FTC Touts Three Right To Repair Actions (Free Edition)

FTC Touts Three Right To Repair Actions (Free Edition)
Photo by JESHOOTS.COM on Unsplash

Microwave

Three companies are found to violate the law barring companies from forcing people to buy parts and services from them on pain of voiding a warranty for a consumer good.

Shortwave

In three right to repair actions before the one year anniversary of the Biden Administration’s competition EO, the United States (U.S.) Federal Trade Commission announced “proposed settlements with grill maker Weber-Stephen Products LLC, motorcycle manufacturer Harley-Davidson Motor Company Group, LLC, and MWE Investments, LLC, which manufactures Westinghouse outdoor power equipment, alleging they violated the Magnuson-Moss Warranty Act and the FTC Act by including warranty provisions that unlawfully conveyed that their warranties would be voided if a customer used third-party parts or, in the case of Harley-Davidson and Westinghouse, independent repairers.”

Longwave

In July 2021, President Joe Biden signed an executive order (EO) to combat the increased consolidation in the United States’ (U.S.) economy and its anti-competitive effects. The sweeping, EO, “Promoting Competition in the American Economy,” would remake how the U.S. government regulates and polices antitrust and competition policy. And, to no great surprise, the largest U.S. technology companies would see many of their practices and acquisitions targeted if this set of interlocking directives is fully carried out. Biden urged the FTC to consider regulating data collection and surveillance, the right to repair consumer electronics, competition in online marketplaces (i.e. Amazon primarily), and other practices.

A few weeks later, the FTC held its second monthly meeting and voted to change agency policy on how it would use its powers to enforce a right to repair. In its press release on its newly adopted right to repair statement of policy, the agency explained:

The FTC today unanimously voted to ramp up law enforcement against repair restrictions that prevent small businesses, workers, consumers, and even government entities from fixing their own products. The policy statement adopted today is aimed at manufacturers’ practices that make it extremely difficult for purchasers to repair their products or shop around for other service providers to do it for them. By enforcing against restrictions that violate antitrust or consumer protection laws, the Commission is taking important steps to restore the right to repair.

In May, the FTC released a report to Congress that concluded that manufacturers use a variety of methods—such as using adhesives that make parts difficult to replace, limiting the availability of parts and tools, or making diagnostic software unavailable—that have made consumer products harder to fix and maintain. The policy statement notes that such restrictions on repairs of devices, equipment, and other products have increased the burden on consumers and businesses. In addition, manufacturers and sellers may be restricting competition for repairs in a number of ways that might violate the law.

In the policy statement, the Commission said it would target repair restrictions that violate antitrust laws enforced by the FTC or the FTC Act’s prohibitions on unfair or deceptive acts or practices. The Commission also urged the public to submit complaints of violations of the Magnuson-Moss Warranty Act, which prohibits, among other things, tying a consumer’s product warranty to the use of a specific service provider or product, unless the FTC has issued a waiver.

The Commission voted 5-0 to approve the policy statement during an open Commission meeting live streamed to its website. Chair Lina Khan issued a statement. Commissioner Rohit Chopra issued a separate statement.

It deserves some emphasis that policy statements do not have the force of law like regulations do. Rather, “[g]eneral statements of policy under the Administrative Procedure Act…are agency statements of general applicability, not binding on members of the public, ‘issued . . . to advise the public prospectively of the manner in which the agency proposes to exercise a discretionary power.’”[1]Hence, the FTC informed the public and companies offering warranties how it would use its power under the Magnuson-Moss Warranty Act (MMWA) to investigate and punish violations as they relate to the right to repair. However, until the three recently announced actions, there has been little in the way of publicly visible implementation of this policy statement. This may be a good lesson for those expecting quick action from the FTC following a change in policy given that most agencies cannot stop and change direction on a dime.

Nonetheless, in its 2021 report on the issue, the FTC conceded its authority under MMWA to take on the right to repair is limited:

A revised Interpretation of the MMWA, however, is not a panacea. First, it would only strengthen repair rights for products that are sold with a written warranty and only during the duration of the warranty period. Thus, manufacturers could entirely avoid the anti-tying provision by refraining to offer written warranties. Second, consumers would be left without repair rights during the time period when they are most likely to use them—after the warranty has expired. Finally, because the MMWA only applies to consumer products, a revised Interpretation would not address repair restrictions imposed on owners of products that fall outside the scope of the MMWA.

There are a few things worth noting. First, the reach of statute is only to those companies selling consumer goods that offer written warranties. If an entity does not offer a warranty, no legal jeopardy under MMWA with respect to tying.

And so it bears special emphasis that MMWA can be used to address only a part of the right to repair issue and not typically the aspects that have given rise to the most prominent, recent advocacy. Proponents of this policy have been driven, in large part, by the increasingly difficultly, if not impossibility, of getting one’s smartphone, tablet, and, in some cases, computer fixed by someone other than the manufacturer. If companies like Apple or Samsung do not condition their warranties to buying certified parts or services, then MMWA largely does not control. However, as suggested in the FTC’s revised policy statement, the FTC Act or Sherman Antitrust Act may apply to conduct that is anti-competitive, and one could seemingly make a colorable argument that a major manufacturer of a consumer good restricting all parts and information about repairs is inherently anti-competitive.

In the meantime, while the FTC was working on these actions and quite possibly conducting other investigations under MMWA, right to repair proponents have been using other means to persuade large companies to change these policies. For example, a number of groups have used shareholder resolutions to force companies to change policy. Last year, in order to head off just such a resolution, Apple announced that its policies would change with the iPhones 12 and 13 through “Self Service Repair, which will allow customers who are comfortable with completing their own repairs access to Apple genuine parts and tools.” Apple added that this is “soon to be followed by Mac computers featuring M1 chips, Self Service Repair will be available early next year in the US and expand to additional countries throughout 2022.” Earlier in 2021, Microsoft agreed to examine changing its policies to accommodate a right to repair with a commitment to announce plans next year. And, while these actions are likely encouraging to right to repair proponents, there are many, many other large players in the tech space that have not changed their policies.

Incidentally, these changes may have had less to do with FTC policy change than the actions of a different regulator. the U.S. Securities and Exchange Commission (SEC) rolled back Trump Administration measures to limit the use of shareholder resolutions to effect changes at public companies that proponents for the right to repair or other initiatives may use to push for other changes, say on e-waste, recycling, supply chains in nations with poor human rights records such as the People’s Republic of China (PRC).

Champions of right to repair have also been trying to change U.S. law. There is legislation in Congress to enshrine a right to repair in federal statute beyond what MMWA offers (see here for more detail and analysis.) It must be said that, at present, prospects do not look good on such legislation even though the New York legislature recently passed the “Digital Fair Repair Act,” the first right to repair law passed in the U.S., but New York’s governor has not yet signed or vetoed the bill.

One other development bears notice. In March, a group of farmers’ advocacy organizations and right to repair proponents filed a complaintwith the FTC, arguing that John Deere’s policies towards repairs of its equipment violates both the FTC Act and the Sherman Antitrust Act. These groups are asking that the FTC investigate and agree with their assertion that John Deere has violated these laws. However, they are not relying on MMWA for the very good reason that the statute only covers consumer goods.

Turning to the FTC’s MMWA complaints, let’s take Weber Grills first. The FTC made available its complaint, agreement containing a consent order, decision and order, and an analysis to aid public comment. The FTC vote to issue the complaint and consent order was unanimous.

In the complaint, the agency asserted that MMWA “prohibits a warrantor from conditioning a warranty for a consumer product that costs more than $5 on the consumer’s use of an article or a service (other than an article or a service provided without charge) which is identified by brand, trade, or corporate name, unless the warrantor applies for and receives a waiver from the Commission (the “Tying Prohibition”).” In other words, a company cannot issue a warrant that is voided if a person uses non-branded parts absent an FTC waiver, which have been rarely issued in over 40 years. Moreover, a company can avoid legal jeopardy under MMWA for a warranty that is voided by using non-branded parts is through offering the products or services for free. The FTC contended that two of Weber’s user manuals and warranties stated that use of “not genuine” Weber parts would void the warranty.

Additionally, as promised in its policy statement, the FTC also brought charges for violating Section 5 of the FTC Act as it is permitted to do when finding violations of the MMWA. The agency reiterated that:

A warrantor cannot, as a matter of law, condition the validity of a warranty on the consumer’s use, in connection with the warranted product, of an article or service (other than an article or service provided without charge under the terms of the warranty) identified by brand, trade, or corporate name, unless it has received a waiver from the Federal Trade Commission.

The FTC claimed that Weber engaged in a deceptive practice barred under Section 5 because the company “represented, directly or indirectly, expressly or by implication, that the validity of its warranty for consumer products costing more than $5 is conditioned on the use, in connection with the warranted product, of genuine Weber parts that were not provided to the consumer free of charge under the warranty.”

Curiously, the FTC has not yet made publicly available the terms of the consent order with Weber. However, it is a safe guess that its terms will be very similar to those in the orders filed regarding Harley-Davidson and MWE Investments, LLC.

In its complaintagainst Harley-Davidson, the FTC cited three different passages in its 2021 warranty that implied or explicitly stated its warranty would be voided if a buyer did not use genuine parts or services. The agency also found a violation because the company did not fully explain what its warranty covered in one document and instead advised people to check with Harley-Davidson dealers. Consequently, the agency alleged violations of MMWA, its implementing regulations, and Section 5’s bar on deceptive practices.

The FTC and Harley-Davidson reached a settlement that lasts 20 years and bans the company from engaging in the same and similar practices. There is language requiring the company to inform customers of their right to use non-Harley-Davidson parts and services without fear that their warranty will be voided.

Moreover, as with the Weber case, the FTC was unanimous in agreeing to the complaint and settlement.

Finally, in the complaint against Westinghouse Outdoor Power Equipment (MWE Investments, LLC), the FTC cited “numerous instances” where the company “conditioned a warranty for [its portable generators] costing more than $5 on the consumer using, in connection with the warranted product, an article or service identified by brand, trade, or corporate name that was not provided to the consumer without charge under the terms of the warranty.” Again, the agency claimed violations of both the MMWA and Section 5 of the FTC Act. The consent order mirrors the one reached with Harley-Davidson and also lasts for 20 years.

There are a few final things to note. None of the companies are being forced to disgorge the proceeds of tying the warranties in question to using their parts and services. Presumably, the companies made money on these practices, but the FTC is not touting recovered funds or a penalty as it does in cases where it obtains such funds. One wonders if this was due to the difficulty of determining when the companies profited from violating MMWA or if the agency wanted “quick wins” to coincide with the one year anniversary of the competition EO. Either could easily be the case, or perhaps both reasons are behind the settlements.

Finally, even if the FTC prevents every company selling consumer goods in the U.S. from conditioning warranties in violation of MMWA, the right to repair issue would not be resolved as proponents would like. Companies could stay silent on whether certified or genuine parts must be used in order to not void a warranty and could use practices like not making available parts to third parties, designing devices not to work if not accessed with tools only the manufacturer has, or keeping secret the know-how to diagnose and repair increasingly computerized, complicated goods. Moreover, with the wave of “smart” devices sweeping analogue goods off the market, these practices will stifle further a consumer’s ability to use entities and services aside from a manufacturer. Perhaps the FTC will bring some Section 5 or Sherman Act actions, alleging such practices are anti-competitive. But, what is clear is that MMWA will not be helpful with these practices.

Other Developments

The United States (U.S.) Department of Homeland Security (DHS) released the first report of the recently established Cyber Safety Review Board (CSRB), that “includes 19 actionable recommendations for government and industry…[to] address the continued risk posed by vulnerabilities discovered in late 2021 in the widely used Log4j open-source software library.”

The European Data Protection Board (EDPB) “adopted a set of criteria to assess whether a cross-border case may qualify as a case of “strategic importance” for closer cooperation” “[f]ollowing the commitments set out in its Vienna Statement on Enforcement Cooperation.”

The United Kingdom’s (UK) Competition and Markets Authority and the Office of Communication published a joint statement that “sets out their shared views on the interactions between online safety and competition in digital markets.”

The United States (U.S.) Government Accountability Office (GAO) ruled the statute that established the Technology Modernization Fund (TMF) allows the Office of Management and Budget (OMB) and the General Services Administration (GSA) the “discretion to set rates at less than full reimbursement…[but] does not provide the discretion to totally waive reimbursement by an agency.”

Canada’s Office of the Privacy Commissioner announced that “foreign nationals outside Canada will have the right under the Privacy Act to access their personal information being held by federal government institutions.”

The United States (U.S.) National Telecommunications and Information Administration (NTIA) announced that “all states and territories have confirmed their participation in the Biden-Harris Administration’s Internet for All initiative announced in May.”

The United States (U.S.) Federal Communications Commission announced “it is committing over $266 million in two new funding rounds through the Emergency Connectivity Program, helping to close the Homework Gap.”

The United Kingdom’s (UK) Information Commissioner’s Office (ICO) detailed its “commitment to safeguard the information rights of the most vulnerable people, including regulatory work around children’s privacy, AI-driven discrimination, the use of algorithms within the benefits system and the impact of predatory marketing calls.” Information Commissioner John Edwards made remarks explaining the commitment.

The United States (U.S.) House Energy and Commerce Committee passed a number of technology bills as explained in the majority’s press release:

§ The “Spectrum Innovation Act of 2022” (H.R. 7624) that “would make available additional frequencies in the 3.1–3.45 gigahertz band for non-federal use, shared federal and non-federal use, or a combination thereof…[and] also funds the Secure and Trusted Reimbursement Program and a newly authorized Next Generation 9-1-1 grant program from the proceeds of the auction required under the legislation.”

§ H.R. 7624 was the vehicle for two other bills: the “Extending American’s Spectrum Action Leadership Act of 2022” (H.R. 7783) “that would extend the Federal Communications Commission’s (FCC) general auction authority for an additional 18 months, to March 31, 2024, and the “SMART Act” (H.R. 5486) that would “provide for a standardized framework to facilitate the sharing of electromagnetic spectrum between non-Federal users and incumbent Federal entities, and for other purposes.”

§ The “Ensuring Phone and Internet Access Through Lifeline and Affordable Connectivity Program Act of 2022” (H.R. 4275), that “requires the FCC to annually submit a report to Congress regarding the number of households that qualify for Lifeline and the Affordable Connectivity Program through automatic qualifying programs set forth in statute and regulations.”

§ The "Institute for Telecommunication Sciences Codification Act" or the “ITS Codification Act” (H.R. 4990) that “amends the National Telecommunications and Information Administration (NTIA) Organization Act by providing statutory authority for the Institute for Telecommunication Sciences…[and] also requires the Assistant Secretary for Communications and Information to establish an initiative at NTIA to develop emergency communication technologies for use in locating individuals trapped in areas where mobile connectivity may not be available.”

§ The “Safe Connections Act of 2022” (H.R. 7132) that “amends the Communications Act by requiring mobile service providers, after receiving a line separation request from a survivor of domestic violence, human trafficking, or other related crimes for a mobile service contract shared with an abuser, to separate the line of the survivor (and the line of any individual in the care of the survivor) from the shared mobile service contract or separate the line of the abuser from the shared mobile service contract when technically feasible.”

The European Data Protection Board (EDPB) and the European Data Protection Supervisor (EDPS) have adopted a Joint Opinion on the European Commission’s Proposal for the European Health Data Space (EHDS) that “aims to facilitate the creation of a European Health Union and to enable the EU to make full use of the potential offered by a safe and secure exchange, use and reuse of health data.”

The United States (U.S.) Networking and Information Technology Research and Development (NITRD) National Coordination Office (NCO) and National Science Foundation (NSF) published a request for information “on updating the 2020 Federal Video and Image Analytics (VIA) Research and Development (R&D) Action Plan (VIA R&D Action Plan), Research and Development Opportunities in Video and Image Analytics.”

Meta issued its “first annual Human Rights Report, covering 2020 and 2021, which details how we’re addressing potential human rights concerns stemming from our products, policies or business practices” according to its press statement.

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Further Reading

DOJ Poised to Rebuff Google Concessions, Clearing the Way for Antitrust Suit” By Leah Nylen — Bloomberg

How state politics and abortion data risks drove fertility app Proov to move from AWS to Google Cloud” By Kate Kaye — Protocol

Elon Musk Is A “Nightmare Client’” By Derek Thompson — The Atlantic

For Blind Internet Users, the Fix Can Be Worse Than the Flaws” By Amanda Morris — New York Times

Twitter went easy on Trump because it ‘relished’ the power, ex-employee says”  By Drew Harwell and Naomi Nix — Washington Post

GLAAD: Social media networks fail to protect LGBTQ users” By Ina Fried — Axios

Twitter experiences longest global outage in years” By Alex Hern — The Guardian

Restaurants Face an Extortion Threat: A Bad Rating on Google” By Christina Morales — New York Times

Ukraine says Big Tech has dropped the ball on Russian propaganda” By Will Oremus — Washington Post

Amazon Secretly Funds New Coalition Opposing Tech Regulation” By Emily Birnbaum — Bloomberg

‘Lives are at stake’: hacking of US hospitals highlights deadly risk of ransomware” By Kari Paul — The Guardian

Amazon Proposes Settlement of EU Antitrust Charges on Seller Data” By Kim Mackrael and Sam Schechner — Wall Street Journal

In a Post-Roe World, the Future of Digital Privacy Looks Even Grimmer” By Natasha Singer and Brian X. Chen — New York Times

Telstra and the Australian Government Now Own Formerly Foreign Telco Digicel Pacific” By Matt Novak — Gizmodo AU

White House wants transparency on American investment in China” By Ellen Nakashima — Washington Post

Chinese Communist Cells in Western Firms?” By Dennis Kwok and Sam Goodman — Wall Street Journal

Sen. Warner maneuvers to secure intelligence community backing of tech antitrust bill, sources say” By Suzanne Smalley — Cyberscoop

Melbourne woman ‘dehumanised’ by viral TikTok filmed without her consent” By Rafqa Touma — The Guardian

Former CIA engineer convicted in massive theft of classified info” — Associated Press

Coming Events

§  19 July

o The United States (U.S.) House Judiciary Committee will hold a hearing titled “Digital Dragnets: Examining the Government's Access to Your Personal Data.”

o The United States (U.S.) House Intelligence Committee will markup the FY 2023 Intelligence Authorization Act.

§ 20 July

o   The United States (U.S.) Senate Commerce, Science, and Transportation Committee will hold a hearing on the nomination of Dr. Arati Prabhakar to be Director of the White House Office of Science and Technology Policy (OSTP).

§ 19 October

o   The United States (U.S.) Federal Trade Commission (FTC) will hold a virtual event “to examine how best to protect children from a growing array of manipulative marketing practices that make it difficult or impossible for children to distinguish ads from entertainment in digital media.”

§ 1 November

o   The United States (U.S.) Federal Trade Commission (FTC) will hold PrivacyCon.

Photo Credits: Photo by Eric Nopanen on Unsplash; Photo by Mitchell Luo on Unsplash; Photo by REGINE THOLEN on Unsplash; Photo by Jacek Dylag on Unsplash; Photo by G Bodin on Unsplash; Photo by Rick Rothenberg on Unsplash; Photo by . liane . on Unsplash



[1] Administrative Conference of the United States, https://www.acus.gov/recommendation/agency-guidance-through-policy-statements