BURSTIn the final days of the Biden administration, the Federal Trade Commission filed a flurry of cases, including one against farm equipment giant John Deere. A number of states - Illinois, Michigan, Wisconsin, Minnesota, and Arizona - joined the commission in the complaint. The allegations were that Deere, a monopolist in large combines and tractors, prohibited independent repair shops and farmers from fixing their own equipment, forcing them to go to official John Deere dealers for expensive repairs.
For a frame of reference, hourly rates for a Deere dealer in 2023 were between $130-200, and more if the repair was in the field. One might ask how a company prevents farmers from fixing mechanical machines like tractors? Well, most machines these days are computerized. In the case of John Deere combines and tractors, multiple functions are no longer purely mechanical, but run under the control of electronic control units (ECUs), which are embedded computers.
Digitizing farm equipment offers new features, but it also creates new chokepoints for John Deere, including restrictions on how the machines can be fixed or modified. The scheme is simple. Deere has designed its equipment so that fixing them requires electronic repair tools to identify, diagnose, test, calibrate, update and reprogram ECUs. Deere-authorized dealers get a full version that enables a repair of everything, whereas independents don’t. And so, to repair equipment, farmers often have to go to an overpriced Deere dealer, or hack their own machinery with illicit Ukrainian software.
Large tractors and combines are massively expensive, costing in the hundreds of thousands or even millions of dollars. They last for decades, and it’s difficult to switch from one brand to another. Farmers have traditionally loved John Deere, which makes good equipment in the U.S. Increasingly, however, farmers are frustrated; John Deere has been offshoring production, and exploiting its customers. The used tractor market is now booming, in part because it includes a host of machines whose repair situation John Deere can’t control.
The FTC’s case was that Deere, already a monopolist in the sale of large tractors and combines, controls 100% of the market for aftermarket repairs for John Deere branded farm equipment. And its restrictions in that area were designed to maintain its control of those repairs. The two victimized groups were farmers, who bore the brunt of higher costs charged by Deere for parts and repairs, and independent repair shops, who were disadvantaged versus Deere-controlled shops.
Such restrictions on our “right-to-repair” equipment are rife in the economy, exploited by everyone from Apple and electronics producers to defense contractors to wheelchair makers. It’s a huge deal in corporate America; Ford CEO Jim Farley recently claimed that if drivers get the ability to fix their own cars, people will die. The reason for this paranoia in the C-suite is because a key plank of American economic policy since the early 1980s were strong patent, copyright, and trademark rules.
Prior to the 1980s, American companies built things domestically, because they risked losing control of the technology if they built things abroad using contractors. But when we tightened IP rules, and embedded those in global trade agreements, it became possible for say, Apple to make its products in China using someone else’s capital while maintaining strict control and high profit margins. And on the consumer side, as more and more things were embedded with digital technology, corporations could lock down and control the user experience. A “capital light” model of production, and an extractive monopolistic sales and repair strategy, are key parts of the Number Go Up rule, in which America prioritizes only economic activity that supports higher equity prices.
Enshittification of the internet and digital tools in general was one result. Indeed, the coiner of that term, Cory Doctorow, often points to Section 1201 of Digital Millennium Copyright Act, passed in 1998, as foundational to the rise of the bad platforms on which we find ourselves imprisoned. This law makes it a crime to bypass technological measures used to maintain copyright protections. A different and related phenomenon, the increasing locking out of Americans from their own property, is another result. The phrase, "You'll own nothing and be happy,” became an iconic way to understand the transformation of property rights.
This John Deere suit was the centerpiece of beginning a rollback of this approach. Lina Khan, then the Chair of the FTC, said that Deere’s restrictions on the “right to repair” had boosted its revenue by $6 billion/year, and become the most profitable segment of its various lines of business. Deere, rather than investing in better products and services, invested in making its products worse, harder to use, and more problematic to repair. It had an incentive to embed excessive digitization into its products, since it could more easily control updates and repairs.
The case was a long time coming. The FTC did hearings and a report in 2021 titled “Nix the Fix,” the investigation took years, and most importantly, a sprawling right to repair social movement had been advocating for this suit, and for state legislative changes, for years. In parallel, a class action antitrust case of farmers wound its way through the courts. The momentum seemed to be swinging against big business. Colorado passed important legislation on repairs, as did New York, and Deere cut a deal with the American Farm Bureau to address the concerns of farmers. Iowa’s House passed a strong bill.
The FTC action, as one would expect from something so foundational, was controversial. Then commissioner and now FTC Chair Andrew Ferguson bitterly opposed bringing it, even though right-leaning farmers are frustrated with Deere’s policies. But when he became chair, he was forced to bring it forward anyway, and last June, the judge issued a stinging rebuke of John Deere, ruling that the FTC’s case could move to trial.
On Wednesday, the FTC, and the five states involved, settled the case without going to trial, earning praise of many right-to-repair advocates and writers. The populist news outlet 404 summed up the settlement as “Farmers Finally Get a John Deere Right to Repair Agreement That Doesn’t Screw Them Over.” Here’s Nathan Proctor, the foremost advocate of right-to-repair in America: “Deere has now agreed to make available all materials needed to conduct repairs, including some which it has previously withheld.” This settlement follows a similar attempt to settle the class action suit against John Deere a few months ago.
Sure there are no trials, no one gets put on the stand, and there’s no admission of wrongdoing. But even so, a settlement that allows farmers access to diagnostic and repair tools is good, right? And since there is no trial, it’ll get implemented quickly, instead of dragging out for years. Unfortunately, when challenging something so fundamental to U.S. statecraft as the monopolistic restrictions on intellectual property, it’s not so simple.
The proposed class action settlement, and the proposed FTC settlement, are quite similar. Both mandate that Deere make repair resources, such as technical information and software, available to independent dealers on a “fair and reasonable” basis. They both say that when Deere updates its products, it must offer new resources to independents once more than half of its own dealers get them, for fair and reasonable terms. It lets them calibrate equipment and do fluid sampling, and repair and replace electronic control units. The class action settlement also required a $99 million payout. That seems fine so far.
But there is a fly in the ointment. When the class action settlement was proposed, one farmer, Jared Wilson, submitted a long objection and asked the court not to approve it. There were many reasons, one of them being that farmers had suffered billions in losses, and yet Deere only had to pay $99 million. For that paltry sum, farmers could never again bring cases with this same charge. Moreover, half of the money would go to the class action attorneys themselves, so this proposal looked like self-dealing from greedy lawyers.
More fundamentally, the mandates on Deere to make its repair resources available, Wilson argued, don’t actually do that. First, Deere designs its products so that you have to use Deere software and tools to repair them. The settlement did not stop that behavior. Mandatory interoperability of third party software tools seems like the obvious fix here and that didn’t happen.
Another problem is that Deere could simply charge a lot more to independent dealers for repair software than its own dealers. Sure, those charges must be “fair and reasonable,” but that’s not a clearly defined term. If you don’t like Deere’s prices, do you really want to do costly multi-million dollar litigation against a monopolist who controls your livelihood? The proposal also allows Deere to impose “reasonable restrictions” on independent dealers and owners of equipment, and that’s not well-defined either. And finally, Deere only needed to distribute repair resources for future updates when more than half its own dealers get those resources. To avoid that, it could simply choose not to send those resources to more than half its own dealers.
There are many more carveouts and loopholes. I think my favorite from the objection to the proposed settlement is that Deere simply doesn’t make necessary hardware available. For instance:
For example, Deere’s USB-Link 3 Wireless Machine Interface Kit is used to connect equipment to PRO Service for diagnostics and reprogramming, and a PRO Service license is separately required. The price of Deere’s USB-Link 3 Wireless Machine Interface Kit is $1,100, and it is currently out of stock.
The fundamental problem with the proposed settlement is that Deere still maintains its monopoly power. Since it didn’t have to admit liability, and no one was put on the stand, it’s not particularly easy to litigate against bad behavior if John Deere flouts the wording or spirit of the settlement. That dynamic is well-understood, most right-to-repair groups saw this settlement as corrupt and self-dealing, a cash grab by plaintiff lawyers. The court hasn’t approved the class action settlement, and the judge may take the objection seriously. Hopefully he does.
But the proposed FTC settlement that garnered so much praise from those same groups, while a bit better, doesn’t seem to address the main problem either. On the positive side, it doesn’t include a release of claims, and the FTC itself and state attorneys general could do enforcement. There’s monitoring, and Deere must submit annual reports. But as far as I can tell, there is no mandate to allow interoperability or third party software or tools to repair equipment. And there’s nothing to stop Deere from charging more to independents than its own dealers, meaning it can simply continue to force high prices. Further, John Deere can simply refuse to distribute future tools to more than half its own dealers, and that is perfectly legal according to the settlement.
I could be wrong, and maybe there will be significant meaningful changes. We’ll know in four months, when this deal goes into force. But based on what I’m seeing, fundamentally, enforcers just didn’t break John Deere’s monopoly, or interrupt its extractive use of its copyrights and patents. There’s also something of a gutless quality here, with FTC Chair Andrew Ferguson again refusing to pull the trigger to actually go to court in a trial, even with a pretty favorable judge. Getting a finding of liability, and laying out a record for the public in court, really does matter in terms of understanding what is going on, and allowing for follow-on lawsuits and legislation. But we got none of that, and it’s because the Trump FTC leadership are just not serious people, and the follow-on state plaintiffs didn’t have the capacity or willingness to litigate without them.
Here’s Basel Musharbash, who calls the FTC settlement a “scam.”
And the outcome is not really much of a surprise. Ferguson is a weak person, and lacks rigor and any respect for policy substance or ordinary Americans undermined by John Deere’s behavior. He’s a Mitch McConnell disciple, and normie corporate Republican attempting to make his way in MAGA world. He is not the type to challenge a basic artifact of U.S. statecraft that has made so much for Wall Street.
Change however, is coming. And the reason isn’t just because of popular frustration from important groups like farmers, but also because the capital light model of production doesn’t work when you’re not on the technological frontier. And increasingly, we are not. The Chinese have leaped ahead of the U.S. across the board in a host of areas, from batteries to electronics to rare earth magnets to cars. And there’s a reason for that, which is, as we see here, companies like John Deere are increasingly investing not to improve their products, but to make them worse.
It’s not just John Deere of course, it’s across the board. U.S. carmakers are increasing prices and charging for their car apps, while making it harder to repair these already overpriced and technologically backward products. U.S. defense contractors have been embarrassed by the superior performance at much lower cost of Iranian and Ukrainian drones.
It’s infecting our most prestigious and powerful corporations. Google blocked new app stores from its Android phones for years, worsening the quality of their phones until a recent settlement forced it to let users buy apps from alternative suppliers. In the Apple antitrust case, it was even more direct. Here’s an email that came out from an executive on why they needed to stop improving their products.
For example, Apple’s vice president of iPhone marketing explained in February 2020: “In looking at it with hindsight, I think going forward we need to set a stake in the ground for what features we think are ‘good enough’ for the consumer. I would argue were [sic] already doing *more* than what would have been good enough.” After identifying old features that “would have been good enough today if we hadn’t introduced [updated features] already,” she explained, “anything new and especially expensive needs to be rigorously challenged before it’s allowed into the consumer phone.”
Of course, Apple’s market capitalization is in the trillions, if it actually had to compete to improve its products, that would not be the case. So here we see a direct trade-off between improving product quality and keeping stock prices up. That’s true with John Deere as well, and though it’s not a particularly important company in terms of the equity markets, a precedent to limit the farm equipment giant from using its IP to unfairly extract from farmers would reverberate through other industries.
This extraction is based on policy choices. Doctorow’s analysis of copyright and patent restrictions, particularly the DMCA, shows one reason farmers can’t produce their own software to repair equipment, or buy software from a non-John Deere source to do it. There’s a legal lock that Congress put on Americans to keep us from getting access to our own property. Instead we must pay for the right to access what we already bought, which juices the returns for the companies who are gatekeepers.
It’s not just copyright but antitrust as well. The FTC had John Deere, but let them get away. And in other areas, it’s bad as well. The Trump administration is right now allowing defense contractor monopolist Transigm to buy Stellant, rolling up yet another segment, this one being radar components for the Navy and Air force.
At some point, we should take on this fight directly, and argue for a return to traditional American copyright, patent, and trademark protections, prioritizing production and quality instead of financial extraction. The right-to-repair movement is perhaps the single biggest proponent of doing so. I think they are wrong that this settlement is good, and trying to give themselves a sense that their effort is being rewarded. Sometimes that’s a story you have to tell yourself to keep going. I’ve certainly done that. Still, my guess is that if the settlement doesn’t deliver, they will be strident about it.
This John Deere case should be easy. That it’s not shows that politically and intellectually, we have still only nibbled around the edges of our core social dysfunctions. At some point, and it’ll probably be soon, there’s going to be a reckoning. This situation is not sustainable. And if something can’t go on forever, it won’t.
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cheers,
Matt Stoller