On March 28 2012 the Australian Competition and Consumer Commission (ACCC) lodged proceedings in the Federal Court of Australia against Apple Inc and its Australian subsidiary Apple Pty Limited in relation to a series of Apple advertisements for its new iPad.

The gist of the ACCC's complaint was that Apple's advertisements for the "iPad with WiFi + 4G" were misleading because they represented to Australian consumers that the new iPad could, with a SIM card, connect to Australia's 4G mobile data network when that was not the case.

Australia's 4G mobile data network is offered by telecommunications company Telstra. Telstra's 4G network operates at a frequency of 1800 megahertz, which is not compatible with Apple's latest iPad. The latest iPad can operate on 4G networks internationally, as they operate on different frequencies.

At an urgent interim hearing, without admitting fault, Apple agreed to an undertaking whereby it would display the following statement in its promotional materials and on its website and online store: "This product supports very fast cellular networks. It is not compatible with current Australian 4G LTE networks and WiMAX Networks." Apple also agreed to contact consumers who had bought the new iPad and offer them a refund.

However, Apple rejected the ACCC's claims and denied that it had said that the iPad could connect to Telstra's network. Apple filed its defence on April 17 2012.

A "speedy trial" on the question of liability was proceeding in early May 2012, but the issue was ultimately settled. The court had to decide on the appropriate penalty. Justice Bromberg found that Apple's admitted contraventions were not trivial and that the penalty imposed required serious and careful consideration. He approved a settlement requiring Apple to pay the Commonwealth a pecuniary penalty in excess of A$2 million and to meet the ACCC's costs in the amount of A$300,000.

The case was closely watched by those in the technology arena. The fact that it was swiftly prosecuted by Australian regulators serves as a reminder to retailers and other advertisers of goods and services in Australia that the claims in their advertising material can and will be subjected to court scrutiny if they have the tendency to mislead Australian consumers. Although the size of the penalty imposed on Apple for its admitted breaches was relatively minor in comparison to Apple's global profits, the damage to its reputation has been significant.

For further information on this topic please contact Tom Griffith at Piper Alderman by telephone (+61 2 9253 9999), fax (+61 2 9253 9900) or email ([email protected]).