FTC OKs Right-to-Repair Policy Statement

The commission voted 3-2 to rescind a 1995 policy statement on prior approval and prior notice provisions in transactions. Such provisions allowed the agency to make “effective use of its scarce resources,” said Chair Lina Khan. Without them, the agency might unnecessarily spend months and months investigating deals already deemed unlawful, she said. Khan cited comments from then-Republican Commissioner Mary Azcuenaga warning that the 1995 statement would incentivize companies to repeatedly attempt unlawful deals. With the rescission, the commission will deploy these provisions based on facts and circumstances of the proposed transaction when the “structure of the industry and concentration of market call for it,” said Khan.

Staff spends an exorbitant amount of time investigating clearly illegal buys that shouldn’t have been proposed in the first place and are quickly abandoned, said Commissioner Rebecca Kelly Slaughter: The rescission will signal to industry not to pursue clearly illegal mergers. Commissioner Rohit Chopra called the 1995 statement a misguided policy that undermined deterrence and promoted repeat offenses. He noted formal comments from a bipartisan group of 43 state attorneys general highlighting the importance of prior approval and prior notice provisions, particularly for platform markets.

The 1995 statement was adopted after “excessively burdensome” litigation between the FTC and Coca-Cola, argued Commissioner Christine Wilson. Then-Democratic Chairman Robert Pitofsky implemented the policy in part as a guardrail to prevent “similarly questionable exercises of enforcement discretion,” she said. Wilson also spoke against an anticipated shifting of the burden of proof for companies to prove deals aren’t harmful to competition: If the FTC wants to flip the burden of proof, it should ask Congress to pass legislation, she said. Wilson offered a motion to seek public comment on the proposed rescission, which failed 3-2.

Commissioner Noah Phillips criticized Democrats for the second time this month for pursuing a partisan vote with minimum notice for commissioners and “virtually no public input.” The agency is reducing clarity in the application of the law, which is bad government and bad policy, he said. Despite the 1995 statement, the commission has discretion to exercise prior approval and prior notice provisions, he noted, questioning the purpose of a blanket policy routinely including such provisions in merger orders. He and Wilson also questioned the lack of public input for agenda items at the meeting, with Wilson calling Khan’s first two open meetings more “theater” than public process. Wilson spoke against Khan reportedly “muzzling” staff by limiting their public appearances.

CTA submitted comments saying “all stakeholders would be better served with greater notice and transparency as to any rulemaking or policy proposals under consideration, particularly in the context of competition policy.”

The commission voted 5-0 to issue a policy statement aimed at manufacturer practices that make it “extremely difficult” for purchasers to repair products. The agency will enforce against “restrictions that violate antitrust or consumer protection laws,” the FTC said.

Technology has created fresh opportunity for companies to limit consumers’ right to repair through patent justification that is often unlawfully overbroad and by other means, said Khan. The policy statement will commit the FTC to moving forward with “renewed vigor,” she said. The commission is seeking public complaints about violations of the Magnuson-Moss Warranty Act, which prohibits tying a consumer product warranty to repairs from a specific service provider unless there’s an agency waiver. As the new statement notes, the commission will target violators of antitrust laws or FTC Act prohibitions against unfair or deceptive practices, said Khan.

The repair policy statement continues the FTC’s “proud history” of bipartisan policy consensus that has paved the way for legislation, said Phillips. He said he supports the statement’s effort to “focus law enforcement on illegal repair restrictions.” Though he conceded some restrictions are legitimate, he cited unwarranted ones that make it unacceptably expensive for consumers to repair devices. He also called attention to repair provisions in President Joe Biden’s competition executive order, which also addressed overly “restrictive occupational licensing.” He called for more bipartisan work on that.

Wilson voted in support, though she made a few recommendations. Manufacturers have intellectual property rights that may justify certain restrictions, and a full exploration of IP issues should be considered in upcoming cases, she said. She also opposed “blanket condemnation” of exclusionary design choices and urged the commission to consider instances in which exclusionary design is needed for competitive reasons.

The current business incentive is to extract recurring revenue instead of yielding to an open and competitive repair market, said Chopra. The commission should actively solicit input from the independent repair community for complaints and intelligence about manufacturers blocking consumers from repair. Slaughter called the policy statement a “significant” step in making clear the FTC is dedicated to eliminating anti-competitive and anti-consumer restrictions. Other markets, as Biden’s EO suggests, might benefit from clearer rules, she said. Khan noted the FTC will seek public comment on other market restraints, specifically concerning contracts and noncompete clauses.

Right-to-repair advocates applauded the unanimous approval of the FTC's policy statement committing the agency to rigorous enforcement against manufacturers that impose what they called "unfair" repair restrictions. “For too long, manufacturers have been bullying consumers and driving local repair shops out of business," said iFixit CEO Kyle Wiens. "This landmark new policy changes that. There’s a new sheriff in town." CTA, which defends manufacturer repair restrictions on a multitude of grounds, didn’t comment.

Public Knowledge also welcomed the vote on right to repair. “Commissioner Chopra’s call to engage the independent repair community, make it easier for consumers to file complaints, and assist policymakers as they craft right-to-repair laws would help move the needle even further,” said Policy Counsel Kathleen Burke.

The House Commerce Committee announced a July 28 legislative hearing Wednesday, with the five FTC members and consumer protection advocates. The hybrid in-person and virtual hearing will be at 10:30 a.m. in 2123 Rayburn.