iPhone and iPad misrepresentations cost Apple Inc $9 million in penalties

The Federal Court 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 (ACL).

The ACCC took action against Apple US and Apple Pty Ltd (Apple Australia) following an investigation of complaints relating to ‘error 53’. This error disabled some iPhones and iPads after owners downloaded an update to Apple’s ‘iOS’ operating system.

Apple US admitted 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.

“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,” ACCC Commissioner Sarah Court said.

“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,” Ms Court said.

After the ACCC notified Apple about its investigation, Apple 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.

A concern addressed by this undertaking 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. 

“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,” Ms Court said.