While industry has generally opposed right-to-repair efforts, even that is changing.

On November 27, 2023, the U.S. District Court for the Northern District of Illinois denied agricultural giant John Deere’s request to dismiss a proposed class action alleging the company has violated antitrust laws. Specifically, the purported class alleges that John Deere unfairly limits competition for farming equipment by restricting access to software and tools needed to repair electronic control units on tractors. In re: Deere & Company Repair Service Antitrust Litigation, No. 3:22-cv-50188, MDL No. 3030 (N.D. Ill. Nov. 27, 2023). In denying Deere’s motion for judgment on the pleadings, the court found that the proposed class sufficiently pled its “harmful allegations” that the company exercises monopoly power in the aftermarket, thereby rejecting Deere’s proffered theory that “everybody knew” options for consumers were limited.

Takeaways

• The Deere case is an important development in the right-to-repair movement that accelerated in the wake of a presidential executive order and a promise by the Federal Trade Commission to ramp up enforcement against illegal repair restrictions.
• Original equipment manufacturers traditionally sought control in so-called repair markets; however, that may be changing.
• While just at the pleading stage, the Deere decision is notable in that the court recognized that the plaintiffs alleged a single-brand repair aftermarket and that Deere failed to provide sufficient information regarding product lifecycle costs and repair options.
• The case also tackles the Illinois Brick doctrine head-on and could be an important decision for downstream customers in future right-to-repair cases.

A Brief History of the Right to Repair

The debate over the consumer right to a competitive aftermarket for service and maintenance has existed for centuries.[1] In recent years, however, as electronics and software systems have integrated with mechanical systems like automobiles and tractors, the issue has gained prominence and urgency, with lawmakers and industry players staking positions on the issue. For example, legislation introduced by congressional Democrats would ensure consumers can have vehicles and electronic devices serviced by independent outlets by requiring open access to tools and technology. President Joe Biden has also expressed broad support for this initiative. The Federal Trade Commission also unanimously voted to prioritize manufacturer-imposed requirements for consumers to use licensed dealerships for repairs.

While industry has generally opposed right-to-repair efforts, even that is changing. Other companies have responded by forming alliances―such as the recent Tesla and Rivian pact―that on their face expand aftermarket repair options but that some critics say still limit consumers from choosing completely independent repair shops.[2]

Not all developments have been in favor of greater rights to repairs. Last month, a federal judge in California dismissed a class action right-to-repair case against Tesla, finding plaintiffs failed to both plausibly allege that the Tesla aftermarket for repair services and Tesla-compatible parts is a cognizable single-brand aftermarket for purposes of Sherman Act and related state law claims.[3] However, the plaintiffs were given leave to amend their complaint(s) to more adequately define the alleged aftermarket monopoly and explain how (a) “consumers are in fact unaware of the supposedly supracompetitive prices and exorbitant wait times” in servicing their vehicles, (b) “significant information costs prevent accurate life-cycle pricing,” and (c) “consumers cannot switch between [electric vehicles] in the foremarket.”[4]

Analysis of the Deere Decision

John Deere’s motion argued that plaintiffs lacked Article III standing and antitrust standing, and further contended that plaintiffs failed to plausibly allege the existence of a relevant market.

The district court’s rejection of those arguments was significant in several ways. First, the court held the plaintiffs adequately pleaded a single-brand aftermarket. While Deere argued consumers were well-aware that repair options are limited, Judge Iain Johnston credited the “bait and switch theory” alleged by the plaintiffs and also found that:

To the extent such a claim can be based on the lack of information preventing the consumer from determining the life cycle cost of the product, based on the Complaint’s allegations—particularly Deere’s market power—the Court finds Plaintiffs have stated a claim under this theory as well.[5]

The court determined from the allegations that Deere unfairly hampered aftermarket competition because of “a lack of forthrightness and/or the lack of consumer information to calculate life-cycle costs,” despite the fact that customers are not even aware of their future maintenance needs at the time of purchase. Deere argued it never hid from consumers the range of available aftermarket service providers, but Judge Johnston appears to impose an affirmative obligation on Deere and others hoping to avoid antitrust scrutiny.

Second, despite coming in the posture of a Rule 12(c) motion for judgment on the pleadings, with litigation on the merits still unresolved, Judge Johnston went to great lengths to discuss cultural implications of this decision, noting the proximity of the Rockford courthouse to where John Deere built his first plow, and suggesting that it may preserve the “humble origins” of a 19th-century blacksmith’s steel plow that unpredictably evolved into a 21st-century agricultural monopoly. The judge wrote, if the claims turn out to be meritorious, “the Court assumes the man lionized at the historic site [close to the courthouse] would be deeply disappointed in his namesake corporation.” While choice of venue is often significant in high-stakes litigation, it seems especially notable that the court admittedly viewed this case through the lens of Deere’s tradition as a local mechanical innovator.

Finally, the court seized the opportunity to provide a more contemporary analysis of the decades-old but inconsistently applied Illinois Brick direct-purchaser rule, which dictates that indirect purchasers “who are two or more steps removed [from the alleged violator] in a distribution chain may not sue” on antitrust violations.[6] The court first made the threshold determination that the so-called conspiracy exception to the rule applied because Deere plaintiffs “are the type of party best suited to bring the claims” and are “the first purchasers into the [alleged] conspiracy” between the manufacturer and the dealers. Therefore, the Illinois Brick rule was inapplicable. The court nonetheless undertook the analysis to explain why John Deere-authorized dealerships need not be joined in this case. Judge Johnston admittedly embarked on this route to protect his ruling on appeal and to elucidate a perceived gap in decisional case law on the issue.

After a lengthy summary of the persuasive cases on the issue, the court concluded that a fresh analysis was warranted: “The Court believes it is writing on a clean slate. It is not bound by any controlling authority under these circumstances. So to the extent the Court needs to determine this issue, it will.”[7] The court applied the three Illinois Brick factors and found, (1) “there is no risk of double recovery” from the dealerships and John Deere itself, (2) the failure to include the dealerships in the litigation “does not complicate damage calculations,” and (3) “requiring the Dealerships to be joined as defendants would not increase enforcement of the antitrust statutes.”[8] Plaintiffs’ failure to join John Deere dealerships as defendants was therefore immaterial. In concise fashion, the court provided what is likely to be one of the more useful—and citable—applications of the Illinois Brick direct purchaser rule, just as the doctrine becomes increasingly central in future right-to-repair litigation.

For More Information

If you have any questions about this Alert, please contact Sean P. McConnell, Christopher H. Casey, Brian H. Pandya, Joseph R. Welsh, any of the attorneys in our Antitrust and Competition Group or the attorney in the form with whom you are regularly in contact.

Notes

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