‘Loose change’: Judge suggests Apple could recoup $9m penalty in minutes

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‘Loose change’: Judge suggests Apple could recoup $9m penalty in minutes

By David Estcourt

A $9 million penalty imposed on Apple for deceiving Australian customers is “loose change” and unlikely to deter future misconduct, a Federal Court judge says.

The court this week found the tech giant misled at least 275 customers by telling them it was not obliged to fix a software fault if a third party had worked on their device.

Justice Michael Lee, who handed down the judgment in the Federal Court this week, asked counsel for the ACCC, which brought the action against Apple, how many minutes it would take the “behemoth” to generate the $9 million.

The settlement, despite being “very significant” under Australian Consumer Law “does not impose a sting or burden” that would deter Apple's conduct, which was found misleading or deceptive, or likely to mislead or deceive.

Credit: James Alcock

The case represents a prime example that even penalties imposed in line with the upper limits provided under Australian Consumer Law (ACL) can pale in comparison to revenues of the multinational corporations facing misconduct allegations.

“Where the penalty does not impose a sting or burden on a contravener, it is less likely to achieve the deterrent effect that is the raison d’être of its imposition,” Judge Lee said.

Judge Lee called it a "paradigm example", saying "it is difficult to escape the conclusion that a penalty of $9 million to a corporation such as Apple Inc might be regarded as loose change.”

For the year ended September 30, 2017, Apple reported annual net sales of more than $308 billion, a net income of more than $64.6 billion and total assets of more than $504.9 billion.

Judge Lee said Apple engaged in misleading or deceptive conduct, or conduct likely to mislead or deceive in contravention of the ACL by telling customers whose iPhone or iPads had the 'error 53’ software fault that they were not eligible for a free repair if their device had been serviced by a third party.

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ACCC chairman Rod Sims gave a speech last week saying it was a combination of poor behaviour largely going "unpunished", the importance placed on short-term profits and that meeting customer needs may not be the main way companies succeed that can lead to this kind of misconduct.

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“It is often said that companies succeed by looking after the needs of their customers. I have been surprised over very many years, however, at the way in which many businesses often do precisely the opposite,” he said.

“They appear to put immediate profit ahead of their customers either by engaging in misleading or unfair conduct, or even unconscionable conduct towards their customers.”

An Apple Australia spokesperson told Fairfax Media it had productive conversations with the ACCC about the decision and will ‘‘work hard to offer our customers the best possible service”.

Legislation currently being considered by the Senate could more closely tie penalties to the revenues of corporations facing misconduct allegations instead of maximums under the ACL.

A report reviewing the ACL was released in April 2017 that found the current maximum penalties available for breach of the ACL are insufficient to deter non-compliant conduct that is highly profitable, and that some entities see the penalties merely as a cost of doing business.

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