The Federal Court has made the ruling after finding that Apple misled customers regarding repair of their iPhones and iPads.
The Australian Consumer Law (ACL)provides that it is an offence to make false or misleading representations about goods and or services.
The court has now ruled Apple US and Apple Pty Ltd (Apple Australia) contravened the law when they made representations to at least 275 customers in Australia that they were no longer eligible for repairs or a refund if their iPhone or iPad had been repaired by a third party. The non-authorised repairers had generally undercut Apple on the price of a screen replacement.
The court action was taken by the primary enforcer of the ACL, the Australian Competition and Consumer Commission (ACCC). It related to the ACCC’s investigation of consumer complaints about the notorious ‘error 53’.
The error disabled some iPhones and iPads after customers updated their Apple iOS operating system. In a practice known as ‘bricking’, the devices were locked after the iOS detected a cracked screen had been repaired by a third party.
Apple claimed the error was the result of a security measure. The later 9.2.1 update to the iOS restored ‘bricked’ devices but it did not re-enable Touch ID and some consumers lost documents and photos they had stored on their devices.
News: iPhone and iPad misrepresentations cost Apple Inc $9 million in penalties https://t.co/OX8ep5I51L
— ACCC (@acccgovau) June 18, 2018
In a press release on 19 June 2018, the ACCC said the company made these representations on its US website, through its in-store staff and during customer service phone calls.
An investigation by the ACCC also saw Apple make representations that it was not obliged to offer repairs or refunds for devices affected by error 53. It made such representations at least 13 times to ACCC officers working undercover.
Sarah Court, Commissioner of the ACCC, added: “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.”
However, the court stated the mere fact a customer had used a third party repairer did not mean the ACL no longer applied or that the consumer’s legal right to a remedy had been somehow extinguished.
Further, the court ruled that Apple US was 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,” Sarah Court added.
Apple fined for misleading customers in Australia https://t.co/ClVnSqw2SP
— BBC News (World) (@BBCWorld) June 19, 2018
After the ACCC informed Apple about the investigation, it put in place an outreach program to compensate individual consumers whose devices were disabled by error 53. So far Apple has contacted around 5,000 customers according to the ACCC.
The tech company has agreed to update its training and internal processes to ensure compliance with the ACL. It will also make more information about warranties and consumer law available on its website.
Another issue was that Apple allegedly provided refurbished goods as replacements in some instances. It has now committed to an undertaking that it provides new replacements where a device has suffered a major failure and the consumer requests a new one.