The Federal Court of Australia has ordered Apple Inc (US) to pay $9 million in penalties to the Australian Government for making false or misleading representations to the Australian public relating to the “Error 53” software fault that left some iPhones and iPads disabled.
The Australian Competition and Consumer Commission (ACCC) took action against Apple in April last year, alleging that Apple made “false, misleading, or deceptive representations” about consumers’ rights under the Australian Consumer Law.
The ACCC’s Federal Court case against Apple's Australian operation as well as its parent company in the United States came after an investigation following reports relating to an error, dubbed ‘Error 53’, which disabled some users’ iPads or iPhones after downloading an update to Apple’s ‘iOS’ operating system.
Many Australian customers who experienced ‘Error 53’ had previously had their Apple device repaired by a third party; usually replacing a cracked screen, the ACCC said at the time.
In its case against Apple, the ACCC alleged the iPhone maker had represented to consumers with faulty products that they were not entitled to a free remedy if their Apple device had previously been repaired by third party.
Ultimately, the ACCC alleged that Apple engaged in misleading or deceptive conduct and made false or misleading statements to consumers about the availability of remedies for non-compliance with the consumer guarantees under Australian Consumer Law.
While the ACCC launched its legal proceedings against the California-based tech giant and its local subsidiary, with the industry watchdog seeking pecuniary penalties, injunctions, declarations, compliance program orders, corrective notices, and costs against Apple, the case ultimately went to mediation.
Now, a ruling handed down by the Federal Court of Australia’s Justice Lee on 18 June has ordered Apple to pay the Australian Government $9 million due to its contraventions of the Australian Consumer Law.
Apple was also ordered to pay the applicant – the ACCC – costs of and incidental to the proceeding or, failing an agreement on the quantum of those costs, an amount to be determined by the court on a lump sum basis.
The ruling by Justice Lee 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.
It also said 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 Australian Consumer Law.
According to the ACCC, 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, the ACCC 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," ACCC Commissioner Sarah Court said
“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,” Court said.
As a result of the legal challenge, Apple Australia has also offered a court-enforceable undertaking to improve staff training, audit information about warranties and the Australian Consumer Law on its website, and improve its systems and procedures to ensure future compliance with the law.
“Apple has been operating in Australia for over 35 years and we work hard to offer our customers the best possible service," Apple said in a 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," it said.