Overview
The “Right to Repair” is a nationwide movement seeking to lift repair restrictions on various products from consumer electronics to large-scale agricultural equipment. For farmers, this movement marks an attempt to restore the ability to repair their equipment without being subjected to manufacturer restrictions. The “Right to Repair” has recently been implicated in a lawsuit filed by the United States Federal Trade Commission (“FTC”). The FTC, joined by the states of Illinois and Minnesota, has filed suit against Deere & Company (“Deere”) in the United States District Court for the Northern District of Illinois. In the 37-page complaint filed in January of this year, Deere faces allegations that its repair policies have violated both federal and state antitrust laws. This article will cover the basics of the “Right to Repair” movement, the laws implicated in the FTC’s complaint, and the timeline of the case.
Right to Repair Overview
The “Right to Repair” refers to the idea that owners of products ranging from electronics to farm equipment should also possess the right to repair that equipment. However, many companies sell their products with user agreements requiring all repairs to be made at licensed facilities approved by the manufacturer. Such agreements will typically mean that repairs, replacement parts, and diagnoses be conducted and provided for by the manufacturer of the product. As machines become more reliant on proprietary electronic systems to operate, purchasers are left with fewer self-repair options. Deere prohibits customer modification of “embedded software” due to “risks related to the safe operation of equipment, emissions compliance, engine performance, data security, warranty validation, and resale value.” Legislation attempting to codify the “Right to Repair” has been advanced in all 50 states, but many states have yet to fully enact “Right to Repair” laws. Colorado was the first state to pass a law targeting right-to-repair in agricultural equipment. For more information on states’ right to repair legislation, read the NALC article “Update on Right-to-Repair” here.
Applicable Law
The FTC, Minnesota, and Illinois are claiming violations of state and federal antitrust law in the complaint filed against Deere. The primary intent of antitrust laws is to prohibit “unfair” business practices that may result in a monopolization of the market. A monopoly can be shown by evidence that a business can control prices or exclude competition in its market. This concept is written into law by federal statutes such as the Federal Trade Commission Act and the Sherman Act, both of which are included in the FTC’s complaint against John Deere.
In its complaint, the FTC has alleged that John Deere’s repair practices have violated Section 5(a) of the Federal Trade Commission Act. The language of the act specifically prohibits “unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce.” 15 U.S.C. § 45(a) (2004). Further, the complaint alleges violations of Section 2 of the Sherman Act, which prohibits any attempt to “monopolize any part of the trade or commerce among the several States.” 15 U.S.C. § 2 (2004). Minnesota and Illinois each allege violations of state statutes, both of which echo the antitrust and monopoly prohibitions of the federal statutes mentioned above.
Timeline of the Case
The FTC’s complaint, filed in January of this year, alleges that Deere has engaged in “unlawful business practices” and the attempted monopolization of the repair and replacement parts market for its line of large-farm equipment. As mentioned above, monopolization occurs when a business attempts to control prices or excludes competition from the market. Here, the FTC is alleging that Deere has attempted monopolization by making its diagnostic repair tool available only to authorized Deere dealers. The FTC asserts that this exclusivity allows Deere to control when and where farmers can repair their equipment. The FTC alleges that this is an unlawful business practice which has caused the inflation of farmers’ repair costs and has frustrated farmers’ ability to “obtain timely repairs.” The FTC is joined in this complaint by the states of Illinois and Minnesota, who make similar monopolization claims under respective state laws.
The FTC alleges two violations of federal law against Deere. First, the FTC claims that Deere has violated Section 2 of the Sherman Act by “willfully maintain[ing] its monopoly power in the market for restricted repairs for Deere Large Tractors and Combines through its course of anticompetitive and exclusionary conduct, including Deere’s repair restrictions.” Second, the FTC alleges that Deere has engaged in an “unfair method of competition” in violation of Section 5 of the FTC Act. Here, the FTC claims that Deere has used its “fully functional repair tools” to “harm competitive conditions in the market for restricted repairs for Deere Large Tractors and Combines by unfairly disadvantaging equipment owners performing self-repair and independent repair providers seeking to compete with Deere dealers in the supply of repair services.” Alleged violations of Minnesota and Illinois state law make up the final counts of the complaint.
The complaint asserts that as Deere equipment has become increasingly reliant on electronic and computer systems, the era of purely mechanical repairs has accordingly passed. As a result of this shift, special tools are required to diagnose faults with the systems and in turn facilitate repairs. One such tool, and the crux of this complaint, is Deere’s Full-Function Service ADVISOR (“the ADVISOR”). The ADVISOR is a diagnostic tool that connects to Deere equipment to identify errors or faults in the system, making the tool necessary to begin repairs on Deere equipment.
Currently, the Full-Function Service ADVISOR is available only to authorized Deere dealers. This exclusivity is what the FTC claims to have allowed Deere to gain monopoly power over the repair market for its equipment. Although Deere has made a version of this tool available for purchase to farmers and third-party dealers, the Customer Service ADVISOR tool is reportedly not as capable as the Full-Function Service ADVISOR. In the FTC’s complaint, it is referred to as an “inferior repair tool that is not capable of enabling all repairs on Deere agricultural equipment.” The FTC cites the lack of alternative fully functional diagnostic tools as evidence of Deere’s monopoly power.
In addition to the alleged problems presented by the ADVISOR tool, the FTC includes Deere’s practices regarding replacement parts in its complaint. The complaint focuses on Deere’s chosen distribution methods for its line of “OE” repair parts. These “OE” repair parts are replacement parts which are created to the exact specifications of parts on new Deere equipment. In its complaint, the FTC claims that Deere will only ship these “OE” repair parts to authorized Deere dealers. The FTC does note that Deere is prohibited by the laws of certain states from requiring Deere dealers to only purchase parts from Deere. However, the FTC alleges that Deere has agreements in place with authorized dealers which “actively and aggressively promote the sale of Parts and Services.” This has allowed Deere to, in the words of the FTC, “reap massive profits from its part business.”
According to the FTC, the exclusivity of the ADVISOR, in conjunction with the company’s repair practices, constitutes unfair competition and monopolization. The FTC alleges that, through these practices, Deere “forces farmers to turn to Deere dealers for critical repairs rather than complete the repairs themselves or choose an IRP that may be cheaper, closer, faster, or more trusted.”
In an opinion issued on June 9, the presiding federal judge denied Deere’s motion for a judgment on the pleadings. Such a motion would have made a trial unnecessary if the court had granted it. Here, however, the court denied Deere’s motion. From the opinion issued by the court, it is clear the judge agreed that the FTC’s allegations were plausible and fit for a trial. The court noted that the allegations regarding the ADVISOR tool, specifically how its exclusivity forces customers to a single source for repairs, were plausible allegations for anticompetitive behavior.
Conclusion
The court has plainly stated that the FTC’s allegations of anticompetitive behavior and attempted monopolization are, at the very least, plausible. This, in turn, means the litigation will continue. The outcome of this case will be felt across the agricultural industry. This case marks a significant milestone in the nationwide “Right to Repair” movement, with both critics and supporters of the movement likely to be keeping a close eye on the outcome.
To read the FTC’s complaint, click here
To read the June 9 opinion, click here
To read the Sherman Act, click here
To read the Federal Trade Commission Act, click here
To view the “Right to Repair and Agriculture” webinar, led by Ross Pifer, click here
To read the NALC Publication “Update on Right-to-Repair”, click here