North Dakota farm sues John Deere in federal class action suit
A Forest River, North Dakota, farm says the ag equipment giant monopolizes the service market.
MOLINE, Ill. — A North Dakota farm filed a federal antitrust class-action lawsuit on Jan. 12, 2022, alleging John Deere has made excess profits by preventing farmers and independent shops from getting access to diagnostic software for repairs.
Forest River Farms in Forest River, North Dakota, about 30 miles northwest of Grand Forks, owned by Robert Blair, has asked for a jury trial. The plaintiffs seek the company to “disgorge” excessive charges and damages for unfair repair charges from John Deere dealers beginning on Jan. 12, 2018, to the present. The plaintiffs say only John Deere knows many class members exist but suggests “thousands.”
No John Deere lawyers are listed in court documents. A message left with Jennifer Hartmann, director of strategic public relations and enterprise social media, was not immediately returned.
Forest River Farms Inc., was established April 22, 2004. The company’s agent name is Blair, according to the North Dakota Secretary of State’s office. A son, Luke J. Blair, is associated with the farm. Separately, in 2016 Luke established Blair Farm & Seed in nearby Gilby, North Dakota.
Agweek was unable to reach the farm by phone. Kenneth A. Wexler in Chicago is heading the farm’s legal team, advised Agweek not to “directly” contact the farm. Wexler promised to refer questions to colleagues but did not immediately do so. Among the questions are whether there will be other named plaintiffs, or if the class has been approved. The judges have not yet certified the class.
According to documents in the case the lawsuit is assigned to Judge Martha M. Pacold in the U.S. District Court for the District of Northern Illinois, and designated as magistrate judge Judge Maria Valdez. The suit alleges Deere & Co. (John Deere), based in Moline, Illinois, has monopolized the repair service market for John Deere brand agricultural equipment with onboard central computers known as engine control units, or ECUs.
The plaintiffs said that of 1,544 Dealerships affiliated with Deere, 91% are owned by a "Big Dealer," defined as a dealer that "owns five or more individual locations,” the suit said. Out of the top ten dealers listed in the suit, two are based in North Dakota — RDO Equipment, with 32 locations in nine states and Brandt Holdings, with 32 locations in five states.
Significantly, the suit is against not only Deere itself, but also the company’s wholly-owned subsidiaries and dealerships “and/or conspirators” including “independently-owned (John Deere) dealerships.”
Corner on repairs
The 52-page complaint alleges John Deere has monopolized repairs for John Deere equipment with “onboard central computers known as engine control units,” or ECUs, by making “crucial software and repair tools inaccessible to farmers and independent repair shops.” Elsewhere in the suit, they described this as a “boycott” of the information.
The plaintiffs allege the company’s “highly-consolidated independent dealerships” are not permitted “through their agreements with Deere” to provide farmers and repair shops with access to the same software and repair tools. John Deere has “cornered” the “multi-billion dollar” repair market for their machines and has “derived supracompetitive profits from the sale of repair and maintenance services.”
John Deere is the No. 1 manufacturer of ag equipment but also sells construction equipment. The other large manufacturers are CNH Inc. and AGCO The plaintiffs allege Deere’s repair business is “three to six times more profitable than its sales of original equipment.” From 2013 to 2019, Deere’s parts sales went up 22% while total ag equipment sales declined 19%.
In 2000, Deere’s net income was about $500 million. Projected net income in 2021 was $5.7 billion — 11 times its income in 2000, and twice its net income of $2.75 billion in 2020.
The plaintiffs allege Deere requires proprietary software and repair tools to complete many repairs. For example, a tractor owner can replace the transmission but the tractor won’t operate unless Deere software “approves the newly-installed part.
“This allows dealers to charge and collect “supracompetitive prices for its services every time a piece of equipment requires the software to diagnose or complete a repair.”
Plaintiffs allege that a trade group “representing Deere” in 2018 made a “highly-publicized promise ” to make software tools available by January 2021, but that “investigative journalists” could not verify that ever happened.
Iron ‘tying’ deals
Customers have purchased “extremely expensive tractors,” and the company locks them into “paying for expensive and inconvenient” repairs through dealers, with a “tying arrangement,” where service is tied to the initial purchase, the lawsuit says.
The plaintiffs ask that the Deere Repair Services Market be “enjoined and dismantled.” John Deere machines run “firmware” that has become as vital to basic functioning as a “steering wheel or an engine.” The ECU monitors sensors. (The S7760 combine has 126 sensors) Error messages put the machines into “limp mode” which prevent full operation until the “error code is cleared.”
In about 2000, Deere tractors started using Controller Area Network bus (“CAN bus”) systems. Dealer technicians can use laptop computers to plug into the system using a “Service ADVISOR” computer program. This requires mechanics and farmers to call the dealership to send a technician to “repair, or clear fault codes,” which can lead to lost time and crop losses.
The plaintiffs say that as of 2021, Deere’s repair services are $150 to $180 per hour for travel and parts. When a farmer calls a dealer for repair, the farmer “is at the mercy of the dealer’s schedule” and must pay pay “whatever the cost is — including travel expenses — even if the problem could be fixed in 15 minutes with the access to the software.”
The plaintiffs assert John Deere is forcing dealer consolidations. In the court case, they quoted a 2009 story in Agweek , where Roy Dufault, whose family had owned a dealership since 1969 at Fosston, Minnesota, was quoted as saying Deere had told him to “get out of the way” to allow large dealers to grow. Customers then worried about dealer access and in 2021 there is “not a Deere Dealership within 20 miles of Fosston, and none within 100 miles that are not owned by a Big Dealer.”
In the past decade, the industry-wide number of agricultural equipment stores owned by big dealers increased by 59%, and that 91% of John Deere’s “independent” dealerships are owned by big dealers. “Deere dictates who the purchaser can be, funneling dealership sales to preferred big dealers” and will “terminate its affiliation with the dealership altogether if the dealership refuses to sell to the specified buyers,” the lawsuit says.
In the lawsuit, the plaintiffs quote an unnamed farmer from an unnamed location who complained: "I can go to a JD dealer 20 miles away. Or one 40 miles away in another direction. Or 80 miles away in a different direction. But they all have the same name. All owned by the same franchise. So, I get 10 to 15 choices all of which are exactly the same.”
The plaintiffs listed a number of alleged “right-to-repair” turning points:
- 2015: Deere argued it can prevent tractor purchasers from “bypassing Technical Protection Measures” to perform “repair, or aftermarket personalization, modification or other improvement” because the owners didn’t “actually own the software.” The U.S. Copyright Office disagreed.
- 2016: Deere issued an end-user “License Agreement for John Deere Embedded Software,” forbidding customers from “accessing, reverse-engineering or modifying the software running on its tractors.”
- 2018: Equipment Dealers Association (EDA) a trade and lobbying group for Deere and other manufactures that “often acts as Deere’s mouthpiece” promised to stave off “right to repair legislation” around the country by making repair tools, software and diagnostics available to the public by Jan. 1, 2021.
- 2018: “Vice Motherboard” , a magazine, reported the new EDA commitment “contained several carve-outs that allow tractor manufacturers to continue using software locks that could prevent repair.” A spokesman for the Association of Equipment Manufacturers in Milwaukee, "another manufacturers' lobbying and trade group that often represents Deere,” told Vice that repair and diagnostic information is available through “the vast majority” of “authorized dealers” for manufacturers, but then didn’t respond when asked for a ”single instance” where that is the case.
- 2021: Natalie Higgins, former vice president of government relations, and currently as manager for state public affairs for John Deere, in an Ag Equipment Intelligence magazine article on March 30, 2021, blamed a “lack of communication” for the availability of resources. The EDA has sponsored a webinar about “reasons the EDA opposes Right to Repair.”
Deere added a web page for “Customer Service ADVISOR.” One dealer described it as a way customers could access “much of the same” information used by dealership technicians. The plaintiffs allege this is a “pared-down” system with costs that “start at $8,500 for the first year alone."
The plaintiffs say the Federal Trade Commission in May 2021 reported to Congress that ag equipment manufacturers had “scant evidence” to rationalize repair restrictions, based on “security risks.” They said manufacturers provided “no empirical evidence” that providing tools to independent repair shops caused “reputational harm” or liability. They note the automotive industry has been providing similar information to vehicle owners and independent repair shops for eight years.
John Deere allegedly asserted that providing the software and repair tools would “allow farmers to bypass emissions and safety controls,” but the FTC said there is a “clear difference between resetting an error code and ignoring or overriding safety codes.”
The FTC said that “in order to override emission controls on a tractor, the entire operating system on the machine would have to be erased and then replaced with new, modified software that either does not have emissions and safety controls or allows a farmer to ignore them.” This would be illegal and separate from the issue of access to software and not what is being lawyers wrote.
While John Deere has claimed repair software is becoming more available, the plaintiffs said there are “plenty of examples” where that isn’t true.
In 2020, they quote a so-far unnamed independent shop in Nebraska that reported “about half” of the repairs he sees are “code faults triggered by emission-control systems." The faults “render vehicles inoperable.” The shop can replace “exhaust filters and particulate traps” that trigger the code, but the dealerships withhold software to restart the tractor, forcing the shop to haul the tractor to a Deere shop or pay for a house call.
“One farmer reported that he purchased a new tractor for $300,000 and spent nearly $8,000 into clearing fault codes over the course of a few years,” the plaintiffs said. This cuts into “already thin profit margins.”