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Apple nets $9m penalty over "Error 53"

19 June 2018

Apple has been ordered to pay AU$9 million in penalties over its involvement in the "Error 53" saga.

"Error 53" affected iOS devices (iPads and iPhones) which had replacement screens installed by third party (non-Apple) technicians. The error occurred after users attempted to update or restore the iOS software, rendering the devices inoperable.

At the time Apple allegedly refused to honour warranty claims for affected devices.

The Proceedings

The ACCC commenced proceedings in the Federal Court of Australia in 2017. The ACCC argued that Apple's refusal to honour warranty was in breach of the Australian Consumer Law (ACL) and that its statements denying warranty coverage were misleading and deceptive.

Under the ACL, consumers have the right to seek a refund or replacement where a product is faulty. Further, the ACL requires products must be of reasonable quality and durability.

These statutory rights cannot be watered down or avoided by product retailers or manufacturers.

The Court declared that representations Apple made about access to warranty repairs were misleading. In an enforceable undertaking, Apple agreed to improve staff training and undertake compliance audits of warranty statements.

Responding to the decision, 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 consumerโ€™s right to a remedy being extinguished.

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.

How the decision affects product suppliers and manufacturers

The key messages from the proceedings for product suppliers and manufacturers are as follows:

  1. ACL consumer guarantees cannot be excluded or watered down.
  2. Under the law consumers have the right to a repair or replacement where there is a major failure.
  3. Use of a third party (or 'unauthorised' provider) to repair a product does not automatically void a consumer's ACL rights.
  4. Suppliers and manufacturers should carefully review their warranty statements to ensure that those statements comply with the ACL and are not misleading or deceptive.

Xuveo Legal can assist in assessing product warranties for compliance with the Australian Consumer Law. Please contact us for more information.

Further Information

ACCC Press Release (19 June 2018)
Federal Court Orders [PDF] (18 June 2018)

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