Overview
On July 21, 2021, the Federal Trade Commission (FTC) unanimously adopted a policy statement regarding repair restrictions imposed by manufacturers and sellers, consistent with the directive in President Biden’s July 9 Executive Order (EO) to evaluate such restrictions. The FTC indicated that it will devote more enforcement resources to combat practices by manufacturers that impede third-party and self-repair—previously a low priority. In describing this new priority, the FTC referred to a May 2021 report titled "Nixing the Fix" that identified several practices that could unjustifiably restrict competition for repair services.
Several of the practices that the FTC highlighted in its policy statement as new enforcement priorities include:
- Overbroad assertion of patent and trademark rights;
- Use of technical measures—such as software locks or digital rights management—or legal measures—such as end-user license agreements—to prevent access to technology beyond what is necessary to protect underlying intellectual property rights; and
- Limiting the availability of inputs to the repair process such as replacement parts, software tools, or service manuals.
Consistent with the new priority placed on repair restrictions, the FTC policy statement stated that it would step up enforcement of the Magnuson-Moss Warranty Act and its implementing regulations by, among other things, potentially filing suits for injunctive relief, closely monitoring private litigation to determine whether the FTC will investigate or file an amicus brief, and exploring rulemaking. The FTC also stated that it would scrutinize repair restrictions for unlawful tying arrangements, refusals to deal, exclusive dealing, or exclusionary design provisions that may violate the Sherman Act or Section 5 of the Federal Trade Commission Act, and would review "any material claims made to purchasers and users" for deceptive acts or practices that could violate Section 5 of the Federal Trade Commission Act.
The FTC's increased focus on the "right to repair" serves as a warning that companies should review their policies and practices regarding third-party and end-user repairs, including striving for precision in developing their strategies to protect their intellectual property, to ensure an adequate balance between protection and compliance with competition laws. This also may portend opportunities for those who wish to offer repair services that were otherwise restricted by overbroad protective measures.
For more information and updates on relevant developments as the EO is implemented, please visit the Steptoe EO Competition (EOC) Tracker.
