Index
What is Right To Repair
Right to repair is a term that refers to consumers having the right to fix something they own when it breaks – either by themselves or by taking it to an independent repair shop. The movement to enact legislation to ensure right to repair has been gaining momentum in recent years.
Right to repair legislation has different names in different states. For example, Colorado passed the Consumer Right to Repair Agriculture Equipment Act in early 2023. New York passed the Digital Fair Repair Act in late 2022.
Recent Trends in Right to Repair Legislation
There are currently four states which have passed some form of right to repair legislation:
- New York’s 2022 Digital Fair Repair Act.
- Minnesota’s 2023 Digital Fair Repair Act.
- Colorado’s 2023 Consumer Right to Repair Agriculture Equipment Act.
- California’s 2023 Right to Repair Act.
Some have taken this as evidence that right to repair is gaining momentum. Many additional states are currently considering similar legislation. For example, Oregon’s legislature recently passed a right to repair bill that is waiting for the governor’s signature.
There are also ongoing efforts at the federal level. However, attempts to pass a federal right to repair bill have not yet succeeded. Regardless, federal agencies are scrutinizing repair restrictions for violations of the Magnuson-Moss Warranty Act as well as antitrust laws. For example, the FTC released a policy statement saying:
“the Commission will scrutinize repair restrictions for violations of the antitrust laws. For example, certain repair restrictions may constitute tying arrangements or monopolistic practices—such as refusals to deal, exclusive dealing, or exclusionary design—that violate the Sherman Act.”
What Economic Benefits or Drawbacks are Associated with Right to Repair
Restrictions on right to repair can lead to economic benefits or drawbacks, depending on the circumstances of the case. This complexity often requires the help of an economic expert. For example, the drawbacks, or harm, from restricting right to repair include:
- Push independent repair shops out of business by increasing their costs and/or denying them access to (1) replacement parts, (2) tools, and (3) software necessary to make repairs. Access to the computer system and/or software in the product is another potential hurdle.
- Increase the wait time and/or availability for repairs due to original equipment manufacturers’ restrictions on using independent repair shops and OEM parts.
- Raise prices and/or reduce quality by eliminating the competitive pressure of independent repair shops or independent parts manufacturers.
- Force consumers to use manufacturer-authorized repair providers and/or parts rather than lower-priced alternatives.
There are also situations where restrictions on third-party repairs can be beneficial to customers and/or manufacturers. For example, some manufacturers have expressed concern that third party repairs could (1) jeopardize consumer safety, (2) undermine intellectual property rights, and (3) diminish brand reputation.
How an Antitrust Expert Can Help in a Right-to-Repair Antitrust Case
Right to repair antitrust cases can be complex and the issues are often complicated and contentious. Expert reports and expert testimony are often relied on to help: (1) define the relevant market, (2) analyze market power, (3) evaluate liability issues such as tying, and (4) quantify antitrust injury.
It is beneficial to engage an expert economist who understands the issues, has experience working with data, and can apply sound economic theory to real-world problems.
(1) Defining the Relevant Market
A relevant market is defined as a set of products or services that consumers consider to be a reasonably close alternative. Which products consumers consider to be close alternatives can often be seen by looking at substitution patterns in response to price changes.
If the price of one product increases, one would expect that consumers would tend to shift their purchases to other products within the market before switching to products outside the market. Economists often evaluate which products are in the market by looking at changes or relative levels of prices and quantities. Various tests based on this principle exist, such as the Hypothetical Monopolist Test (“HMT”) or Small but Significant Non-transitory Increase in Prices (“SSNIP”) test.
Of particular importance in right-to-repair antitrust cases is the question of whether related products and services are in separate markets. For example, are replacement parts and service for an automobile in the same relevant antitrust market as the automobile itself? Expert economists can help to answer these questions by defining relevant markets.
(2) Analyzing Market Power
Market power is an essential concept in antitrust law. A plaintiff typically must show that a defendant has or could obtain market power to prevail in a right to repair antitrust case. The logic being that antitrust harm is caused by the abuse of market power.
Economists have a variety of methods to evaluate market power. These methods rely on a combination of economic theory and data. For example: (a) high prices relative to costs are a potential indicator of market power, as measured by the Lerner Index; and (b) high market shares may indicate market power, as measured by the Herfindahl-Hirshman Index (“HHI”).
(3) Evaluating Liability Issues Such As Tying
In right to repair antitrust cases, there are liability issues which can rely heavily on economic concepts. One such issue is whether the alleged repair restrictions forced customers to buy one product in order to be able to buy a separate product. Economists refer to this as tying.
Another issue that may arise is whether third party repair companies were excluded because of the defendant’s behavior. Expert economists are well positioned to help with those types of issues and can determine if other factors are also in play.
(4) Quantifying Antitrust Injury
In a right to repair antitrust case, the defendant’s behavior may be causing or have caused antitrust injury to the plaintiffs. Such an injury could take the form of (a) overcharges to customers and/or (b) lost profits to independent repair shops.
(a) Overcharges: In a right-to-repair case, often competition has been restrained or eliminated resulting in the potential for higher prices paid by plaintiffs. These higher prices are known as overcharges.
(b) Lost profits: Independent repair shops can also be harmed when manufacturers and dealers attempt to illegally push them out of the market. This harm could result in lost profits which the independent rivals would otherwise have earned.
Quantifying these damages would benefit from having an economic expert to unravel complex issues and extensive amounts of data. An economic expert will often use advanced econometric models and data analysis techniques to accurately determine if there is antitrust injury, and if so, how much.
The factual allegations differ across right-to-repair cases which means there is not a single one-size-fits-all injury or damages methodology. An expert economist can employ a variety of theories and methods to determine if there is anticompetitive impact.
Recent and Noteworthy Right-to-Repair Cases
Right to repair cases have been making headlines. These headlines involve lawsuits against some of the most prominent manufacturers and companies. There is no slowdown of cases expected with more and more states enacting legislation.
Some examples of industries facing right to repair lawsuits include (1) photocopy machines, (2) farm equipment, (3) automobiles, (4) motorcycles, (5) medical equipment, and (6) consumer electronics. The sections below provide examples of right to repair antitrust litigation.
Eastman Kodak Co. v. Image Technical Services, Inc.
The Eastman Kodak v. Image Technical Services, Inc. case is a noteworthy right to repair case decided by the U.S. Supreme Court in 1992. The product at issue in the case was photocopy machines.
Independent service organizations (ISOs) challenged Kodak’s policy of refusing to sell them replacement parts. ISOs claimed Kodak was tying the sale of parts and services together in violation of the Sherman Act.
Kodak conceded that they had a high share of parts sales for Kodak equipment and of service for Kodak equipment. This raised the possibility that Kodak may have had market power in these aftermarkets.
A key issue in the case became whether Kodak’s lower market share (and corresponding lack of market power) in the primary market for photocopy machines precluded the possibility of it having and abusing market power in the aftermarket for parts and service.
The Supreme Court found that a lack of power in the primary market (i.e., foremarket) did not necessarily prevent market power in the aftermarkets.
Deere & Company Repair Services Antitrust Litigation
The John Deere right to repair case focused on the ability to repair agricultural equipment with certain onboard electronic control units. These control units were allegedly used by John Deere and its dealerships to control where and how machines are maintained and repaired.
The Deere & Company Repair Services Antitrust Litigation complaint claims the anticompetitive conduct had the following effects:
- Purchasers of Deere Repair Services have been deprived of free and open competition; and
- Purchasers of Deere Repair Services paid artificially inflated prices.
In late 2023, a U.S. judge said John Deere must face claims that it has unlawfully conspired to restrict services for maintenance and repair. Deere has tried to dismiss the consolidated lawsuits, but that has been rejected. The case is still ongoing.
Lambrix v. Tesla, Inc.
In March of 2023, Tesla was hit with an antitrust class action alleging that it engaged in exclusionary conduct and restraint of the markets for compatible replacement parts and maintenance and repair services for Tesla vehicles.
The Lambrix v. Tesla, Inc. complaint claims that Tesla’s anticompetitive conduct had the following effects:
- Competition has been restrained or eliminated with respect to Tesla Repair Services and Tesla-Compatible Parts, thus depriving purchasers of Tesla Repair Services and Tesla-Compatible Parts of the benefits of free and open competition, leading to customers paying artificially inflated prices.
- In addition to paying artificially inflated prices, purchasers of Tesla Repair Services and Tesla-Compatible Parts have suffered long wait times to receive parts and services.
In November of 2023, a U.S. judge dismissed the antitrust lawsuit saying customers in the proposed class action failed to show that at the time customers bought the vehicles (1) the alleged problems were not generally known and (2) that buyers could not predict the costs to keep their vehicles running.
Harley-Davidson Aftermarket Parts Marketing, Sales Practices, and Antitrust Litigation
Harley Davidson was hit with a right to repair lawsuit soon after the FTC approved its final orders in 2022 in its investigation of right-to-repair issues (including the Magnuson-Moss Warranty Act) involving Harley Davidson. The Harley Davidson right to repair class action complaint alleges that Harley Davidson requires the use of an authorized repair service and/or authorized replacement parts to maintain the validity of the warranty. The complaint describes this as a tying arrangement which violates antitrust laws.
The complaint cited two reasons that the allegedly anticompetitive restrictions would have caused motorcycle owners to pay inflated prices for repairs: First, that Harley’s authorized repair providers price at a premium compared to the cost of independent repair services. Second, Harley’s authorized parts are sold at a premium compared to generic parts and supplies.
As of early 2024, the case was still pending in the Eastern District of Wisconsin.
Granato v. Apple
In 2022, plaintiffs in Granato v. Apple filed a complaint alleging that Apple discourages customers from repairing their own Apple electronic devices. The complaint claims that Apple has threatened to terminate warranty coverage, withhold parts, tools, repair information, and repair documentation such as manuals, and placed booby traps and repair impediments in its devices. In turn, the suit claims Apple is forcing those who need their phone repaired to use Apple rather than independent repair shops.
The case began in California state court, was removed to Federal court, and then was remanded back to state court. As of early 2024, the case was still pending.
Conclusion
Right to repair legislation has been gaining momentum. This is evidenced by ongoing private litigation and federal investigations. Economic experts are essential for unravelling the complex issues which arise in right-to-repair cases.