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ICA concludes the first case ever of planned obsolescence misconduct against Apple and Samsung

  • Italy
  • Competition, EU and Trade

06-11-2018

By two separate decisions published on 24 October 2018, the Italian Competition Authority (ICA) has ascertained that Apple and Samsung had put in place unfair commercial practices in violation of Articles 20, 21, 22 and 24 of Italian Consumer Code (Legislative Decree no. 206/2005), in relation to their release of firmware updates for their mobile phones which caused serious malfunctions and significantly reduced their performance, this resulting in expediting their faster replacement with new devices.

According to the ICA, Apple and Samsung would have led customers – by insistently proposing to proceed with the download and benefiting of the significant information asymmetry of consumers– to install software updates not adequately supported by their devices, without adequately informing them in advance, nor providing them an effective way to recover the full functionality of their devices.

With regard to Apple, the ICA found that, as of September 2016, it had induced the owners of iPhone 6 devices (6/6Plus e 6s/6sPlus respectively marketed in autumn 2014 and 2015), to install the new operating system iOS 10 specifically arranged for the new iPhone 7, without providing information on the higher energy demand of the new operating system and on the possible malfunctions – such as sudden shutdowns – that the installation of such update could have caused. Apple, in order to limit such malfunctions, in February 2017, released a new update (iOS 10.2.1), without alerting that the installation of this update could have reduced the speed and the functioning of the relevant devices. Furthermore, according to the ICA, Apple did not provide maintenance services for the out-of-warranty iPhone devices that had suffered malfunctions due to the update; only starting from December 2017, Apple has given the possibility to replace the batteries at a discounted price.

In relation to Samsung’s conducts commenced in May 2016, the ICA ascertained that it had insistently suggested the consumers buying a Note 4 mobile phone (placed on the market in September 2014) to install the new Android firmware update so called Marshmallow - arranged for the new model Note 7 - without providing information to consumers on the serious malfunctions caused by the increased stress of the hardware and consequently asking high repair costs for out-of-warranty repairs connected to such malfunctions.

According to the ICA’s findings, Apple and Samsung carried out unfair commercial practices in so far as they insistently induced the consumers to install firmware updates, failing to inform them on the impact of such updates on the devices and without providing restoring tools, such as the downgrading or the replacing of the battery at reasonable costs, in order to resolve the relevant decrease of the performances of the device. In particular, the ICA found that:

(i) they failed to inform the consumers on the effective characteristics of the updates, on their negative impact on the functioning of the devices and the batteries, consisting of sudden shutdowns, slowdowns and wear of the batteries. The omission of that information would have been serious in so far as it concerned an innovative update, having considered the existing informative asymmetry of consumers with respect of manufactures. Such informative omission prevented consumers from making informed choice concerning the installation of such updates and it constituted an undue influence upon the customers;

(ii) in addition, they insistently recommended consumers to download and install the updates. In fact, the customers were not free to decide whether or not to install the updates, as they had only the possibility to immediately install the update or to install it later.

(iii) the modalities through which Apple and Samsung had urged customers to install the updates constituted an aggressive commercial practice, in so far as customers were led to assume a commercial decision that they would not have taken otherwise.

The ICA found that if an update is capable to worse the performances of the device, the manufacturer consistently with due professional diligence standards has the burden to identify the devices abstractly compatible with a certain firmware update and to evaluate the impact of the updates released on the devices already in use, taking into account the possible status of the hardware on which such update could be installed.

Limitedly to Apple, the ICA ascertained a second conduct in violation of Art. 22 of the Consumer Code. In particular, until December 2017, Apple had not provided the customers with appropriate information on the essential characteristics of the batteries, such as their cycle life as well as the information on the correct procedures to maintain, verify and replace the batteries in order to preserve the full functioning of the devices.

The ICA imposed to both the manufacturers fines corresponding to the maximum statutory amount established under the applied provisions of the Italian Consumers Code: Apple received a fine of € 10 million (€ 5 million for each of the two separate unlawful practices as ascertained by the ICA) and Samsung has been fined for € 5 million.

These ICA’s decisions are landmark findings in terms of a first ever qualification made by a competition authority of the so-called planned obsolescence of technological devices as a misconduct of manufactures in violation of consumers’ rights.

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