RIGHT-TO-REPAIR SOUNDS STRAIGHTFORWARD; shouldn’t individuals who own equipment or electronic devices be able to repair them on their own? The reality is that the Right-to-Repair movement is more complex than the tagline would suggest.
Since 2014, advocates for Right-to-Repair have argued that removing restrictions on how a piece of equipment can be serviced or repaired creates more competition and reduces costs for consumers. Manufacturers have indicated that is not the case—in fact, by removing all restrictions (including those that govern emission and safety controls on mobile machinery), untrained technicians or consumers may be tinkering with a device in a manner that could result in a costly repair, cause an unsafe working environment, or violate emissions regulations. There have been efforts in various states to rewrite the rules when it comes to the restrictions manufacturers can place on the ability of customers to service their own electronic components and software in their machines. To date, 43 states have had legislation introduced in some shape or form that would alter the rules surrounding repair restrictions. These legislative efforts have included broad consumer electronic language that would impact everything from a cell phone to mining equipment. Others have been more focused on specific industries, including agricultural equipment.
The Right to Repair movement could have significant impact on the residual values of equipment.
Until recently, the focus on Right-to-Repair legislation had been at the state level. However, that changed in 2021. In May, the Biden administration released their executive order on competition, which directed the Federal Trade Commission to review repair restrictions in the market. In June, the FTC released a policy statement that stated: “The Commission will now prioritize investigations into unlawful repair restrictions under relevant statutes...”
In 2021, there were also several bills introduced in Congress, including both broad and industry specific legislation. While no resolution appears to be imminent, the equipment leasing and finance industry would be well served to understand the ways in which this could impact their businesses.
If the landscape changes via legislation, administrative action or litigation, it could have significant impacts on the residual values of equipment. These calculations are often complex and can rely on historical data. Should the law change in a manner that outlaws the requirement of “certified technicians” to perform repairs, there will likely be an increase in repair errors and modifications that place machines outside of the manufacturer's designed performance, leading to a swift departure from historical norms regarding repair costs and residual value. In the OEM space, certified technicians are typically required to reset machines that have been modified by uncertified technicians. Uncertified technicians are under no obligation to reset systems to be in line with designed performance or emissions standards.
In 2019, the Equipment Dealers Association (EDA) and Association of Equipment Manufacturers (AEM) submitted data on the modifications to safety and emissions features in off-road equipment. 33% of responding dealers (certified repair facilities) indicated they had modified equipment that had come into their dealership for service in the past 24 months. Some of those dealers indicated that up to 50% of the equipment brought into their locations had been modified from manufacturer settings. These include the modification, impairment or disabling of safety features and/or the modification of emissions control equipment. The EPA has also identified modified equipment in their enforcement priorities and created a national compliance initiative in 2020 on the matter.
Given the fluidity surrounding the Right-to-Repair movement, ELFA members could benefit from understanding how this would impact residual value calculations. If you have questions regarding Right-to-Repair efforts at the federal level or what ELFA can do to protect the industry, please do not hesitate to reach out to the ELFA Federal Government Relations team.
