The European Union’s Collective Redress Directive (the CRD)—which provides the potential for collective consumer lawsuits to the EU—has prompted sellers of goods and services in the EU to determine which laws are subject to the Directive and to what goods and services the Directive might apply. Automotive manufacturers in particular should be aware of potential collective redress actions by consumers arising out of the so-called “right-to-repair” movement, which aims to strip manufacturers’ aftermarket restrictions in favour of open access to use of third-party parts and non‐authorised service providers.
Recent initiatives in US right-to-repair
That European automotive manufacturers may soon face collective redress actions in this area is more likely than not given recent activity in the US. In federal courts in California and Wisconsin, respectively, an electric vehicle (EV) manufacturer and the motorcycle manufacturer Harley-Davidson face collective redress actions by owners alleging that each manufacturer violated antitrust laws, warranty laws, and unfair competition laws by illegally tying the sale of their vehicles or motorcycles to the use of authorised repair services and parts. The EV owners seek to force the manufacturer to make repair manuals and diagnostic tools available at a reasonable cost, while the Harley-Davidson owners seek a judicial declaration permitting them to use third-party parts and services, which would otherwise violate the manufacturer’s warranty. These lawsuits follow activity in the US legislative and executive branches evidencing that manufacturers’ traditional business justifications for aftermarket restrictions are out of step with today’s lawmakers and enforcers.
The Federal Trade Commission, for example, after years of inactivity in the space, filed in 2022 three right-to-repair complaints against manufacturers (Harley-Davidson being one) alleging the companies violated federal law by “including warranty provisions that unlawfully conveyed that [product] warranties would be voided if a customer used third-party parts … [or] independent repairers.”
In this year’s 118th Congress, two bills seeking to codify automotive consumers’ right-to-repair perspectives were introduced but died in committee.
Several states have passed laws enshrining, to various degrees, automotive consumers’ right-to-repair preferences. Massachusetts’s law—the subject of a pending lawsuit brought by trade association Alliance for Automotive Innovation—would require manufacturers to provide open remote access to vehicle telematics. After urging manufacturers not to comply with the law based on concerns it would make Massachusetts-sold cars susceptible to hackers and thus endanger public safety, federal regulator National Highway Traffic Safety Administration (NHTSA) reversed course in August 2023, expressing its updated understanding that “short-range wireless protocols” such as Bluetooth could be used by owners and independent repair facilities to access vehicle telematics in a manner that “would significantly reduce the cybersecurity risks— and therefore the safety risks—associated with remote access.”
Potential for collective redress Actions in the EU
Most EU Member States do not have a historical legal culture of collective redress for consumers; this is changing, however, with the CRD. Each Member State will implement the CRD individually, but now all EU consumers should have access to a collective redress mechanism. A key aspect of the CRD is that it only applies to certain consumer laws. The nascent nature of the collective redress process in Europe means that most of the recent developments in right to repair have been in legislation.
Within the European automotive industry, a partial “right to repair” has been recognised within the Motor Vehicle Block Exemption Regulations (MVBER) since 1995, where the car manufacturers have an exemption from some aspects of competition law (such as using a franchise dealer network etc.), but they must release technical data and repair instructions to independent repairers. The latest MVBER were recently extended through 2028 in similar form. Breaches of the MVBER are not subject to the CRD (there are separate rules on breaches of competition law).
In addition, under the European Commission’s European Green Deal strategy, there resides a labyrinthine mix of inter-connected laws (both enacted and proposed) including the Right to Repair Directive Proposal (R2RD). This is a proposal to amend the Sale of Goods Directive (SGD) where sellers of any goods are required, as the default option, to offer repair of a defective good that is still covered by the two-year legal warranty period. An exception arises where the repair is more expensive than a replacement. In that case, a replacement can be offered. Because retailers would have the obligation to repair, the MVBER would direct them to provide access to spare parts, proprietary tools and detailed product repair manuals.
Outside the legal warranty period, the R2RD introduces a novel obligation to repair, but only for certain products currently listed in draft Annex II. These products do not currently include vehicles (most focus on household goods such as washing machines, or electronic goods).
It remains likely that the EU will eventually supplement right-to-repair initiatives with both greater access to parts and telematics, with collective redress remedies available to police alleged industry failures
Both the R2RD and the SGD are subject to the CRD, so breaches could lead to a collective action against vehicle manufacturers (especially where the manufacturer also acts as the retailer). At this point, however, as noted, the scope of the obligations under the proposed R2RD has not actually expanded a great deal beyond current obligations. Sellers of goods always had to repair or replace faulty goods within the warranty period; what has changed in this proposal is simply that the consumer has lost the choice of whether to opt for repair or replacement, where the cost of repair exceeds the cost of replacement. The potential legal risk comes where a car manufacturer/retailer refuses to repair, or to deliver the repair option encompassed by the warranty.
Inasmuch as the R2RD is a proposal, however, these requirements (including the list of products outside the legal warranty in Annex II) could be amended as R2RD progresses through the EU legislative process, thus increasing the uncertainty and potential legal risk.
Suggested steps for manufacturers
Given the popularity of these right-to-repair issues among consumers, as well as the developing contours of the law, suggested 2024 actions by companies (manufacturers and retailers in particular) should include the following.
Survey proposed regulations globally (particularly in the EU). Stay abreast of what manufacturers will be required to provide consumers should additional jurisdictions pass laws as in Massachusetts, where at least two manufacturers have cut off telematics access for cars sold there given that the open data platform mandated under the law does not yet exist for such vehicles. The final wording and scope of the EU’s proposed R2RD is sure to have a dramatic effect on manufacturer’s obligations in Europe.
Ensure that repair restrictions do not violate antitrust laws. Evaluate whether, and the extent to which, product warranties place restrictions on the use of aftermarket parts or non‐authorised service providers.
Reevaluate your product warranty. Consider revising product warranties with an eye towards simplicity, such as clarifying that “taking your product to be serviced by a repair shop that is not affiliated with or an authorised dealer of [Company] will not void this warranty” and/or “using third-party parts will not void this warranty.” Take care, however, to limit the commitment so as not to be responsible for damages and defects that are caused by use of third-party parts or non‐authorised service providers.
Verify that marketing materials are not misleading. Instruct authorised dealers to remove any deceptive display materials, such as point‐of‐sale posters, that misrepresent the terms of the warranty, and train customer-facing representatives on permissible sales messaging.
Prepare for government enforcement or collective redress actions. Expect European authorities to request, as an initial investigative measure, the terms of your product warranties. Similarly, with the assistance of counsel, plainly explain the business justifications supporting any aftermarket restrictions. While it may be the policies promoting the European Green Deal will take such precedence as to leave behind right-to-repair considerations relating to competition for some time period, it remains likely that the EU will eventually supplement right-to-repair initiatives with both greater access to parts and telematics, with collective redress remedies available to police alleged industry failures. When and exactly how this will occur should be closely monitored and followed.
About the authors: Lawrence Scarborough is Partner and Christopher Jefferies and Matthew Lechner are Associates at Faegre Drinker Biddle & Reath LLP