

A more competitive market for repair services could be a major opportunity for small businesses, especially in under-serviced rural areas. But Theresa McDonough, an independent technician from Vermont, explained to the FTC that small repair shops often cannot afford costly business agreements with manufacturers to become authorized, even when they have the technical know-how.

Opponents of Right to Repair argue that unauthorized repair technicians and individuals put themselves at risk when handling dangerous parts, like batteries and refrigerant gases. Others are concerned about cybersecurity risks, counterfeit parts, or modifications that violate safety and environmental regulations (a particular concern of agricultural equipment trade groups).

In response, Proctor said it should not be left to manufacturers to regulate terms of repair. “It’s a good question … who gets to decide what products are fixed in a way that balances ownership, free-market for repair, and safety, those are all things which we should care about,” he said. “But the solution [right now is] ‘let’s monopolize the repair process because this benevolent monopoly will protect consumers,’ I’m not a big fan of that particular line of reasoning.”

Proctor mentioned that the FTC or the consumer product safety commission could instead identify devices that are unsafe for an amateur to repair and create repair licensing programs for those products. Whoever the governing body is, they should be “accountable to the public,” he said.

It’s unclear what if anything will come of the FTC’s workshop. The agency recently weighed in on Right to Repair last spring when it sent six major manufacturers warning letters around concerns that they violated the Magnuson-Moss Warranty Act. And in 2015, the Copyright Office sided with Right to Repair by creating exemptions for farm equipment code, among other intellectual property, from the Digital Millennium Copyright Act for the sake of lawful modifications, repairs, and diagnosis.

However, this has not stopped manufacturers from illegally voiding warranties or withholding critical software and source code. Software modification is still against John Deere’s terms of service, though agriculture equipment groups have agreed to make some diagnostic and repair tools available for purchase by 2021.

Meanwhile, industry has launched a strong anti-Right to Repair lobbying effort. From 2015 to 2016, corporations and trade groups opposing Right to Repair, from Apple to John Deere, outspent advocates by 28-to-1 in three key state-level legislative efforts, according to a MapLight analysis.

The public has until September 16th to submit comments to the FTC on this issue. As of this writing, 21 out of 22 comments express some form of support for greater abilities to repair. Microsoft submitted one letter in opposition.