Background
The debate over the consumer right to a competitive aftermarket for service and maintenance has existed for centuries.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, Representative Bobby Rush (D-IL) introduced legislation that would ensure consumers can have vehicles and electronic devices serviced by independent outlets by requiring open access to tools and technology. President Biden has also expressed broad support for this initiative. And in a notable bipartisan move, the Federal Trade Commission unanimously voted 5-0 to prioritize manufacturer-imposed requirements for consumers to use licensed dealerships for repairs.
While industry has historically broadly opposed right-to-repair efforts, even that is changing. Some companies have responded by forming repair alliances―such as the recent Tesla and Rivian pact. On their face, these alliances expand aftermarket repair options, but some critics say still limit consumers from choosing completely independent repair shops.
Despite these political and industry trends, the use of antitrust laws to convey greater rights to repair in court has not been nearly as linear. The Deere case is one of three pending antitrust class actions against vehicle and equipment manufacturers. Just last year, a federal court 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. However, the plaintiffs were given leave to amend the 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.” Recently, the plaintiffs amended their allegations and the court changed course, allowing the case to proceed on all Sherman Act claims and all but one related state law claims.
Similarly, a court in the Eastern District of Wisconsin recently dismissed an antitrust right-to-repair case against the motorcycle manufacturer Harley-Davidson. The Harley-Davidson plaintiffs have appealed the court’s dismissal of their claims to the Seventh Circuit. These cases do not expressly cite each other, but the Deere decision may be developing into a bellwether for right-to-repair litigation. In the six months since the court’s ruling, the Tesla and Harley-Davison cases have taken a similar course.
Analysis
In light of these trends, the John Deere decision represents a notable shift in application of several antitrust doctrines.
In asking the court to dispose of plaintiffs’ case on the pleadings, John Deere 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 for several reasons. 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.
The court determined the allegations were sufficient to show 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 appeared 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 court 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. 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.” 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.” 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.
Conclusion
The Deere case is an important development in the right-to-repair movement that has 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. As the Tesla and Harley-Davidson cases have already demonstrated, the Deere case is a harbinger for increasing antitrust scrutiny and the right-to-repair.
