On 19 June 2018, the Federal Court of Australia ordered Apple Inc (Apple US) to pay penalties of $9 million for making false and misleading representations to customers about their rights under the Australian Consumer Law (ACL). Whilst some misrepresentations were made on the Apple US website, most of the misrepresentations were made by Apple US’s Australian subsidiary, Apple Pty Ltd (Apple Australia).

What are the consumer’s rights under the ACL?

The ACL contains a regime that implies certain warranties into supplies of goods or services which provide consumers with certain statutory remedies where these guarantees are not met. In respect of goods, one of the guarantees is that a good will be of an “acceptable quality” including by being free of faults and capable of doing all the things someone would normally expect them to do.

In the event that it becomes apparent that a good is not of “acceptable quality” within a reasonable time following purchase, and where the consumer notifies the supplier of that fault, the supplier is obliged to provide the remedies set out in the ACL (which include repair, replacement or refund depending on the extent of the fault).

Under the ACL, a person is prohibited from making false or misleading representations about the existence, exclusion or effect of the consumer guarantees and a breach of that prohibition will attract a maximum penalty of $1.1 million for companies or $220,000 for individuals.

Apple’s conduct and the Court’s finding

Between February 2015 and February 2016, at least 275 owners of iPhones or iPads, following complaint of an error which disabled their device, were misinformed by Apple US (on its website) or by Apple Australia (by staff in store or on its customer service phone calls) that they were no longer eligible for a remedy if their device had been repaired by a third party. The Court held that this did not, and could not, result in the consumer guarantees ceasing to apply or extinguish the consumer’s right to a remedy.

What does this mean for you?

If you are a global company that supplies goods and services to Australian consumers you need to comply with Australia’s presumptive consumer laws.

If not, then your parent company, whether it operates in Australian via an Australian subsidiary or not, may become liable for breaches of the ACL especially when your returns policies are not compliant with the ACL.

You should ensure that:

  • express warranties and returns policies (including on the global company’s website) clearly state that those express warranties are in addition to the rights and remedies available to the customer under the ACL;
  • express warranties include the information and wording proscribed by the ACL and the relevant regulations;
  • all staff interacting with Australian customers receive appropriate training in relation to any express warranties and returns policies and are aware of the risks associated with misrepresenting to a customer their rights under the ACL.