Apple Fined $9 Million for Engaging in False or Misleading Representations

Friday 22 June 2018 @ 2.44 p.m. | Industrial Law | Legal Research | Trade & Commerce

The Australian Competition and Consumer Commission (the “ACCC”) has announced in a Media Release that the Federal Court of Australia has ordered Apple Inc (Apple US) to pay $9 million in penalties for making false or misleading representations to customers with faulty iPhones and iPads about their rights under the Australian Consumer Law (the “ACL”) (the ACL is contained in Sch 2 to the Competition and Consumer Act 2010 (Cth)).

The ACCC’s case is against Apple's Australian operation as well as its parent company in the US.

Background

In April 2017, the ACCC took action against Apple US and Apple Pty Ltd ("Apple Australia") following an investigation of complaints relating to “Error 53” (see ACCC v Apple Pty Ltd [2017] FCA 416 (27 April 2017)), the outcome of this error was the disabling of some iPhones and iPads after owners downloaded an update to Apple’s iOS operating system.

Apple US made an admission it had represented to at least 275 Australian customers affected by Error 53 that they were no longer eligible for a remedy if their device had been repaired by a third party. These representations were made from February 2015 to February 2016 on Apple US website, by Apple Australia’s staff in-store and on its customer service phone calls.

The Judgment

An article in ARNNET reports that in handing down his judgment, Lee J said:

“…the court declared Apple had engaged in misleading or deceptive conduct, or conduct that was likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law.”

The article also states that, in connection with the supply of iPhone and iPad devices, including all hardware and software used by those devices from time to time, the company made false or misleading representations concerning the existence, exclusion or effect of the consumer guarantees under ACL.

Comment from the ACCC

Commenting in a recent ACCC Media Release, ACCC Commissioner Sarah Court said:

“If a product is faulty, customers are legally entitled to a repair or a replacement under the Australian Consumer Law, and sometimes even a refund. Apple’s representations led customers to believe they’d be denied a remedy for their faulty device because they used a third party repairer. The Court declared the mere fact that an iPhone or iPad had been repaired by someone other than Apple did not, and could not, result in the consumer guarantees ceasing to apply, or the consumer’s right to a remedy being extinguished. The Court’s declarations hold Apple US, a multinational parent company, responsible for the conduct of its Australian subsidiary. Global companies must ensure their returns policies are compliant with the Australian Consumer Law, or they will face ACCC action.”

The ABC reports that the fine imposed on Apple is one of the highest penalties for a breach of consumer laws.

Allegations of Refurbished Devices

A concern is that Apple was allegedly providing refurbished goods as replacements, after supplying a good which suffered a major failure. Apple has committed to provide new replacements in those circumstances if the consumer requests one.

Ms Court continued further:

“If people buy an iPhone or iPad from Apple and it suffers a major failure, they are entitled to a refund. If customers would prefer a replacement, they are entitled to a new device as opposed to refurbished, if one is available.”

An Apple spokesperson responded to the ACCC's claims [about refurbished devices] in an emailed statement:

"We're constantly looking for ways to enhance the service we deliver and we had very productive conversations with the ACCC about this. We will continue to do all we can to deliver excellent service to all of our customers in Australia."

Remedy from Apple

After the ACCC notified Apple about its investigation, the company implemented an “outreach program” to compensate individual consumers whose devices were made inoperable by Error 53. This outreach program was extended to approximately 5,000 consumers.

Apple Australia has also offered a Court Enforceable Undertaking to improve:

  • staff training;
  • audit information about warranties and the ACL on its website; and
  • improve its systems and procedures to ensure future compliance with the ACL.

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