Aussie court slaps Apple with $A9m in penalties

Case echoes a recent warning from New Zealand's Commerce Commission.
ACCC commissioner and NZ Commerce Commission associate commissioner Sarah Court says "Global companies must ensure their returns policies are compliant with the Australian Consumer Law."

An Australian Federal Court ordered Apple to pay $A9 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).

Apple has also agreed to replace faulty products in Australia with brand new goods, which will put Aussies on a better footing than New Zealand consumers, who still allegedly get failed iPhones and iPads replaced with second-hand models.

The case has similar themes to those of a warning recently issued to Apple by New Zealand's Commerce Commission, which alleges the US company has misrepresented consumers' rights under our equivalent legislation, the Consumer Guarantees Act (CGA). The ComCom has no immediate plans to prosecute. The ComCom says Apple made false claims about warranty lengths and alleges it presented second-hand hardware as new.

Across the Tasman, the Australian Competition and Consumer Commission (ACCC) took action against Apple 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, the ACCC says. 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,” says ACCC commissioner Sarah Court, who also sits on NZ's Commerce Commission under a cross-appointment arrangement.

“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," Ms Court says. 

“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.

In Australia, faulty products will be replaced with new
After the ACCC notified Apple about its investigation, Apple implemented a programme to compensate around 5000 consumers whose devices were made inoperable by error 53. 

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.

Another 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, the ACCC says. 

In NZ, still under dispute
Here, Consumer head of research Jessica Wilson recently told NBR that in her organisation's view, it is not good enough for Apple to replace faulty goods with "re-manufactured" or "refurbished" goods, both of which she sees as weasel words for "second hand." Consumer's interpretation of the CGA is that products that fail in an unreasonable amount of time should be replaced with new goods.

Apple had no comment when approached, except to confirm it had received a letter from the commission. 

Consumer is agitating for tougher fines against companies who break consumer law. If action was taken against Apple here, it would face a maximum fine of $600,000.

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