“Right to Repair” Laws Threaten Big Consumer Tech Companies’ Profits

“Right to repair” laws represent an interesting legislation intended to break manufacturers’ monopoly on the repair market for most consumer electronic goods. It will benefit consumers by making dishwashers, washing machines, washer/dryers, refrigeration appliances, televisions, and other nonconsumer electronics easier and cheaper to repair in order to boost competitiveness and reduce the production of electronic waste (e-waste). In 2019, the world generated about 53.6 million metric tons of e-waste; the telecommunications sector alone generates billions of dollars of waste each year, which has a considerable impact on the environment. To combat this growing problem, President Joe Biden approved an executive order instructing the Federal Trade Commission to create new regulations limiting technology makers’ power to prevent the use of independent repairs in the United States.

The U.K. government has introduced a similar law for electronic products, although smartphones, laptops, and tablets are excluded from the mandate, most likely due to lobbying by major players such as Apple and other computer and phone manufacturers. In 2020, the European Union released its Circular Economy Action Plan, a policy package that includes right-to-repair regulations. For instance, France has introduced a repairability rating for smartphones, computers, washing machines, televisions, and lawn mowers. The European Union is also being pushed to prohibit hardware manufacturers from purposefully reducing a product’s life span. Additionally, due to rising domestic electronic use and the accumulation of discarded products coming from the United States, the European Union, and other affluent countries, China is experiencing escalating e-waste concerns. Further, the official e-waste treatment sector may expect additional technological and economic development with the Chinese government building formal collection routes and recycling infrastructure and treatment subsidies from producers.

The introduction of these laws will have a wide-reaching impact on manufacturers, and one specific area to be affected will be the act of “tying”—where a company sells one product on the condition that the client/customer buys another product from the same company. Manufacturer limitations on aftermarket components or services might lead to an allegation of tying that is unlawful. However, it is unclear how the regulation would influence manufacturers’ pricing decisions to offset the inevitable loss in profit. Consumers may find it easier to change a laptop battery or display at home using instructions given by the Original Equipment Manufacturer (OEM) if right-to-repair regulations are in effect. Alternatively, the regulations might offer consumers more flexibility to use cheaper, independent services to fix their devices rather than to rely on the OEM.

Repair limitations hurt the environment, obstruct timely repairs, raise the cost of repairs for customers, and harm local and small companies. Contrarily, numerous groups representing manufacturers suggest that repair limitations do not add to e-waste as they have adopted processes and procedures to prevent e-waste by extending the useful life of products and returning them to service. For example, Samsung wants to decrease its environmental impact and prevent resources employing recycled materials in all of its new mobile devices, removing all single-use plastics from packaging and reducing smartphone battery standby power usage to below 0.005 watts by 2025, making them the most energy efficient within the mobile sector. Similarly, Apple is transitioning to recycled or renewable materials for its products and packaging to reduce freshwater use and eliminate waste sent to landfills from manufacturing facilities, data centers, retail stores, and corporate offices.

Manufacturers frequently depend on intellectual property legislation to preserve their investment in product development. Therefore, aftermarket competition limitations are required for data security, privacy, production, distribution, efficient design, and safety. Nonauthorized replacement parts or repair services pose a risk to their reputations and could consequently affect their brand value. Many items today include both physical goods and embedded software that the producer licenses to the user under the provisions of an end user license agreement that restricts repairs by forbidding software modifications for any reason. In 2019, Apple introduced the Independent Repair Provider Program that requires third-party repairs to become “Apple certified” and to agree to a set of rules in exchange for access to spare parts. As a result, manufacturers may be enticed to significantly prolong their device warranties or rethink the materials used to construct their goods. Additionally, according to their 2021 Environmental Progress Report, Apple is improving their repairability performance by designing long-lasting products. For example, the new iPhone 12 design allows for more repairs at more repair locations than ever before.

According to the European Environmental Bureau (EEB), global e-waste is expected to reach 74 million tons by 2030. In their study, the EEB found that adding only one year of life to all E.U. smartphones and other consumer electronics currently in circulation would be equivalent to removing two million automobiles off the road annually. Thus, reforming the consumer electronics industry to become more regenerative, sustainable, and resilient provides social benefits and business prospects. However, it is doubtful that a one-size-fits-all solution will be sufficient to handle this problem.

Under the terms of the law, consumers and independent repair shops will most likely be able to obtain replacement components from manufacturers. But what exactly is a replacement part, and to what extent will manufacturers be obligated to make these component parts accessible? Making spare parts available for a set period may result in overstocking—a negative externality of production generating undesirable environmental effects due to excessive and unnecessary manufacturing. In addition, the pandemic has intensified the negative consequences of consumer repair restriction. Many large chain retailers have stopped offering on-site repairs, making it more challenging to have broken products fixed. Therefore, in the short run, it seems that the current regulations in place can only change how smartphones are made in one of two ways.

1. Vendors are forced to create phones that can be easily repaired, perhaps through having to comply with some manufacturing legislation if they want to sell in a particular country or group of countries.
2. Vendors allow the “right to repair” but make it difficult for a consumer or third party to repair—for example, holding back repair manuals and using proprietary tools and glues and “software locks.” However, this is too costly, takes too much time, and is too complicated to achieve.

There is, however, a pressing need for all participants in the value chain to perform due diligence to tackle the ethical and environmental concerns raised by the development of innovative technologies. Companies like Apple won’t be able to raise prices above the competitive level to offset the inevitable profit loss as the aftermarket competition would not be enough to prevent anticompetitive behavior. Further, Apple is committed to using renewable energy to gain a competitive advantage by providing power to operations and suppliers while maintaining greater control over energy supply and minimizing cost fluctuations. This will put them in a unique position to influence environmental policy and help them achieve carbon neutrality by 2030.

Even if federal copyright law must be revised to protect the needs of businesses and consumers, the right-to-repair movement has created an opportunity for the repair industry, which is expected to grow in the foreseeable future. Smartphone vendors have worked hard to raise their Ingress Protection rating. But unfortunately, making their devices easier to repair and with more screw holes will considerably damage these ratings and therefore consumer purchasing decisions. To boost competitiveness, small companies should become authorized or become an associated repair provider to access the necessary parts, tools, and information. Finally, these changes will encourage consumer technology manufacturers to be more sustainable and cooperative as well as redirect consumer purchases toward more energy-efficient items, increasing confidence about tech companies’ environmental credentials.