The Italian Antitrust Authority fines Apple 10 million EUR

With decision of last October 27 (the Italian version is available here), the Italian Competition Authority (AGCM) issued an administrative fine of 10 million euros (the maximum amount possible) against Apple for breach of the Italian Consumer Code, and more specifically for misleading and aggressive commercial practices.

The contested commercial practices were the following:

1. A) Apple’s promotional messages highlighting iPhones’ water resistance at certain depths and for a certain period of time (variable in relation to the different models), sometimes accompanied by a disclaimer which specified that damage caused by liquids and the costs of related technical assistance were however not covered by the warranty;

2. B) Apple’s refusal to provide consumers with a warranty service for damage caused by liquids.

As for practice A), the AGCM had argued that Apple’s advertising messages accompanied by the indication of the maximum depth and duration of immersion misleadingly enhanced the characteristic of water resistance, because such a characteristic did not actually refer to the daily and ongoing use of the devices and misleadingly led the consumer to believe that the products could not only be in contact with water, but could also withstand immersions.

According to Apple, however, the abovementioned promotional messages in no way suggested that the products could withstand prolonged or intentional immersions in situations such as swimming or scuba diving, or that they were waterproof. On the contrary, the specification of the degree of water resistance was to be understood as mere technical data concerning the outcome of the laboratory tests in which these capacities had been measured.

Nonetheless, the AGCM concluded that Apple’s dissemination of advertising images depicting the devices immersed or hit by powerful jets of water, as well as the almost complete lack of specifications that the level of water resistance referred to the use of smartphones in the same conditions in which the test had been carried out, led consumers to perceive the device as waterproof and, therefore, constituted a misleading advertising message.

Moreover, according to the Authority, the exclusion of the damage to the products caused by liquids from the warranty also constituted a misleading practice: on the one hand, in fact, it was unable to narrow the scope and limits of the widely emphasised characteristic of water resistance; on the other hand, it misguided consumers on the possibility of exercising their right of replacement or refund pursuant to article 130 of the Consumer Code. More specifically, such deceptiveness stemmed from the fact that it was not clarified that the limitation of the warranty was exclusively referred to the conventional warranty (see below), such specification was not always displayed in advertising communications and, where displayed, it was not easily readable/accessible.

As for practice B, Apple’s refusal to provide a warranty service for damage caused by liquids, according to the Authority, constituted an aggressive commercial practice. In fact, when a professional boasts some specific product characteristics (e.g. water resistance, immersion, duration) he is required to guarantee the compliance of the product to the claimed characteristics and to provide assistance to consumers who claim defects and/or damage resulting from the use of the product in accordance with a specific advertising message. According to the AGCM, therefore, Apple’s refusal to provide such a warranty led consumers to bear the repair/replacement costs and unduly influenced their behaviour, preventing the exercise of their rights relating to the warranty on the purchased products.

In this regard, Apple argued that the exclusion of the warranty referred to the “additional” warranty of a commercial (or “conventional”) nature governed by article 133 of the Consumer Code, which did not concern the consumer’s inalienable rights and therefore allowed the professional to exclude from it, as in the present case, certain categories of damage, without prejudice to the so-called legal warranty pursuant to article 128 et seq. of the Consumer Code. According to the AGCM, however, this distinction between conventional and legal warranty – not even specified to the consumer – had no relevance in this case: the documents acquired during the proceedings, in fact, clearly proved that Apple had refused to provide customers with assistance in the event of damage to the products deriving from liquids and, therefore, with the legal (and inalienable) warranty under Article 128 et seq. of the Consumer Code.

Therefore, having acquired the opinion of the Italian Communications Authority – which considered that the dissemination also through the internet of the misleading and aggressive claims had significantly influenced the scope of the disputed commercial practices – the AGCM ascertained:

1. a misleading commercial practice under articles 20, 21(1)(b) and (g) of the Consumer Code, with reference to the water resistance claims and the contextual exclusion of the warranty in the event of damage resulting from liquids;

2. an aggressive commercial practice under articles 24 and 25 of the Consumer Code, with reference to the refusal to provide assistance and warranty rights in the event of malfunctions and damage caused by liquids.

At the end of the proceedings, the AGCM thus issued a pecuniary administrative fine for the maximum amount allowed for each infringement, for a total amount of 10 million EUR, and ordered Apple to cease the contested misleading and aggressive commercial practices. The exemplary fine was quantified by taking into account the multiple infringements, the duration and severity of the same, and the fact that Apple is an international leader in the field of medium-high-end smartphones, which boasts a strong loyalty of customers to its products.