Consumer goods’ manufacturers have certainly been doing it tough recently. In 2018, Apple was found to have misled customers as to their rights when they experienced a certain error message. Apple refused to refund customers if those customers had phones repaired by a third party and paid a $9m penalty as a result. Earlier this year, TomTom, Navman and Garmin agreed to stop using “lifetime repair” claims in the advertising of their navigation systems after the ACCC raised concerns these statements were misleading and deceptive. Now, the ACCC has commenced proceedings in the Federal Court against Samsung over its advertising of certain models of its Galaxy phones.
The ACCC has taken exception to Samsung marketing certain Galaxy phones and allegedly representing that those phones can be used in a variety of circumstances, with no detriment to longevity and performance. The ACCC relies on Samsung’s entire e advertising campaign for these phones, dating back to 2016 and involving over 300 ads. For example, one ad showed a phone being used under water in a swimming pool. Another showed a man lying on a floating inflatable with the phone on his stomach captioned “GalaxyA is water resistant so you can just relaaax”. The ACCC contends the advertising campaign implied that submerging a Galaxy phone under 1.5 metres of water for 30 minutes or less would not negatively impact the device over its lifetime.
Consumers, who found their phones damaged after water exposure, have stated that Samsung has rejected their warranty claims. Whether this is ultimately borne out by the evidence remains to be seen. The ACCC has also pointed out that Samsung's own website claims the Galaxy S10, its early-2019 flagship phone, is "not advised for beach or pool use”.
In response, Samsung has announced that it is intending to dispute the claim given that the phones are rated to IP68. The IP Code is an internationally recognised code and gives consumers a shorthand way to understand the resistance of their devices to damage from various types of “ingress”.
Samsung is additionally contending that it has fully complied with its obligations under the consumer law to replace or repair water damaged phones.
There are a number of matters the Federal Court will need to determine in this case:
- There is an evidentiary question of the elements Samsung’s phones are capable of withstanding. If the phones are found unsuitable for reasonable use at the beach or the pool due to the impact of the salt and/or chlorine, then Samsung may have no choice but to argue that the ordinary and reasonable consumer would not have believed from the advertising campaign that they could use the phones in such a way that they would regularly end up submerged. In other words, that the situations were just regular marketing exaggeration or “puffery” and not meant to be taken seriously.
- There is also the question of whether Samsung misled consumers about their rights in the event that their phone was damaged by the exposure. Samsung should have refunded, repaired or replaced any damaged phones (and compensated the consumer for any other loss or damage) by any exposure to water, salt or chlorine without any cost to the affected consumer. Whether it did so, is a question of fact.
This action proves that, despite several notable losses in the Federal Court recently, the ACCC is still on the offensive. It provides us all with yet another timely reminder of the following key recommendations when considering advertising execution:
- Consider your advertising generally Remember, merely relying on the product specifications is not enough. If you are creating a marketing program, the product must be reasonably capable of the usage depicted without impacting the overall performance of the product for its lifetime. You will need to consider the target audience and how an ordinary, reasonable customer in your target market would interpret your marketing. Although Samsung’s Galaxy phone was rated to an internationally recognised standard, its marketing promised additional benefits. Samsung’s marketing implied that the Galaxy wasn’t merely resistant to ingress or damage by water but by depicting it in a variety of situations, it promised that it was resistant to damage from chlorine, sand and salt. If your product similarly is depicted in real life situations that may differ in some way from the product specifications, you need to be very sure that the product is tolerant of them.
- Price premiums Ensure that if you are charging a price premium over other products within your range for a particular advertised feature, there is a benefit to the consumer for that product received. In Samsung’s case, the premium product also came with a premium price tag over its lower cost phones. Further, with the water resistance being a key selling point for customers, be aware that if your feature does not ultimately fulfil its promise, the customer may be able to argue that they would not have purchased your product had they known that the feature was not present.
- Refund, replace, redeliver In the event that claims are made in your marketing material that ultimately turn out to be false, fix the claims through corrective advertising if necessary, and for previously affected unhappy customers, refund or replace the item. An action by the ACCC saps time, energy and money from an otherwise healthy business and is often far more expensive than directly addressing the consumer concern.
Whatever the result, the progress of this action is definitely an interesting one to watch for manufacturers and advertisers. No one wants to end up in the sea of grief that accompanies legal action by the ACCC.