Edition 129, February 2024

Reverse Logistics & Right to Repair - Two Sides of the Same Coin

By Gay Gordon-Byrne, The Repair Association

RLA members are often the first in line when it comes to making repairs for new or nearly new products. In order to make money on managing returns, value recovery must be practical. That's where “Right to Repair” ties to reverse logistics.

Returned products with digital electronic parts need to be tested before they can be resold or returned to inventory. If manufacturers don’t make diagnostic testing tools and software available, even this simple task is thwarted. Some do, and some don’t. Until very recently, there were no laws in the US that made any requirements of manufacturers to make such basic service materials available.

Not only are some OEMs actively fighting to prevent commercial scale testing and restocking, but they actively refuse to sell spare parts and specialty tools necessary to make repairs. Even if spare parts can be found – these same OEMS throw up road blocks that assure that even authentic spare parts will not work without “activation” by the manufacturer. All of these artificial hurdles to repair destroy secondary market value and add to our burgeoning problems with managing the resulting waste.

Under these conditions, many millions of products are currently more costly to evaluate and repair than to shred and recycle. The cost of repair is the deciding factor for these decisions.

We estimate that 90% of products on the market today are repair-monopolized – meaning that the only source of repair as a service for any product with a digital electronic component is limited by the manufacturer. These are true monopolies – illegal under antitrust law – but lack of enforcement for over 4 decades has led most of us to believe that OEMs should be in charge of repair. The opposite is true – manufacturers cannot legally “tie” the two businesses together.

The lapse in antitrust enforcement is structural and not easily improved. The FTC and DOJ are set up to engage in “investigations” one OEM at a time. When groups such as CTA (Consumer Technology Association) boast 1700 members, going one by one at the pace of even 2 per year would take 850 years. Nor does any single action lead to industry change. Using a fishing analogy – if the FTC snags a whale in their nets, 1699 other fish get away. CTA is only one of several large trade associations. There are just too many “fish” in the sea for a one-by-one approach.

The best way, and perhaps the only way, to make repair and refurbishment a productive business model is to demand the option of competition for repair services in state law, specifically under General Business Law. States control what they require of manufacturers as a condition of providing a business license. If an OEM doesn’t like the requirements, they do not have to sell into that State.

State laws already prohibit “Unfair and Deceptive Acts and Practices” (“UDAP”). Every OEM that sells a product that cannot be repaired is almost always (99.999%) violating some aspect of UDAP law. Everything that requires an End User License Agreement (“EULA) is deceptive by definition. Sales contracts that document a sale on the front side of the document and then add extra references to “accessory” or “reference” materials are similarly deceptive. States attorneys general across the country have vetted and reviewed Right to Repair language and advised their legislatures if the requirements are legal (they are), and in some cases have argued for additional funding for enforcement. None has disagreed that consumers should not be able to fix their stuff.

For the past ten years, we have promoted and refined our “Digital Fair Repair Act” legislative template which has been taken up so far by 45 states and Puerto Rico. This year 4 states passed variations of our template into law – covering several different categories of equipment ranging from agricultural equipment to cell phones, home appliances, powered wheelchairs and data center equipment. More state legislatures are pushing the boundaries of these new laws to cover other areas of interest such as industrial equipment, commercial HVAC, more types of medical equipment, forestry, boating, digital watches and everything made with a chip.

The provisions of our template are very simple and consistent across all industries. Manufacturers must sell, on fair and reasonable terms, the same repair and maintenance materials that they already use for their product repair subcontractors or by themselves. There are no design mandates, no format requirements for reporting, no requirements to disclose any information other than repair information, including disclaiming any interest in trade secrets.

As a result, parts pricing should become rational. It should be easier to acquire legitimate spare parts directly from manufacturers rather than have to search for alternative providers.

Documentation and schematic diagrams will be available at no charge, unless you require a physical copy in which case there is provision to charge a reasonable fee.

Manufacturers do not want to be forced to enable repair, but are unable to justify how, in law, products that are sold or leased are still controlled by the manufacturer. Arguments about protecting their IP (Copyrights, Patents, and Trade Secrets) have been evaluated and dismissed by no less than the US Copyright Office in multiple studies commissioned by Congress i 2016 and 2017 and by the FTC in the 2019 “Nixing the Fix” [insert link] study. The FTC concluded in their report to Congress in May of 2021 there is only “scant evidence” that consumers are being harmed by non-OEM repair.

Now that there are statutes in states - more and more OEMs have announced their plans for national compliance. They don’t need to sign any agreement – they just figure out how to sell more parts and tools. Those companies that never had a retail or wholesale “parts desk” are making partnerships to help them if needed. Several have updated their marketing to tout their improved repairability as a form of environmental sustainability.

There is considerable work yet to be done – not just in making sure loopholes in state laws are closed – but making sure that copyright law is updated to clarify that tools needed for repair, including software tools, are available so long as they do not actually infringe on author’s rights.

We welcome your comments, support, suggestions, and questions.

Gay Gordon-Byrne