consumer rights
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Apple on the hook for €10M in Italy, accused of misleading users about iPhone water resistance
Apple’s marketing of iPhones as “water resistant” without clarifying the limits of the feature and also having a warranty that excludes cover for damage by liquids has got the company into hot water in Italy.
The Italian competition authority (AGCM) has informed the tech giant of an intent to fine it €10 million for commercial practices related to the marketing and warranty of a number of iPhone models since October 2017, starting with the iPhone 8 through to the iPhone 11, following an investigation into consumer complaints related to its promotion of water resistance and subsequent refusal to cover the cost of repairs caused by water damage.
In a document setting out the AGCM’s decision dated toward the end of October — which was made public today (via Reuters) — the regulator concludes Apple violated the country’s consumer code twice because of what it characterizes as “misleading” and “aggressive” commercial practices.
Its investigation found Apple’s iPhone marketing tricked consumers into believing the devices were impermeable to water, rather than merely water resistant — with the limitations of the feature not given enough prominence in ads. A disclaimer stating that Apple’s warranty excludes damage by liquids was deemed an aggressive attempt to circumvent consumer rights obligations — given its heavy promotion of the devices as water resistant.
Apple places a liquid contact indicator inside iPhones, which changes from white or silver to red on contact with liquid, and checking the indicator is a standard step undertaken by its repair staff.
The AGCM report cites examples of consumers whose iPhone had taken a “short dive” in the sea being refused cover. Another complainant had been washing their device under the tap — which Apple deemed improper use.
A third reported that their one-month-old iPhone XR stopped working after coming into contact with water. Apple told them they must buy a new device — albeit at a subsidized price.
An iPhone XS user, with a one-year-old handset who reported it had never come into contact with water, was refused coverage by Apple support who said it had, complained to the regulator there’s no way for a consumer to prove their device was not immersed in water for more than the length of time and depth to which Apple’s small print specifies it has water resistance.
We’ve reached out to Apple for comment on the AGCM’s findings.
The tech giant has 60 days from the date it was notified of the regulator’s intent to fine to appeal the decision.
The size of the penalty is well under half of the operating profit the regulator says Apple’s Italian operation made in the year September 2018 to September 2019, when it noted it recorded revenues on its sales and services of €58,652,628; and an operating profit of €26,918,658.
Two years ago Italy’s competition watchdog also fined Apple and Samsung around $15 million for forcing updates on consumers that may slow or break their devices. This February, France fined Apple $27 million for capping the OS performance of iPhones with older batteries.
Apple has also faced much larger penalties from competition authorities elsewhere in Europe — including being notified of a $1.2 billion fine by France’s competition authority in March this year, which accused the tech giant of operating a reseller cartel along with two wholesale distribution partners, Ingram Micro and Tech Data.
Apple also had to stump up as much as €500 million in back taxes demanded by French authorities last year.
Some $15 billion from Apple’s European HQ is sitting in an escrow account to cover a 2016 European Commission “State Aid” charge that it illegally benefited from corporate tax arrangements in Ireland between 2003 and 2014.
In July Apple and Ireland won the first round of an appeal against the charge. But the Commission filed an appeal in September — meaning the case will go up to the CJEU, likely adding years more of legal wrangling.
EU lawmakers are continuing to work on pushing for global reform of digital taxation, while some Member States push on with their own digital taxes.
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Apple slapped with $6.6M fine in Australia over bricked devices
Apple has been fined AUS$9M (~$6.6M) by a court in Australia following a legal challenge by a consumer rights group related to the company’s response after iOS updates bricked devices that had been repaired by third parties.
The Australian Competitor and Consumer Commission (ACCC) invested a series of complaints relating to an error (‘error 53’) which disabled some iPhones and iPads after owners downloaded an update to Apple’s iOS operating system.
The ACCC says Apple admitted that, between February 2015 and February 2016 — via the Apple US’ website, Apple Australia’s staff in-store and customer service phone calls — it had informed 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.
Image credit: 70023venus2009 via Flickr under license CC BY-ND 2.0
The court judged Apple’s action to have breached the Australian consumer law.
“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,” said ACCC commissioner Sarah Court in a statement.
“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 ACCC notes that after it notified Apple about its investigation, the company implemented an outreach program to compensate individual consumers whose devices were made inoperable by error 53. It says this outreach program was extended to approximately 5,000 consumers.
It also says Apple Australia offered a court enforceable undertaking to improve staff training, audit information about warranties and Australian Consumer Law on its website, and improve its systems and procedures to ensure future compliance with the law.
The ACCC further notes that a concern addressed by the undertaking is that Apple was allegedly providing refurbished goods as replacements, after supplying a good which suffered a major failure — saying Apple has committed to provide new replacements in those circumstances if the consumer requests one.
“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,” said Court.
The court also held the Apple parent company, Apple US, 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,” added Court.
We’ve reached out to Apple for comment on the court decision and will update this post with any response.
A company spokeswoman told Reuters it had had “very productive conversations with the ACCC about this” but declined to comment further on the court finding.
More recently, Apple found itself in hot water with consumer groups around the world over its use of a power management feature that throttled performance on older iPhones to avoid unexpected battery shutdowns.
The company apologized in December for not being more transparent about the feature, and later said it would add a control allowing consumers to turn it off if they did not want their device’s performance to be impacted.
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