That someone in a mall kiosk is more skilled and authorized to fix a phone than an entire Apple store full of Apple geniuses?
Edit: Apple Authorized Service Providers (AASP) have mall kiosks, for those doubting authorization.
Telling customers that the phone cannot be repaired is deceptive though when it actually can be repaired. That's where I would expect regulators to step in.
The honest answer would have been: "We are not competent to repair your phone. Maybe someone else can repair it."
They may or may not be competent to repair the phone, but Apple probably doesn't permit them to. So it might be more accurate to say that they aren't allowed to repair the phone, but what they _can_ do is sell you a new one.
AASPs are prohibited from doing component level repair, they are only allowed to sent the phone to apple for anything more than major component (screen battery camera) swap.
The story would look exactly the same, motherboard problem = $560.
Several repairs on iPhones and other Apple hardware are exactly that: not authorized by Apple, unless done by Apple itself.