The fact that the US allows companies to flat out steal your device during a repair process is insane.
The US doesn't allow it. Google won't keep your phone; they'll just refuse to service it. They had that line in their TOS for their own protection for weird scenarios, but they're not going to keep your phone. Why would they? It's broken and full of parts they can't use; they're not going to just let it occupy space in their warehouse, they'll send it back.
This whole thing is an absurd overreaction to a poorly-written line in a TOS that has never even been enforced.