On the surface it appears like everything we normally would oppose; government Karen-agencies getting their tentacles into the arcane details of commerce and further gumming up the works with regulatory overreach. The headlines of the feds wanting to involve themselves with McDonald's ice cream machines inspire eye-rolling. Are there not far greater issues in need of attention after all?! Then when you roll in the president’s affinity for frozen treats this takes on all appearance of the government busying itself with garbage trivialities.
But there is more at play. Many are familiar with the experience of visiting a McDonald’s only to be told its menu of ice cream-related items is off the board due to the machines being down. At given times as much as one-quarter of these frozen dispensers, or more, in restaurants across the country may be down. It is prevalent enough to become a punchline. This confectionary restriction is so widespread a website has been created that tracks where and when these machines are offline. But is this something in need of government intervention?
There is an old joke regarding repair work in the business world:
When a machine goes down a technician comes out to assess the situation. He gets a hammer and hits the machine one time, gets things operational, and then charges $500. When the business owner asks to justify this fee he is then given an itemized bill – Service of hitting machine with hammer - $50 / Knowing where to hit machine with hammer - $450. The McDonald’s ice cream quandary is this black humor playing out in real life.
We first need to understand that most McDonald’s restaurants are franchises with private ownership responsible for operational costs on site. As part of the franchisee agreement the stores need to adhere to certain corporate mandates, and one of these is the requirement to use uniform ice cream machines provided by the Taylor Corporation. This is where the problems for McFlurry fans derive. While most of the base functionality of these Taylor machines is easy, the maintenance and setup each day is involved.
The startup of the machines each day is a lengthy process. After a system cleaning and flush, once the mixture is added it first needs to be heated properly in order to kill any bacteria, then needs to be frozen to a servable temperature. This can take four hours on average, and if there is any part of the process that is not done correctly it leads to a shutdown. The common fix is to begin the process anew - another 4-hour run - and if the same problem arises it is another shutdown.
If there is any kind of deviation in this process the machines will stop and the front display panel will show codes explaining the issue. These are arcane hieroglyphics for the most part, and the franchisees are rarely privy to the translation of the displayed prompts. Password access and coded error messages necessitate a technician to rectify the issue. Those repair visits from Taylor techs - when they can manage to come out - run $350 per 15 minutes, a serious expense for a small business owner.
Taylor does not divulge these machine prompts for owners, and it keeps a tight lock on its operation manuals. Common sense would dictate that the McDonald’s corporation, facing the perpetual customer blowback and bad PR on this issue would work with Taylor to rectify things. Or, another possible solution, McDonald's could have its own repair force to come out in expeditious fashion and get things operational for its franchisees.
This is not possible as Taylor, under the guise of copyright law, has exclusivity on these details with its machines, as well as the parts and licensed services. If any outside repair work or maintenance takes place the warranty on machines is voided. This shielded intellectual property generates a flush money stream for Taylor. With its annual revenue 25% of that figure is from maintenance and repair.
The Taylor machines are a significant strain on the business. There is the cost for repairs/maintenance, the loss of sales on products, salary expense of employees wrestling with problems, with the cost of these issues passed on to consumers. One company - Kytch - has provided the restauranteurs with an affordable solution that translates the machine directives so owners can troubleshoot on their own. Taylor (as expected) as well as McDonald’s fought this effort and currently Kytch has brought Taylor to court with a $900 million suit.
Taylor rests on the Digital Millennium Copyright Act as a means of blocking these circumvention efforts, and this is where the government has been called in. The FTC and DOJ have been looking to move the US Copyright Office to have these ice cream machines exempted from the DMCA umbrella. In the joint letter from these agencies they address the problems, and the fix.
Section 1201 of the DMCA prohibits the “circumvention” of TPMs [that is “Technical Protection Measures”] and imposes civil and criminal penalties for bypassing these digital locks.9 It is possible to violate Section 1201 without infringing a copyright. Although TPMs can serve the important function of protecting copyrighted works from theft and infringing uses, TPMs can also be used to prevent noninfringing “DIY” or third-party repair. For example, TPMs can be used to restrict access to computer maintenance hardware and software programs, thus creating an environment where maintenance and repair work can be performed legally only by original equipment manufacturers (“OEMs”). Ultimately, by limiting access to data and software functionality necessary for independent repair and maintenance, TPMs can be used to squash competition for replacement parts, repair, and maintenance, thus ultimately limiting consumer choice.
Considering the size of the McDonald’s corporation and the amount of revenue Taylor generates by this exclusivity, what we are looking at here is clearly a racket. The two companies are colluding to keep Taylor in a position to exert expenditures on the restaurant owners, with those owners restricted from taking action in their own best interest, and those of the customers. As frivolous as this action may appear on the surface, it ultimately makes sense.
That kind of pragmatism is in severe short supply with the government, so we should take a moment and applaud them for getting something correct.
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