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The FTC Publishes a report for Congress titled "Nixing the Fix" on Repair Restrictions found in Smartphone and Auto Sectors

1 cover FTC REPORT ON REPAIRABILITY

 

The U.S. Federal Trade Commission has published an in-depth report covering how  product repair restrictions from manufacturers like Apple have a negative impact on consumers, especially minorities, and small businesses.

 

The report's executive summary in-part states that "The Federal Trade Commission (“FTC” or “Commission”) submits this report pursuant to Congress’s directive for the Commission to report to the Committees on Appropriations of the House and Senate regarding anticompetitive practices related to repair markets. When directing the Commission to issue this report, Congress 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." Congress specifically directed the FTC to include recommendations on how to best address these problems.

 

To fulfill this Congressional directive, the Commission has synthesized the knowledge gained from its July 16, 2019 workshop titled “Nixing the Fix: A Workshop on Repair Restrictions” (the “Workshop”), public comments, responses to a Request for Empirical Research and Data, and independent research. This report examines consumer protection and antitrust issues relating to repair restrictions, with particular emphasis on those imposed by mobile phone and car manufacturers.

 

Congressional interest in the competition and consumer protection aspects of repair restrictions is timely. 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.

 

Furthermore, the burden of repair restrictions may fall more heavily on communities of color and lower-income communities. Many Black-owned small businesses are in the repair and maintenance industries,5 and difficulties facing small businesses can disproportionately affect small businesses owned by people of color. This fact has not been lost on supporters of prior right to repair legislation, who have highlighted the impact repair restrictions have on repair shops that are independent and owned by entrepreneurs from underserved communities.

 

Repair restrictions for some products—such as smartphones—also may place a greater financial burden on communities of color and lower-income Americans. According to Pew Research, Black and Hispanic Americans are about twice as likely as white Americans to have smartphones, but no broadband access at home. Similarly, lower-income Americans are more likely to be smartphone-dependent. This smartphone dependency makes repair restrictions on smartphones more likely to affect these communities adversely.

 

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 through:

 

  • Product designs that complicate or prevent repair;
  • Unavailability of parts and repair information;
  • Designs that make independent repairs less safe;
  • Policies or statements that steer consumers to manufacturer repair networks;
  • Application of patent rights and enforcement of trademarks;
  • Disparagement of non-OEM parts and independent repair;
  • Software locks and firmware updates; or
  • End User License Agreements.

 

Manufacturers, including Apple, explain that these repair restrictions often arise from their desire to protect intellectual property rights and prevent injuries and other negative consequences resulting from improper repairs."  

 

There are three direct references to Apple found in the FTC report as follows:

 

Reference #1 on Software Locks, Digital Rights Management, and Technological Protection Measures (page 23): Theresa McDonough, the owner of Tech Medic, a mobile phone and computer repair shop located in Middlebury, Vermont explained that Apple synchronizes some iPhone parts to the device’s logic board, making the part repairable only by Apple. Although McDonough said she does not believe this practice is widespread in the marketplace, she fears that other manufacturers will engage in a similar practice in the future, making it impossible for individuals and independent repair shops to make certain repairs to electronic devices.

 

Reference #2 on Design Choices and Consumer Demand Drive the Repairability of the Devices (pages 35 & 36): Apple’s experience with its battery replacement program also suggests that, given a choice between a low-cost repair and buying a new mobile phone, many consumers will opt for the low cost repair. In early 2018, after Apple was found to be slowing down certain models of iPhones in order to compensate for degrading batteries, the company reduced the price of out-of warranty battery replacements for iPhone 6 and later models. Under the program, Apple reduced the price for a battery replacement from $79 to $29.191 Subsequently, in a January 2, 2019 letter to investors, Apple’s CEO explained that iPhone sales were lower than anticipated due to, among other things, "some customers taking advantage of significantly reduced pricing for iPhone battery replacements."

 

Whether consumers are willing to trade repairability of devices for other design features is a question that remains open. Further research is required to understand the tradeoffs consumers are willing to make when fully informed about repairability.

 

Reference #3 on Timing of Repairs (page 39): Multiple Workshop panelists argued that allowing or providing for repair only through authorized repair networks or through the manufacturer can lead to repair taking too long to actually be a feasible option for consumers. Vermont State Senator Pearson, for example, stated that when his iPhone’s camera broke, "according to Apple, nobody in Vermont could fix it. They wanted me to send it to them.”209 However, because he also runs a consulting business from his phone, mailing it away for repair would have had the effect of closing his business for a week and so “it was a non-starter."

 

FTC's Conclusion

 

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. 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 Commission also stands ready to work with legislators, either at the state or federal level, in order to ensure that consumers have choices when they need to repair products that they purchase and own.

 

For more on this, review the full 56 page FTC report below, courtesy of Patently Apple.

 

FTC Report - Nixing the Fix by Jack Purcher on Scribd

 

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