[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
RIGHT TO REPAIR: LEGISLATIVE AND BUDGETARY
SOLUTIONS TO UNFAIR RESTRICTIONS ON REPAIR
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HEARING
BEFORE THE
COMMITTEE ON RULES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
WEDNESDAY, SEPTEMBER 21, 2022
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[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Available via http://govinfo.gov
Printed for the use of the Committee on Rules
__________
U.S. GOVERNMENT PUBLISHING OFFICE
48-919 WASHINGTON : 2022
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COMMITTEE ON RULES
JAMES P. McGOVERN, Massachusetts, Chairman
NORMA J. TORRES, California TOM COLE, Oklahoma
ED PERLMUTTER, Colorado Ranking Republican
JAMIE RASKIN, Maryland MICHAEL C. BURGESS, Texas
MARY GAY SCANLON, Pennsylvania GUY RESCHENTHALER, Pennsylvania
JOSEPH D. MORELLE, New York MICHELLE FISCHBACH, Minnesota
MARK DeSAULNIER, California
DEBORAH K. ROSS, North Carolina
JOE NEGUSE, Colorado
Don Sisson, Staff Director
Kelly Dixon Chambers, Minority Staff Director
------
Subcommittee on Legislative and Budget Process
JOSEPH D. MORELLE, Chair
MARY GAY SCANLON, Pennsylvania MICHAEL C. BURGESS, Texas
DEBORAH K. ROSS, North Carolina Ranking Republican
JOE NEGUSE, Colorado TOM COLE, Oklahoma
JAMES P. McGOVERN, Massachusetts
------
Subcommittee on Rules and Organization of the House
NORMA J. TORRES, California, Chair
ED PERLMUTTER, Colorado GUY RESCHENTHALER, Pennsylvania
Vice Chair Ranking Republican
MARY GAY SCANLON, Pennsylvania TOM COLE, Oklahoma
JOSEPH D. MORELLE, New York
JAMES P. McGOVERN, Massachusetts
------
Subcommittee on Expedited Procedures
JAMIE RASKIN, Maryland, Chair
DEBORAH K. ROSS, North Carolina MICHELLE FISCHBACH, Minnesota
Vice Chair Ranking Republican
NORMA J. TORRES, California TOM COLE, Oklahoma
MARK DeSAULNIER, California
JAMES P. McGOVERN, Massachusetts
C O N T E N T S
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September 21, 2022
Opening Statements:
Page
Hon. Joseph D. Morelle, a Representative in Congress from the
State of New York and Chairman of the Subcommittee on
Legislative and Budget Process............................. 1
Hon. Michael C. Burgess, a Representative in Congress from
the State of Texas and Ranking Member of the Subcommittee
on Legislative and Budget Process.......................... 3
Witness Testimony:
Mr. Nathan Proctor, Senior Campaign Director, Right to
Repair, U.S. PIRG (Public Interest Research Group)......... 5
Prepared Statement....................................... 8
Dr. Lauren Williams, Sr. Associate Director of National
Affairs, New York Farm Bureau.............................. 12
Prepared Statement....................................... 14
Mr. Sandeep Vaheesan, Legal Director, Open Markets Institute. 17
Prepared Statement....................................... 20
Additional Material Submitted for the Record:
Letter from Mr. Carl E Gierisch, Jr., Gierisch Brothers Motor
Co. Ltd., dated September 21, 2022......................... 42
Letter from Mr. Drew Campbell, dated September 21, 2022...... 44
Letter from Ms. Kathleen Burke and Ms. Meredith Rose, Public
Knowledge, dated September 21, 2022........................ 47
Letter from Mr. Rob Larew, National Farmers Union, dated
September 21, 2022......................................... 49
Letter from Mr. Garrick Francis, Alliance for Automotive
Innovation, dated September 21, 2022....................... 53
Letter from Ms. Lisa Foshee, Auto Care Association, dated
September 26, 2022......................................... 55
Letter from Mr. Gay Gordon-Byrne, repair.org, dated September
19, 2022................................................... 57
Letter from Mr. Paul McCarthy, Automotive Aftermarket
Suppliers Association, dated September 20, 2022............ 62
Letter from Mr. Chris Netram, National Association of
Manufacturers, dated September 21, 2022.................... 65
Curriculum Vitae and Truth in Testimony Forms for Witnesses
Testifying Before the Committee............................ 67
RIGHT TO REPAIR: LEGISLATIVE AND BUDGETARY SOLUTIONS TO UNFAIR
RESTRICTIONS ON REPAIR
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WEDNESDAY, SEPTEMBER 21, 2022
House of Representatives,
Subcommittee on Legislative and Budget Process,
Committee on Rules,
Washington, DC.
The subcommittee met, pursuant to call, at 10:00 a.m., in
Room H-313, The Capitol, Hon. Joe Morelle [chairman of the
subcommittee] presiding.
Present: Representatives Morelle, McGovern, and Burgess.
Mr. Morelle. The Subcommittee on Legislative and Budget
Process of the Committee on Rules will come to order.
I want to welcome our witnesses and thank them for being
here today. And I would also like to thank my colleagues on the
Rules Committee for joining us as well, Dr. Burgess, ranking
member; of course, the chairman of the Rules Committee, my dear
friend, Chairman McGovern from Massachusetts.
Today's hearing will focus on a simple concept: the
consumer's right to repair. The fundamental idea that if you
own something, you own all of it, including the right to repair
it. It is a right many people watching at home might think they
currently enjoy. Sadly, they are sorely mistaken.
Manufacturers often used to make repair parts, tools, and
information available for consumers and independent repair
shops to fix their own appliances--TVs, cameras, other
products. However, today's increased reliance on software for
these types of products has made it easier for companies to
restrict access to the tools and other basic repair materials
needed for third parties to fix digital equipment.
In fact, there is a clear incentive to do so. Repairs of
digital equipment are now often intentionally limited by the
manufacturer, with companies requiring consumers to pay for
repair services through either their own repair division or a
manufacturer-authorized vendor. These practices by
manufacturers essentially create a monopoly on repair services,
with fewer options for consumers, leading to significantly
higher repair prices than the free market would otherwise
provide.
Importantly, another result of this dynamic is that
consumers are driven to purchase new digital equipment more
frequently instead of repairing old equipment, resulting in a
significant increase in electronic waste, which has now become
the fastest growing waste stream in the world.
This problem first came to my attention many years ago when
I had the privilege of serving in the New York State Assembly.
Earlier this year, I was pleased to see that legislation I had
originally authored passed both houses in the New York State
Legislature, placing New York on the precipice of being the
first State in the country to enact robust protections for
consumers against unfair repair restrictions.
I hope to see the legislation signed into law in the near
future, but the issue is really best addressed, in my view, at
the Federal level to avoid a patchwork of different rules and
regulations for each of the 50 States.
So I look forward to hearing from today's witnesses about
the broad impact that repair restrictions have on a variety of
different aspects of American life, including family budgets,
the vibrancy of small business and entrepreneurs across the
country, farmers and the agricultural community, and better
sustainability practices to protect our environment.
Today's hearing will explore actions that Congress can take
to allow individuals the right to choose how they repair their
own digital equipment, ensuring that companies who unfairly
restrict the right to repair are held accountable. Those
potential actions include ensuring that the Federal Trade
Commission has both the necessary authority and resources to
protect consumers from such anticompetitive behavior.
In May of 2021, the FTC released a landmark report that had
been required by Congress, and it detailed the extent to which
these restrictions hurt consumers and potential considerations
for Congress to consider. The report states that although the
FTC does have some authority to protect consumers from product
warranties that restrict repair options, they said, quote,
``Technological developments have introduced new challenges
that warrant a reconsideration,'' end quote, of whether that
existing authority is sufficient.
The report also pushed back on industry claims that current
repair restrictions are justified in the interest of
maintaining device integrity and preventing reputational harm,
determining that there was scant evidence to support these
claims.
The administration has recognized the importance of the
right to repair as well, including President Biden's executive
order on promoting competition in the American economy issued
last year. The order asked the FTC to exercise its existing
authority to protect consumers from anticompetitive repair
restrictions.
Since then, the FTC has brought actions against several
companies, claiming those companies imposed illegal conditions
on their products' warranties by including terms that declared
the warranty void if a consumer used a third party to repair
their products. So I applaud the FTC for their increased focus
on the issue and encourage them to continue using the tools
that are available to them to protect the right to repair.
Although there have been a few different legislative
proposals introduced this Congress, including both the
implications of repair restrictions on copyright law and the
auto sector, the goal of this hearing will be to focus on
determining whether the FTC has adequate resources and
enforcement authority to protect consumers from repair
restrictions on consumer products and agricultural equipment.
Last summer, I was proud to introduce the Fair Repair Act,
which is broadly focused on enhancing FTC authority. The bill
would require OEMs to make diagnostic and repair information,
parts, and tools available to third-party repairers and owners
on fair and reasonable terms, helping consumers and repair
shops avoid unnecessary and costly delays while also reducing
waste.
I recognize the importance of protecting trade secrets and
other intellectual property rights, and the bill allows the FTC
to better guard against anticompetitive conduct without
damaging existing protections of such proprietary information.
So I look forward to the discussion today, which I hope
will produce a constructive dialogue on how we can work
together to make technology repairs more accessible and
affordable for items from cell phones to laptops to farm
equipment, giving individuals the ability to choose how they
want to repair their own property, which, again, I repeat, was
something that consumers for decades and decades and decades
have held as a right.
So, with that, the chair now recognizes a good friend, the
ranking member, Dr. Burgess, for any opening comments he wishes
to make.
Dr. Burgess. Well, and I thank the chair.
I am a little bit mystified as to why we are here in the
Rules Committee doing a hearing on something that logically
would belong in one of the committees of jurisdiction, one of
the authorizing committees, Small Business, Financial Services,
Energy and Commerce, that has the jurisdiction over the Federal
Trade Commission.
But I am grateful to our witnesses for being here with us
today. Thank you for allowing us to hear your insights and your
expertise and to work with the committee while we work through
this issue.
I will tell the chairman, I have constituents who are
firmly on both sides of this issue, so I recognize the
importance. I am just a little perplexed as to why it is in the
Rules Committee as sort of original Rules jurisdiction.
Constructive to acknowledge from the outset the contents
and the nuance that surrounds the right of repair issue. As
Chairman Morelle knows well, the debate concerning the right to
repair legislation can trace its origins back to disagreements
between car manufacturers and independent automobile mechanics.
The issue has grown much more complex since that initial
debate. Items such as iPhones and personal laptops have become
ubiquitous. Now that these products are owned by large segments
of the American population, the need for access to parts to
keep these devices in working order has indeed become critical.
Chairman Morelle, you and I are both aware of the debate
surrounding the right to repair that has been around for easily
over a decade's time. In 2013, Massachusetts became the first
State to sign the right of repair legislation into law.
Subsequently, Massachusetts has set into motion a flurry of
legislative activity. Currently, 19 States are actively
considering right to repair legislation.
Proponents for stronger consumer protections argue that,
once an individual has purchased a product, it is well within
their rights to seek out the cheapest and most efficient form
of repair. However, when the products consumers have purchased
need repair, consumers are unable to find independent--and
consumers are unable to find independent repair businesses who
will facilitate these repair, it becomes difficult. Right to
repair advocates argue that manufacturers have made it
difficult to purchase parts required to repair the products
that they have bought.
Incidentally, I have just very recently heard from some
automobile dealers that that is--they take issue with that.
They believe it is not the case. They believe they make those
parts available on a timely basis; it is more supply chain
issues that are causing the problems now than it is the dealers
themselves.
Conversely, manufacturers argue, and not without merit,
that if they are compelled to provide parts and sensitive
technical information regarding their products, that their
intellectual property will be jeopardized and the competitors
will be able to reverse-engineer those products.
It is my hope that in our discussion today, we will not
only explore the arguments and merits of this type of
legislation, but also arguments that present compelling
evidence that certain pillars of our dynamic digital economy
could be adversely affected by this legislation that skews too
far in either direction.
I believe this legislation is a beneficial starting point
for discussions as to how to harmonize the needs of individual
consumers and safeguarding American companies' intellectual
property.
Mr. Chairman, in closing, I find it interesting that the
right to repair debate does not divide itself deeply along
partisan lines. The right to repair often forges consensus
between Republicans and Democrats who may not be able to agree
on much else. I hope our discussion today concerning this piece
of legislation will demonstrate the perspective to various
stakeholders who could be affected by this issue.
And, Mr. Chairman, before I yield back, let me just ask
unanimous consent to insert into the record a letter from Carl
Gierisch, Jr., who is the current mayor of Roanoke, Texas, and
the owner of Roanoke Auto Supply, who sends a letter to me in
favor of right to repair legislation. And I also have a
statement for the record from Mr. Drew Campbell, who aligns
himself more with automobile manufacturers and dealers.
So I would ask that both of these letters be made part of
the record.
Mr. Morelle. Without objection.
[The information follows:]
Dr. Burgess. And I will yield back.
Mr. Morelle. Thank you. Thank you to the ranking member for
his very thoughtful and I think really well-reasoned opening
that sort of does talk about the balance between all these
issues and how it is our responsibility to try to strike the
right balance when it comes to public policy. So I thank him
very much for his opening comments.
Now, I would like to introduce our witnesses, if I may.
First, we have Nathan Proctor, who is senior director of
the campaign for the right to repair at U.S. Public Interest
Research Group, where he works to pass legislation that will
prevent companies from blocking consumers' ability to fix their
own electronics. Mr. Proctor has been with PIRG since 2005.
We are also joined by Lauren Williams, who is the associate
director of national affairs at the New York Farm Bureau, which
is the largest general farm and agricultural organization in
New York State. Ms. Williams is responsible for directing and
coordinating the Bureau's Federal advocacy efforts, including
working with the New York Congressional Delegation and Federal
agencies on a wide range of farm and agricultural legislative
and regulatory issues.
And then, finally, remotely, we are joined by Mr. Sandeep
Vaheesan, who is the legal director of the Open Markets
Institute, where he leads the organization's legal advocacy and
research work. Mr. Vaheesan works on a range of antimonopoly
topics, including antitrust law's role in promoting fair
competition. 2015 to 2018, he served as a regulations counsel
at the Consumer Financial Protection Bureau and, before that,
worked at the American Antitrust Institute.
So to the witnesses, thank you again for joining us.
Mr. Proctor, you are recognized for your testimony, sir.
STATEMENTS OF MR. NATHAN PROCTOR, SENIOR CAMPAIGN DIRECTOR,
RIGHT TO REPAIR, U.S. PIRG (PUBLIC INTEREST RESEARCH GROUP);
MS. LAUREN WILLIAMS, SR. ASSOCIATE DIRECTOR OF NATIONAL
AFFAIRS, NEW YORK FARM BUREAU; AND MR. SANDEEP VAHEESAN, LEGAL
DIRECTOR, OPEN MARKETS INSTITUTE
STATEMENT OF NATHAN PROCTOR
Mr. Proctor. Thank you very much, Chair Morelle, Ranking
Member Burgess, Chair McGovern. My name, as was just said, is
Nathan Proctor. The PIRG network is mostly State-level advocacy
groups that work all over the country, and we have been behind
right to repair efforts in dozens of States. We have also
issued some 13 reports on right to repair and related topics,
so I could definitely talk your ear off about this, as Owen
probably and your other staff perhaps can attest. But I think
what we are talking about is pretty simple. It boils down to a
pretty simple idea, which is manufacturers have a clear
incentive to control the repair process, and they do so.
When the only one who can fix something is a manufacturer
or their authorized representative, they control the cost of
that repair or they can choose to push an upgrade and to force
you to buy a new product. A look at how the repair process
actually works, I think, will elucidate how this is
accomplished. And then, finally, I will talk a little bit about
why this matters.
So the first part of repair process is figuring out what is
wrong. In most of our modern devices, there is a lot of
embedded information that the product actually knows why it is
failing, right. Your phone probably knows why it is shutting
off periodically. But it doesn't tell that information to you,
the product owner. You actually have to plug in a proprietary,
you know, dealership-controlled diagnostic tool to get the
phone to report what it is experiencing. And sometimes you get
some version of the diagnostic information, but it is like a
light version that is incomplete, and so you can't fix the
problem without more information.
Once you diagnose the problem, then you need to go and buy
some spare parts. And I will--you know, to Mr. Burgess' point
that some--for many industries, parts are not the core of the
issue. But for a lot of other industries, especially around
consumer products, it is very much the core of the issue.
If your control board in your Sony television was to break,
where would you get that part if Sony didn't want to sell it to
you? Where could you possibly buy a control board for that
particular TV, right? They control the parts, and they can
charge whatever they want for that part. They usually can price
it to push you to buy a new product.
And, finally, and the most perniciously, sometimes after
you fix the product, you need to authenticate or calibrate so
that it becomes fully operational. Like when you install a
printer, you have to put up printer drivers so that the
computer and the printer can communicate.
Imagine if you had to pay Epson to fly a dealer to your
house to install your printer driver. This is essentially what
farmers are experiencing, where there is a dealer software tool
without which it is impossible to complete the repair, and it
is not just the software.
Sometimes it is just the calibration settings. Like a
farmer from Oklahoma told us, he replaced the hydraulic
injectors on his equipment. He was unable to get the
calibration settings for those injectors. The dealer would not
tell him what those settings would be, and it is just basic
technical information needed for repair.
So repair restrictions are ubiquitous, as we have
discussed, and it has a big impact. And I will talk about a
couple of different areas.
First is the cost, right? Our research has shown that
consumers could save about $330 a year if they were to repair
instead of replace products. That is $40 billion across the
U.S. economy. That is a lot of money when costs are high and
budgets are tight.
The second is that it increases the digital divide. It
removes used products that could be low entry points to get a
working computer with access to the internet. The FTC noted in
their Nixing the Fix report that the higher cost of repairs,
quote, fall disproportionately, burden Americans in financial
distress and communities of color and lower-income communities.
So the third thing is that it hurts small businesses. I
can't tell you how often small, independent repair shops will
tell me, Apple could flip a switch, push an update at any
moment and make screen repair impossible because of the
software in the phone.
Can you imagine having to hire staff and sign a lease
knowing that the most high-volume part of your business could
be shut off at any moment? We need to protect these businesses
so that they can thrive and grow.
And, finally, electronic waste is the fastest growing part
of our waste stream. Disposable electronics are incompatible
with a livable planet. A single cell phone takes about 122
pounds of carbon to make, and if we used our cell phones for 1
year longer on average as Americans, it would have the same
climate benefits of taking 636,000 cars off the road.
So I believe there is a better way we can empower repair,
remove these barriers. People can fix stuff, save money,
protect the environment. And I don't think this issue will go
away until Americans have that right.
So thank you very much.
[The statement of Mr. Proctor follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Morelle. Perfect. Thank you, Mr. Proctor.
Ms. Williams.
STATEMENT OF LAUREN WILLIAMS
Ms. Williams. Thank you to the Committee on Rules and the
subcommittee Chairman Morelle, Ranking Member Burgess, and
other members of the committee for having me here today.
As was stated, my name is Lauren Williams, and I get the
pleasure of working on behalf of 15,000 farmers across New York
State on a whole host of issues. And we are affiliated with the
American Farm Bureau Federation, which represents farmers all
across the country.
And, you know, New York and this country is home to a lot
of diversity of agricultural production, you know, and one of
the key components of making sure that food gets to consumers'
tables is the farm equipment and the technologies that are able
to plant, harvest, and produce, you know, quality goods and
foods to consumers.
And it is really critical that the, you know, pieces of
equipment ensure that farmers can operate smoothly and
efficiently. However, the timely repair and maintenance of
equipment is really critical to ensuring that farmers don't
have to face unnecessary breakdowns. And it is really key that
farmers have the option to repair their own equipment, get it
fixed at a dealership of their choice, or go to an independent
repair shop.
And, you know, equipment is a major financial investment
for farmers. And, you know, if they don't have the freedom to
choose who they can go to, that makes an impact to their
budget. And when we talk about equipment, just want to frame it
in the form of, you know, it is a tractor, a planter,
harvester, robotic milking system, or, you know, other produce-
handling type of, you know, infrastructure.
And, you know, as Congress considers to address right to
repair, you know, we think it is really critical to understand
that, you know, it does have a really big impact on farmers.
Based on feedback that we have received from farmers, you know,
sometimes a dealership that may be the only authorized facility
to repair equipment can be, you know, far away, whether it is,
you know, over an hour, or they just don't have the technicians
during the busy time of the year to send that out.
And this has only been exacerbated by the supply chain
delays that we have seen, the availability of labor, and the
consolidation of equipment dealerships. That continues to be a
big thing we hear from our farmers.
You know, farmers have also hired their own repair
technicians, because as they get larger in operation, it just
makes sense to have somebody on their farm to, you know, handle
that repair. So--and that repair staff shouldn't be blocked
from doing repairs. You know, it is more economically viable to
go down that route.
And so, you know, farmers are more dependent on technology,
you know, as we continue to see advancements, you know, through
the uses of computers or GPSs in farm equipment. It is really
critical that farmers have access to documentation, parts,
digital components, onboard diagnostic and software tools
needed to make repairs on equipment that they have purchased.
And as part of, you know, our farm bureau organization, we
get direct feedback that sets our policy as an organization,
and based on what the feedback we have received is, you know,
farmers really want the ability to make arrangements to fairly
purchase repair and diagnostic information and repair tools
from, you know, manufacturers. And so this allows the OEMs, or
original equipment manufacturers, to still capture the value of
their product, but also so they can--farmers can get their
product repaired in a timely manner.
And so the other key component is making sure that any of
that information is available to all ages, models, and years of
equipment in use. And so we have also expressed the desire of,
you know, maybe we can do MOUs with repair with dealerships.
But, you know, sometimes the legislative can help--efforts can
help nudge that along, which is really important.
And, you know, we have seen some OEMs make commitments to
releasing their information, but I think we still have a long
ways to go to make sure that that goes into place. And I would
say, you know, what I think sometimes, you know, dealerships
like to say, well, they are going to do--make changes to
emissions or safety things, and that is not what we are
advocating for. So I want to make sure that is clear there,
that we want, you know, good things that enables farmers to
keep rolling, you know, and not have to face shutdowns due to
repair or, you know, slowdowns.
So thank you again for this opportunity, and, you know,
right to repair is critical for our farmers.
[The statement of Ms. Williams follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Morelle. Thank you very much.
And now we have, remotely, Mr. Vaheesan. Welcome, and the
floor is yours.
STATEMENT OF SANDEEP VAHEESAN
Mr. Vaheesan. Thank you, Chairman Morelle, Ranking Member
Burgess, the other members of the subcommittee, for the
opportunity to participate in today's hearing.
My name is Sandeep Vaheesan. I am the legal director at the
Open Markets Institute, an antimonopoly research and advocacy
organization.
Manufacturers of goods, ranging from automobiles to
tractors to ventilators, have tried to monopolize markets for
repair, commonly known as aftermarkets. The motivations are not
hard to divine. The public spends tens of billions of dollars
on repairs and maintenance every year. The profits and profit
margins on parts and service are substantial and sometimes even
higher than on the sale of original equipment.
Original equipment manufacturers, or OEMs, such as Apple,
Ford, and John Deere, employ a variety of unfair competitive
tactics to lock up parts and service markets and lock in their
customers. They restrict the availability of parts and tools,
including manuals for independent technicians, and prevent
competitive manufacturing of these items through the assertion
of patents and trademarks. OEMs design products and----
Mr. Morelle. I am sorry to--if I could interrupt for one
second.
I don't know if there is a way to increase the volume, but
it is difficult to hear your comments. I don't know if you can
do it on your end. I am not sure what we can do technologically
here, but it was--it is difficult to hear. I am following along
in your written testimony, but if there is a way to----
Mr. Vaheesan. Oh, okay. Sure. Let me try to hold the
microphone closer.
Mr. McGovern. That is better.
Mr. Morelle. That is better. Much better. Thank you.
Mr. Vaheesan. Okay, great.
Sorry. Let me--OEMs design products that thwart independent
repairs too, using everything from unusual screws to software
to prevent and deter customers from servicing their products
where they want. For example, on one occasion, when users
updated to the latest iOS, Apple disabled iPhones that had
installed third-party parts.
Two other methods of restricting the right to repair are
worth noting. Manufacturers condition warranty coverage on the
use of branded parts and service, which generally violates the
Magnuson-Moss Warranty Act that Congress passed in 1975. U.S.
PIRG found that, out of 50 surveyed home appliance
manufacturers, 45, or 90 percent, indicated they voided
warranties in the event of unauthorized repairs.
OEMs also disparage the safety and quality of independent
parts and service, despite typically having no basis for doing
so. Indeed, in a 2021 report, the Federal Trade Commission
found that OEMs provide little or no substantiating evidence
for these claims against independent rivals.
So what are the consequences of aftermarket monopolization?
First, it subverts common notions of ownership. OEMs prevent
car owners from making routine repairs in their garages,
computer aficionados from upgrading their machines at home, and
millions of others from patronizing independent service
centers.
Owners of appliances, electronic devices, farm equipment,
and vehicles are made captive to manufacturers and their
network of service providers and have no option but to pay
their inflated prices. The economic effects are especially
severe for lower-income households who may have little
financial cushion to pay, for instance, overcharges on car
repairs, while also covering their rent and meeting other
financial obligations.
In some cases, the dearth of independent repair options can
force people to delay essential service. In rural and other
less densely populated places of the country, many OEMs do not
have a service presence. This can compel farmers to wait
extended times to repair tractors, combines, and other
equipment, which is something they cannot afford during harvest
season and other critical points in the agricultural calendar.
In healthcare, delayed repairs on life-supporting equipment
can have dire consequences. Without functioning ventilators,
hospitals may be unable to treat seriously ill COVID-19
patients in their community.
Due to higher prices for parts and service, many consumers
may opt not to repair damaged or wornout products at all. The
ubiquity of broken smartphone screens is an illustration. More
than 60 percent of Americans with broken phone screens do not
get them fixed.
Monopolization of aftermarkets also closes off an important
entrepreneurial path for many Americans. Manufacturers deny
aspiring businesspeople the freedom to establish their own
service centers for repair of cars or to set up a kiosk at the
mall to fix smartphones. These business opportunities may be
especially valuable for people of color, who frequently face
discrimination and exclusion in labor markets.
Aftermarket monopolization also has damaging effects on the
environment. By substantially raising the cost of repairs,
manufacturers can effectively force many customers to purchase
new products instead of repairing what they have. This means
reduced longevity for appliances, cars, and smartphones, and
greater production of replacement items. Reduced effective
longevity for these products translates to more waste into
landfills and increased greenhouse gas emissions and natural
resource extraction.
Electronic waste, or e-waste, is especially harmful.
Millions of computers, phones, and televisions are sent to
landfills in the United States, and especially countries in the
global south every year. This waste can contaminate groundwater
used for drinking and agricultural purposes and, when
incinerated, can cause cancer and other serious illness.
Congress must restore and protect Americans' right to
repair their cars, farm equipment, and smartphones, just to
name a few examples.
Chairman Morelle's Fair Repair Act would be a major advance
and ensure the wide availability of parts and tools on fair and
reasonable terms. Through such measures, Congress can end
manufacturers' ongoing monopolization of aftermarkets. The
benefits of such legislative action include restoration of the
rights traditionally associated with product ownership, lower
priced and more timely repairs, more entrepreneurial
opportunities, and a cleaner environment.
And without a captive customer base for parts and service
and an easy source of revenues and profits, OEMs may have a
stronger incentive to design, manufacture, and market high-
quality appliances, electronics, equipment, and vehicles.
Thank you for the opportunity to testify at today's
hearing. I look forward to your questions.
[The statement of Mr. Vaheesan follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Morelle. Thank you very much, Mr. Vaheesan.
I am going to just ask a couple of questions, and I am
going to reserve the right to come back and ask more, but I do
want to give my colleagues the opportunity to ask questions if
they have so--so if that is all right, I will proceed that way.
So I wanted to--Mr. Proctor, if I might start with you. I
mentioned in my opening comments that manufacturers used to
make repair parts, tools, and information like schematic
diagrams pretty accessible to consumers and independent repair
shops.
Could you just sort of describe what has happened now with
the increased reliance on digital technology and how that has,
both in subtle ways and not subtle ways, really changed access
to the necessary repair materials over the last--in particular,
the last couple of decades?
Mr. Proctor. Yeah, it is a great question. I think that
there is--there is two ways to answer this. The first is, the
regulatory environment has changed as the technology has
changed. So if you go back, and you are an auto maker in 1985,
and you wanted to make a car that no one could fix, the
technology--you could do it. You could put a padlock on the
hood, but I don't think that would be tolerated by the--you
know, I think somebody would step in and stop that.
And, now, it is actually a lot easier to accomplish that
same feat. You can do it with software. And, also, nobody is
stopping them from doing it, right? I heard a story the other
day from somebody who knocked a sideview mirror off their car.
They put another side mirror on. The car detected that it was
a--you know, a foreign part, like it was a new part. The serial
numbers didn't match, and it refused to start. Like, this is
the--and this is trivial technologically to do. But it is also
a product of what the government and what consumers are letting
these companies do.
And so I think both things need to change, right? We need
to design things to be fixable. And then, when I think
companies cross the line, there needs to be a consequence. They
need to be drawn back so that we can use the technology in our
lives.
Mr. Morelle. You raise an interesting point, because what
you are really describing is this technological handshake that
happens. And you can see it even with printers. So I have a
printer--a home printer, which it is interesting. The fact that
you can use third-party cartridges has really created much more
competition in the marketplace. You can even get them refilled
or what they call recharging a cartridge.
But when I do that, my printer, obviously because it isn't
able to complete the handshake with the OEM-brand cartridge,
will--it knows that there is a cartridge that is not--even
though the cartridge might work perfectly fine--I mean, it is
just filled with ink. It is--I don't know how complicated that
is. I certainly couldn't do it, but I don't think it is
technologically all that much of a marvel. But that handshake
is unable to be completed. So it knows that I haven't used its
brand cartridge.
So that is what you are talking about, is really--and more
and more sensors and more built-in software for consumer goods
of all kinds is now going to be ubiquitous. It is already
ubiquitous. And that really does allow and affect an inability,
then, to make those repairs, in some cases. In some cases, it
just notifies you and tells you you have been a bad consumer
because you haven't bought their particular product.
But when you think about it--and I think you would agree
that that kind of--that inability to have that competition
really makes also the OEM less interested in consumer
innovations, right, if you don't have competition in the
marketplace. So I often think of--it is like the old days when
you had the razor. You didn't have to buy the blade necessarily
from the manufacturer. People could just, you know--now, that
is not a repair issue, but it is effectively the same kind of
thing. Now, could you imagine an electronic sensor that tells
you you are not using the right blades, so, therefore, you
can't use the razor anymore? I don't know how they would stop
that, but----
Mr. Proctor. Yeah. I wanted to make one comment on that,
because I think it is an important point, which is sometimes
the aftermarket produces higher-quality parts than the original
manufacturer. Like, the first time I repaired the battery in my
iPhone 6, it doubled the life of the battery of the phone,
because somebody figured out how to make a better battery that
fit that form factor.
And there is no reason to think that some company couldn't
make a way better printer ink that doesn't run as much and is
che--you know, so it is not just that, oh, the manufacturer has
like this pristine, perfect technology, and everybody else is
just competing for a piece of that. Sometimes there really--
they are improvements, and that--and we should allow that
innovation to occur that--I mean, there is a huge history of
that in car culture. Like, that is how a lot of our cool car
technologies came about, because tinkerers actually added to
the product and car companies learned from them.
Mr. Morelle. Well, there is no question. I think if you
think about sort of the whole notion of capitalism is this
ability to compete, and competition typically has two benefits.
One is innovation, and two is downward pressure on price. So if
you remove that leverage in a sense, economic leverage, you
have really now subjected the consumer to higher prices for
supplies and other things or replacement parts.
If I could, Ms. Williams, in the FTC's report to Congress
on right to repair in May of 2021, which I referenced earlier,
the Commission studied the impact of repair restrictions on
farmers.
By the way, I will just note parenthetically, the number
one industry in the State of New York is agriculture. I am sure
you know that, and I don't think most people think of New York
as an agricultural State, but it is in both dairy and crops.
And so I appreciate all the work you do.
But, in one instance, as it related to restrictions on
farmers, it was found that a farmer in Kansas had to wait 32
days for repairs on agricultural equipment, which ultimately
resulted in a loss of tens of thousands of dollars in revenue.
It is cited in the report.
And you discussed that failure to repair farm equipment can
be detrimental without swift legislative solutions.
I just--you know, if you could talk about that, because I
think people tend to think of, oh, it is harvesting season, so
you have got, depending on where you are in the country and
what you are harvesting, 2 months, 3 months. But weather
doesn't allow you to harvest every day during that season. So
you may have a relatively short window in a year, and if your
harvester or other equipment that you need is unavailable, can
you just talk a little bit about that and the impact on yield?
Ms. Williams. Yeah. Thank you for that question. And I
think that raises a really good point, is, you know, when
farmers are ready to harvest or plant, you know, it is a matter
of hours or days that they need to get that accomplished. And
so if their equipment breaks down and they are waiting for a
dealership to come out and repair, and that dealership is also
dealing with, you know, other farms in the area that may be
also facing, you know, repair needs, it could be, you know,
outside of that window of prime harvest season.
So not only is that impacting your overall time to get a
crop in, you know, it impacts your--you know, your revenue as a
farm and your ability to sell, you know, a product to market,
because if it is no longer a quality good, that market may say,
hey, we are not interested anymore. And now you have lost out
on that revenue.
So, you know, each farm, you know, is different in what
that revenue may look like, but it is, you know, a key, you
know, thing to highlight that there is lost revenue potential
there.
Mr. Morelle. I will--I will just note, I was--not too long
ago, I had a--probably a moderate sized farm in my district,
and the farmer wanted to show me his robotic milking machines
and what they are doing. It is fascinating stuff. But while I
was there, I--he pointed to a piece of equipment that related
to his crops, and he said--so I asked him about it. And he
said, This is a--I have been waiting and waiting and waiting
for months now for someone to come repair this piece of
equipment, which I need, and it is just sitting idle. It is
costing me--it was--it is pretty expensive. I don't know that
there is any inexpensive farm equipment anymore, so--but he was
just--used it as a practical demonstration of the challenges he
faced because he couldn't get someone to come in and repair the
equipment.
Ms. Williams. Yeah. And I think, you know--and this is all
part of, you know, the wider, you know, issues that I think
farmers are running into. Yes, some of it is supply chain, but
if you don't have, you know, a dealership that is willing to
come out in a timely manner, that slows you down. And like you
said, it can cost you, you know, thousands of dollars over
those days or months that they are unable to get those repairs.
And I think, you know, it is not just harvest season, but
as you were talking about a robotic milking system, you know,
those cows need to be milked twice or three times a day. So if
you can't get in a company that has--is the only availability
to fix that robotic milking system, you know, you are shut down
and not able to, you know--you know, milk your cows or, you
know, just do everyday things that you should be able to do.
Mr. Morelle. Yeah. Let me ask you, Mr. Vaheesan, a
question. And I do want to allow Dr. Burgess opportunity, and
then I will come back, and I have additional things I would
like to ask.
But, in your testimony, you highlighted some of the recent
actions taken by the FTC using their powers under the Magnuson-
Moss Act--it was in your testimony--which protects consumers
from illegal conditions related to repair being placed on
product warranties.
Can you just expand on the role of the strong enforcement
by the FTC to protect the right to repair, and whether it be
providing additional resources or rulemaking authority, what
more Congress might be able to do to help the FTC in this area?
Mr. Vaheesan. Thank you for that question, Chairman. So the
Magnuson-Moss enforcement activity of the FTC is a very
positive start.
Mr. Morelle. I am going to ask--I am sorry. I am going to
continue to ask you to speak up if you can. I apologize, but
the audio here is not great.
Mr. Vaheesan. Yes. I will certainly speak up.
So this past few months, the FTC has brought three
Magnuson-Moss cases, and the FTC should continue its
enforcement activity in this area because many OEMs flout the
law. I noted in my testimony that U.S. PIRG found that, out of
50 surveyed home appliance manufacturers, 45 openly disregard
Magnuson-Moss. So deterrence will require vigorous FTC
enforcement of this particular statute.
But the FTC should do more and has legal authority to do
more specifically to prohibit unfair methods of competition as
well as unfair or deceptive acts or practices. So these are its
antitrust and consumer protection powers, respectively.
So there are two things it can do. So, first, it can
challenge refusals by OEMs to sell parts and tools to
independent repair shops as an unfair method of competition.
Second, it can challenge false claims made about independent
parts and service, whether it is about their safety,
reliability, or overall quality.
So neither OEMs nor authorized businesses should be
permitted to compete through deceptive marketing, and that is
unfortunately what some OEMs are doing at present. But Congress
can help the FTC carry out its consumer protection and
antitrust missions.
First, the FTC has a lot to do but, unfortunately, has far
fewer staff than it did in 1979, and obviously the economy as
well as the population of the United States have grown
significantly during that time.
Second, Congress should bolster the FTC's remedial powers.
In a decision last year called AMG Capital Management v. FTC,
the Supreme Court stripped the FTC of the power to obtain
restitution and other monetary relief in competition cases. So,
right now, at least against first-time violators of FTC
competition law, the FTC can only seek an order telling that
company, go forth and sin no more. That, as you might guess,
provides insufficient deterrence against lawbreaking.
But, thankfully, Congress has a good model to follow when
it comes to agency remedial power. It can emulate what it did
in the Dodd-Frank Act when it gave the CFPB expansive monetary
relief powers so that CFPB can seek refunds of money,
restitution, disgorgement of compensation for unjust
enrichment, payment of damages or other monetary relief, and
civil money penalties. So I hope Congress seriously considers
granting the FTC comparable powers.
Mr. Morelle. Terrific. Thank you.
I am now going to reserve some time for further questions,
but I am happy to turn to my colleague, Dr. Burgess.
Dr. Burgess. And I thank the chairman.
So, Mr. Chairman, let me ask you. I mean, this is--I was
given a bill that you have introduced on right to repair. Is
this a legislative hearing on that bill?
Mr. Morelle. This is a subcommittee on legislative and
budget implications, and I think, in the bill, it references
the Rules Committee and empowers us to be able to hold a
hearing on what kinds of things around right to repair can be
done legislatively and budgetly to help consumers.
Dr. Burgess. So let me just ask our witnesses: Are you
familiar with the legislation that Mr. Morelle has introduced?
Which bill is it? H.R. 4006.
Ms. Williams. The Fair Repair Act, yes.
Dr. Burgess. So do you have an opinion as to whether or not
this legislation would be helpful for the things that are being
talked about before the Rules Committee today?
Yes. Speak, sir, if you would, Mr. Proctor.
Mr. Proctor. Thank you, Dr. Burgess. Yes. I do strongly
support----
Dr. Burgess. Okay.
Mr. Proctor [continuing]. That as a remedy. And I do think
that----
Dr. Burgess. Fair answer.
Mr. Proctor. Okay.
Dr. Burgess. Ms. Williams, let me ask you.
Ms. Williams. Yes. We do think--we have supported the bill,
and we do think it is a good avenue to address right to repair.
Dr. Burgess. Okay. And our remote witness? Were you able to
hear the question?
Mr. Vaheesan. Yes, I heard the question, and I do support
the bill and believe it would help restore Americans' right to
repair.
Dr. Burgess. So help me here, because, in reading the bill,
section 4, rules of constructions, limitations, and
nonapplication, if you are familiar with that, and it goes
through some things about the security functions are not
excluded. Okay. Fair enough.
Trade secrets protection. Okay. Fair enough.
Section 4, nonapplication to motor vehicles or motor
vehicle repair manufacturers: Nothing in this Act shall apply
to a motor vehicle repair manufacturer, a manufacturer of a
motor vehicle equipment, or a motor vehicle dealer acting in
that capacity.
I guess the question I have back to you, since you feel
that this legislation is consistent with the goals of this
hearing, it seems like that excludes a big chunk of what you
are trying to include. Am I correct in that?
Mr. Proctor. That is correct. And would you like me to
expand on that? Thank you.
Dr. Burgess. I wish you would, because I don't understand
it.
Mr. Proctor. So Chairman Morelle mentioned that, in 2012,
Massachusetts passed the Fair Repair Act, which passes both on
the ballot and then through the legislative--it actually passed
the ballot 86 to 14, which is a higher percentage than actually
people in Massachusetts who own cars. And it was to create
parity around access to digital diagnostic tools, because that
was becoming an issue.
And now there is other issues with car repair, which is why
there are two other bills actually in this Congress right now,
one by Representative Darrell Issa, called the SMART Act, which
has to do with the ways in which manufacturers are increasingly
using design patterns to prevent aftermarket competition for
parts. And then there is a bill by Representative Bobby Rush of
Illinois, called the REPAIR Act, which expands access to
digital diagnostics, including things that are over the
airwaves.
So as technology is improving and getting more developed,
there is new techniques to restrict repair, and there have been
new bills. This bill would essentially bring other kinds of
technology up to the point where cars are, you know, circa 19--
or 2012. So cars are a little bit ahead, but there are still
issues, and then other kinds of technology do not have as much
protection as cars.
Dr. Burgess. So let me ask you a question. Saturday
mornings I am frequently driving around the district from point
A to point B. There is a 5-hour car show on one of my local
radio stations, and I usually have that tuned in on those hours
on Saturday morning when I am traveling around the district.
The reason I do that is because I have found that most of the
cities that I represent, constituents from those cities will
call into this car show with questions.
And one of the issues that has come up that is a burning
issue apparently locally are the issues surrounding the use of
software in automobiles and the fact that the software is not
owned by the automobile owner but owned by the software
company. And, you know, fair enough. We need to have that
discussion, and people need to understand.
I think, when I buy a car, I buy the car--the spark plugs,
the fuel line, and, yes, the little items on the screen. But
apparently that is not always the case anymore, and there are
separate licensing agreements with the software that--just,
quite frankly, I don't know that owners--automobile owners are
as aware of that as perhaps they should be. I don't know if we
as automobile owners are as aware of the data collected by our
automobiles that may be--even if it is still wholly contained
within the vehicle, at some point may be subpoenaed, or there
may be writs and what not. I am not a legal person, but it is
certainly discoverable information in the case of an automobile
accident.
So, I mean, there is a lot of aspects to this that I think
need to be explored. I am just not sure that the Rules
Committee is the place to do that. Again, we have committees of
jurisdiction that cover small business, that cover financial
services, that cover even the Federal Trade Commission. As I
mentioned, the Energy and Commerce Committee has jurisdiction
over the Federal Trade Commission. So I just think it might be
useful to explore this on a broader footing than the--than we
are doing today.
I think the--and one of the things that worries me is, as,
you know, you hear the comments surrounding those types of
activities, is the--we may get to a point where you don't own a
car anymore. You may just buy a license to operate the car,
basically lease the car and lease the software. And maybe that
is a good thing. Maybe it is not. I am old school. I always
think owning the nuts and bolts that you purchased in an
automobile is a good thing.
But we may be--and even legislation like this and the other
legislative products that were mentioned may be driving us, no
pun intended, in a direction that would be lease only; we would
not be--we would not be able to own our own vehicles. And, in a
free society, I don't know that that is a good thing.
In many ways, the freedom that we have derived from our
love affair with the automobile has made this country what it
is, and I remember George Will wrote on this several years ago
about the freedom to--freedom to drive is the reason that
people value living in a free society.
So I just offer that out there, because we know some things
are changing in the industry. We know some things are going to
look vastly different 10 years from now than they do today. But
I--while I appreciate the issues that are being brought up
today--and I do want to stress I have constituents and
supporters who are on--strongly on both sides of this issue,
we----
Mr. Morelle. May I interrupt for just one second before
Jennifer leaves to wish her a happy birthday? We want to make
sure that I--I would sing to you, but I would not want to ruin
your day, but I understand it is your birthday, and I want to
join with all your friends in wishing you a happy birthday.
Ms. Belair. Thank you.
Mr. Morelle. Sorry, Mr.--that is the only reason I would
interrupt you, Dr. Burgess.
Dr. Burgess. Fair enough. If you are not going to sing,
then I will yield back.
Mr. Morelle. Well, I do--look, I appreciate it very much.
First of all, you know, our goal in the drafting of the
bill, which is--this is not a legislative hearing on the bill,
but was really to start to take a more narrow view, but to
directly confront the issues related to digital equipment.
I certainly think you make great points about whether or
not the expansion of that bill or the work of the Congress to
look at automotive, because I think there are clearly parallels
here, so I--I take that all as very positive, and I think that
is a part of the discussion that ought to go on.
And, frankly, again, this is sort of directed at--because
the subcommittee has responsibility for recommending
legislative and budgetary things that we ought to be thinking
about and the FTC's role, while clearly not exclusively under
our jurisdiction, legislative and budget is the subcommittee's
charge.
But I very much think that the conversation will expand,
because the principles will, I think we would all agree,
probably hold no matter what the digital thing is. And I think,
actually--and I would be happy to have any--any other witnesses
comment on this, but--and I was thinking this, and what Dr.
Burgess said further prompted it.
So if I--just to be devil's advocate, there is a couple of
things that OEMs might say about this. First of all, the
question of--well, let me ask it this way: If you were an OEM
and you are building something, and you are sort of trying to
figure out what is my profit going to be here, what is the cost
of building this, what am I doing, you may anticipate, okay,
there is X amount of revenue I am going to derive on the sale
of the good itself, so the phone. But I am sort of calculating
in here what I think I can get in return per unit on service
costs, right?
And so could they make an argument or would they make an
argument that, if you don't allow us sort of the exclusivity to
provide the repairs and do service on it, or if you don't allow
me to have a relatively short period of ownership and then
forcing this planned obsolescence, that my revenues won't be
sufficient and now I will have to raise the cost of goods?
So I am just--you know, I suspect that is probably part of
the argument, that that is a way to have a longer tail on
revenues other than the sale of the good itself, and I just
wonder if anyone wants to comment on that. Yeah.
Mr. Proctor. I am happy to comment on that. Sandeep might
also have thoughts.
I mean, I think it goes back to Dr. Burgess' comment. Like,
you can own a car but then, also, you are leasing the car. I
believe in truth in advertising. If you are going to sell
somebody something, sell it to them. If you are going to lease
something to somebody, lease it to them. If you tether their
future purchases to a secret agreement that you baked into the
technology that they don't know about, that is deceptive, and
we should stop that. They should be required to, I mean, at a
minimum, disclose that.
But it is also--in antitrust law, that is a tying
arrangement, and that is supposed to be enforced against, but
these are just ubiquitous, right? I mean, the thing we are
discussing with cars, this is essentially--these tethering, you
know, technologies to force you to buy services from them, they
should just be honest with you. They should honor the doctrine
of the sale, or they should lease it to you.
And so I do think that that is a really important aspect to
this. And if they were to charge you more, at least you would
know what you were getting. You wouldn't be--you wouldn't be
like, oh, I am buying this thing because it is a low-cost
thing, and then it turns out the headlight goes out and you had
to pay $1,600 to get them to put the new headlight in, and you
didn't know that they had this gotcha--I mean, you brought up
razor blades and printer cartridges, which are, like, this is
the experience people have. Oh, this printer is only 40 bucks,
and the ink is 75, right? So we want companies to compete in
commerce. We don't want them to deceive people in the process.
Mr. Morelle. I wonder, Ms. Williams or Sandeep, if you have
any additional comments related to that question?
Mr. Vaheesan. Sure. So a couple of thoughts. So I think
Nathan is absolutely right, we want companies to be forthright
with customers. It is better to have them charge more upfront
than they hide service and parts fees that are unknown and,
frankly, unknowable when someone purchases a car, for example.
You don't know how often the car will break down. You don't
know exactly how much different parts and services will cost.
It is better for manufacturers to be truthful and tell them.
You know, shift the cost toward the list price and away from
parts and service.
But even apart from that, I think there is a reason to
believe that the cost shifting might not actually be as
significant as some of the OEMs claim. And the main reason is,
when people are shopping for a car, for example, there is
competition among different manufacturers. So Honda competes
against Toyota. They both compete against Ford, GM, and Kia. So
there is price competition at the upfront level among different
brands, whether it is cars or the farm equipment or
smartphones.
But once someone has purchased one of these items, they are
captive. So if I purchase a Honda and I need servicing on it, I
have to take it to a Honda dealership. I cannot take it to a
Ford dealership, because they don't have the necessary parts
and tools, and increasingly cannot take it to an independent
dealer either because the OEMs are withholding the necessary
items from them.
So to the extent costs are shifted to the product market,
you know, I think there is good reason to believe that
competition will discipline OEMs' ability to raise prices.
Mr. Morelle. Is--I am not sure. Did you have anything to
add on that, Ms. Williams?
Ms. Williams. And I will just add and kind of going off
what, you know, the other witnesses have said, just, you know,
I think OEMs would be surprised maybe by how many independent
repair shops or, you know, farmers or other, you know,
individuals would be interested in purchasing that technology.
And maybe if there is an additional revenue stream for them,
you know, if they are able to make their technologies more
available.
Mr. Morelle. Yeah, you raise an interesting point. I have
thought about, you know, over the years, while I am thinking
this through. So there are OEMs that have authorized dealers
and repair shops. And I have often thought, if you really
wanted to extend that to consumers, you would allow any third-
party repair shop, if they met standards that you just make
available, to say, okay, as long as you meet these standards,
you are an authorized dealer, but they also don't do that or
rarely do that.
So even the degree to which they have authorized dealers
who might be third party, they are very tightly constrained,
and that is intended, again, I think, to make sure that they
corner the ability to have those products available.
It was interesting, in Dr. Burgess' comments, you know,
talking about sort of the--you know, he used automotive, but it
would apply, it seems to me, to anything in terms of leasing
versus owning, right? So I suppose you could say, if you were a
even home-office printer company or if you were a farm
equipment manufacturer, you could say, look, we don't sell
anything. We are just going to lease it. You really can't buy
the piece of equipment. You can lease it from us.
They don't do that. I am sort of curious, because that sort
of seems more in line. Then you could make a decision as a
consumer, do I want to lease it and pay the lease price every
year, whatever the rental is, but all the obligations for
service would be on the OEM or the lessor? But that doesn't
happen.
Is that a growing trend? Is that something that--or is
there a real reason why they don't want to be leasing and they
do want to sell, but they just want to have both their cake and
eat it too?
And I will start with Mr. Proctor.
Mr. Proctor. I just want to make a quick comment. They are
doing both at the same time. They are selling it to you and
charging you rents on it.
Mr. Morelle. Right.
Mr. Proctor. And so why would they want to stop that? That
is the gravy train, right. I think they will keep doing that
until we stop them. So I don't know what is better----
Mr. Morelle. So do you expect--so let me ask you a
question. Could you see a time in the future where if we really
stepped in as the Federal Government and said, okay, you may
not do this. So as long as it doesn't affect intellectual
property and patents, you are going to be required to provide
diagnostic tools, diagnostic software codes, and you are going
to be--we are going to require that anyone who holds out a
shingle is going to have access to that equipment, is going to
be able to go directly to consumers.
Do you suspect if that happens that then they will stop
selling products and move more to leasing? Which, I guess, a
lease would be a fairer way of doing it. It would be a more
honest and transparent way of doing it. I am not sure consumers
would like that. They may opt not to do business with a printer
company that is only leasing the printer or, you know, a
harvester or some other type of equipment. I just wonder if
that is a possibility.
Mr. Proctor. They could choose to run their business within
the bounds of the law in any way they want. I think that, you
know, Dr. Burgess' comments about wanting to own things, I
think most people are wired that way. So I think that what they
would see is people actually want to own the products that they
buy, and they would rather buy something than to be tethered to
some company and to need their constant approval and to think
that--you know.
So some--I think some items people could operate that way,
but, like, I think these companies would love to move to a
constant guaranteed revenue model, but I just don't know if
consumers are going to go for it. And if other competitors are
going to sell it to you and you would feel more secure in that,
I think that they are going to have a hard time convincing
everyone to give up the idea of ownership across the board.
Mr. Morelle. Yeah, my guess is that you are right, that
they want the advantages of both, and I think you are right,
too, that consumers are going to want to buy things. I think if
you are a farmer, you want to buy equipment and hopefully not
just use it for the lease term of 5 years, but if you are
making a significant investment, you probably have equipment
that you could use for 25, 30 years without having a
replacement cost.
But any comment on that, Ms. Williams?
Ms. Williams. Yeah. I would tend to agree, you know,
farmers make, you know, their decisions. Some, you know, may
choose to keep, you know, or purchase equipment and keep it for
a year or 2 and just like to turn over equipment, you know,
more. But others, that is a long-term investment where, you
know, you have that tractor for 20, 30 years, and you want--
when you buy it, you want the rights to do whatever you need to
do to make sure it works for your operation. So I think, you
know, it comes down to consumer choice and what they want from
the market or what they want from OEMs.
Mr. Morelle. Yeah. I also think, not only can you own it,
can you repair it, you can also sell it. So I am sure there is
some people that want to buy it because they figure there is a
resale value inherited there.
And I apologize, Mr. Vaheesan, did you have any comment on
that?
Mr. Vaheesan. Yes, Chairman. I think you and Dr. Burgess
raised a critical point here, that there has been a dangerous
blurring of the line between products and services. Twenty,
certainly 30 years ago, people knew what fell in the service
category, what fell in the product category. And now, many OEMs
are, as you said, trying to have their cake and eat it too,
where they present something as a sale, I purchase a car and
drive it off the lot, think it is mine. But functionally, in
many ways it resembles a lease where they have a captive
service relationship with the manufacturer.
And if OEMs want to lease products, that is fine. That is a
good option for many people. But they should be truthful and
honest about it instead of trying to disguise a sale as a
functional lease.
Mr. Morelle. So thank you for that. Let me stay with you
for a follow-up question on an item you raised in your
testimony. You talked about the different ways companies are
restricting repairs for consumers.
As an expert on competition, can you speak further on what
these practices do to the market, so in a larger way what this
is doing to markets?
Mr. Vaheesan. Sure. So aftermarket monopolization affects
us as consumers, and that is maybe the way we can all relate to
it most easily, but the harms are not restricted to customers.
Through some of the practices I describe in my testimony,
refusal to sell parts and tools, disparaging independent shops
and parts makers, they are excluding businesses from the
marketplace.
So they are suppressing an important and a channel for
entrepreneurial activity for many people. Or to put it more
concretely, some of these unfair practices by OEMs mean fewer
neighborhood mechanic shops and fewer kiosks at the mall to fix
cars and smartphones at a reasonable price respectively.
So they are really choking off business creation
opportunities for many Americans. And traditionally, these were
very attractive business opportunities because it required, you
know, some important technical know-how but often only modest
capital to start a repair shop service and an assorted array of
durable goods. So the effects on consumers are real, but the
adverse effects on small businesses and small business
formation is significant and important too.
Mr. Morelle. Yeah. You also mentioned the impact this has
on highlighting or exacerbating inequality. Could you just
comment, relative to underserved areas and rural communities in
particular, how stronger enforcement can help mitigate those
inequities?
Mr. Vaheesan. Sure. So we have seen decades of
disinvestment from rural areas and, traditionally, the creation
of independent repair shops and technical service centers have
been an especially important path for entrepreneurs in rural
areas. And through aftermarket monopolization, OEMs have
further contributed and compounded the economic, political, and
social ails facing rural areas because they have cut off an
important way that rural Americans can start businesses,
support themselves, and generate tax revenues for their local
communities.
Mr. Morelle. Ms. Williams, when I talk to people about this
issue--and I have been, as I said, involved with it for a
number of years--they think, understandably, about cell phones,
they think about laptops, they think about--you know, frankly,
now, because everything has digital equipment, so your oven,
your microwave, I mean, all of those consumer electronics. But
I think people don't fully appreciate, maybe if you could just
expand on the use of digital equipment in farming, particularly
as technology has become more and more important around yield,
around land use. Could you just talk a little bit about that?
Ms. Williams. Yeah. So, you know, in recent years, we have
seen a lot more investment in precision agriculture, a lot more
technology advancement in tractors or other farm equipment
where, you know, computers are some of the basis of that
tractor, that equipment, and it is helping, you know, keep
things straight, you know, when they are planting corn or other
crops or just, you know, giving feedback to the farmer on
yields or, you know, how to moderate, you know, fertilizer
application rates.
So farmers are getting all this data, but I think, you
know, as we add more technology to tractors and equipment, it
sets, you know, more abilities for if, you know, a sensor fails
or if something is just not right and it all feeds back to the
computer, sometimes when that happens it can stop the equipment
from operating, and, you know, you need to contact a technician
to what could be a simple repair or is just something like a
part needs to be replaced, but the computer says, no, it can't
function. That just feeds back into it.
So, you know, as we increasingly see reliance on, you know,
more technologically advanced farm equipment, you know, this
issue is going to continue to be pressing, especially as we
need, you know, further folks to be able to have the knowledge
to repair that. You know, it is not just going in with your
tools anymore; it is having to hook up to the computer and
diagnose what the issue is and having the capability to fix it.
Mr. Morelle. I am just sort of smiling to myself as you
were mentioning that. My father was a pipefitter, and
throughout his life he would repair things, both at the house--
and I don't know how he repaired half the things he did. But we
still find things that he did around, and it is kind of like,
wow, that thing broke and then he fixed it and he fixed it this
way. But I am sure if there was a digital piece to it, he would
have been at a loss. He was really a mechanic at heart and
would always figure out how to do things, but in the analog
world not in the digital world.
But, Mr. Proctor, if you could just comment. We do hear
arguments from the OEMs saying that the restrictions they put
in place are important for product integrity, safety, or just
for the reputation of the product. I just wonder if you might
respond to those claims.
Mr. Proctor. Yeah. I think there is two thoughts I have.
The first is, you know, the FTC went through a lot of this
evidence from--manufacturers tried to present these arguments.
I think if you want to go through the evidentiary record, like
the FTC did for 2 years, you come to the conclusion, oh,
actually, there is no real proof to any of this.
The other piece is that they sold the equipment and you are
the owner now. So they can't say, you know, the way you are
handling this equipment reflects badly on us as a brand. It is
like, well, you sold it. Don't sell it if you don't want me to
own it. So I think, to me, that just comes back to the idea of
ownership.
Mr. Morelle. Yeah. And just to change gears a little bit.
You mentioned in your testimony the impact of repair
restrictions on the environment, and obviously this is
critical, particularly given where we are in the world on
climate crisis and the impact of all these things. So could you
just elaborate on the harm caused by increased electronic
waste?
And I know, for instance, when I dispose of a flat screen
TV or a computer, I have to go to a specialized place to bring
it. I am not sure that every consumer is as, you know,
thoughtful about how to do it. But can you just talk about that
in terms of the harm of these electronic goods ending up in the
waste stream?
Mr. Proctor. Yeah. Like, 70 percent of the toxic heavy
metals going into our landfills come from our electronics. You
know, you think about what it is, it is plastic and flame
retardants and lead and other heavy metals, cadmium, all
mingled together, right. It is very difficult to separate them
out.
And really, it is really valuable stuff, right. So I
remember Sonos, which is a company that makes Bluetooth radios,
they had a thing where they let you put it in recycle mode if
you wanted to--it basically destroyed the speaker in exchange
for like a credit on buying a new one. And I talked to a
recycler about that, and he laughed. He was like, how much do
you think a Sonos speaker is worth to me? Like, how much--if
you just take the weight of plastic and copper out of that
thing and the magnet, maybe 3 cents, but it is worth like $150
bucks as a speaker.
So it is really important to make the electronic waste
system work that they can use as much of the electronics as
they possibly can. That drives the, like, profitability of that
industry, and the more that they can reuse stuff, that means
less manufacturing. The manufacturing of new electronics is a
huge part of this issue, right. We are blowing up mountains and
creating giant radioactive acidic lakes of doom in, you know,
Mongolia to get the rare earth metals for our smartphones, and
we should be using them for a long time. That is a huge
ecological investment. And it helps the whole industry operate
if they can reuse those electronics when they come to those
electronic waste facilities.
Mr. Morelle. Before I close, Dr. Burgess, did you have any
further questions to ask of the witnesses?
Dr. Burgess. I probably have said more than I should. I am
just----
Mr. Morelle. Well, we are going to be going through in
excruciating detail everything you have said word by word.
Dr. Burgess. I am concerned about the issue of the funding
of this activity through fines. With the Consumer Financial
Protection Bureau we had this argument round and round and
round. The Constitution was very clear that no activity should
happen without the express appropriation from Congress, and
using the fines to pay for the enforcement just seems, to me,
going down a road that I would not recommended. But beyond
that, I don't have any further comment, and I will yield back.
Mr. Morelle. Thank you, sir.
I would just ask our witnesses, is there anything that you
feel you want to add to this conversation that you haven't had
a chance to say? Mr. Proctor.
Mr. Proctor. Let me just say thank you for having this
hearing, and thank you for being such a leader on the topic. We
do hope that we can continue having these conversations up
here. Like I said in my testimony, I don't think these issues
are going to go away, especially, you know, for folks like the
farming--the farmers out there who really need access to
repair.
Mr. Morelle. Ms. Williams.
Ms. Williams. I will just echo that, you know, thank you
for having us. And, you know, this issue, you know, as others
have said, continues to be, you know, top of mind and just
becomes more and more complicated as equipment gets more and
more sophisticated. And at some point we are going to have to
find answers. And, you know, hopefully we can reach, you know,
agreements that works for everybody and just make sure that,
you know, consumers have a choice when they, you know, buy
their products at different methods or where they get it
repaired as well.
Mr. Morelle. Very good.
Mr. Vaheesan.
Mr. Vaheesan. Yes, Chairman. Thank you for the opportunity
to testify at today's hearing. I think Congress has a special
and important opportunity to restore Americans' right to
repair, promote the businesses of new enterprises, even
encourage OEMs to make higher quality, more durable products,
and maybe, perhaps most critically, protect the environment
from further degradation.
Mr. Morelle. Well, very good. I want to--before I close,
and I certainly want to thank everyone for participating, but I
do have a number of statements, as Dr. Burgess had done
earlier, to have added without--for unanimous consent to submit
to the record comments from Public Knowledge; testimony from
the National Farmers Union; testimony submitted for the
Alliance for Automotive Innovation; comments by Auto Care
Association, Repair.Org, and the Automotive Aftermarket
Suppliers Association.
Without objection, I will submit those all for the record
as well.
[The information follows:]
Mr. Morelle. But, again, I thank the witnesses very much
for joining us, for your continued work on what I think is a
really important issue and important space for consumers and
for small businesses, entrepreneurs, and for the United States
generally and the country.
And I want to thank Dr. Burgess for being here, for
participating and offering thoughtful comments, and I look
forward to our continued discussion on this important issue.
With that, the hearing is closed.
[Whereupon, at 11:15 a.m., the subcommittee was adjourned.]
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