Apple and Samsung fined for planned obsolescence
Business Management

Apple and Samsung fined for planned obsolescence

Archrivals Apple and Samsung are now united on at least one point: both have implemented unfair business practices, violating the Italian Consumer Code. That's  the conclusion reached by the AGCM, the Italian Competition and Market Authority, following investigations launched in January this year and conducted in collaboration with the Special Antitrust Unit of the Guardia di Finanza, Italy's financial law enforcement agency.

The objective of the investigation was to verify whether the software updates released by the two companies for their smartphones caused a significant reduction in performance, accelerating the process of replacing the devices, as reported by the consumer associations Altroconsumo and Codes Onlus.

Following the investigation, the AGCM accepted that the companies "induced consumers -- through the insistent request to download and also because of the existing information asymmetry with respect to the producers -- to install updates on devices not able to support them, without providing adequate information, or any means of restoring the original functionality of the products."

The commercial practices that are cited violate Articles 20, 21, 22 and 24 of the Consumer Code, explains the AGCM in a press release, and are being punished with a fine of €5 million for Samsung and €10 million for Apple. From an economic point of view, the fines are negligible: In 2017, Samsung had a turnover of more than 220 billion dollars, while Apple is the first company in history to have reached a market valuation of one trillion dollars. This is the first time they are believed to have formulated a "planned obsolescence" program to push users to purchase new devices.

The accusation against Samsung

The inquiry on Samsung focused on the Android 6.0 "Marshmallow" update, released for the Galaxy Note 7 smartphone. According to the assessments made by the AGCM, as of May 2016 Samsung had insistently suggested the Marshmallow update to users of Note 4, released back in September 2014. The company's fault was in not informing the owners of the Note 4 "of serious malfunctions due to the greater stresses of the hardware and requiring, for repairs out of warranty related to such malfunctions, a high repair cost."

For this, the South Korean company was fined €5 million (US$5.7 million). The AGCM has published the complete text of the charges against Samsung.

The accusation against Apple

The investigation of Apple focused on the iOS 10 operating system, released in conjunction with the iPhone7 launch. According to the AGCM, since September 2016 the Cupertino, California company has insistently promoted iOS 10 to owners of different models of the iPhone 6, "without informing them of the major energy demands of the new operating system and the possible inconveniences -- such as sudden shutdowns -- that such installation could have caused."

The subsequent update released by Apple to solve these problems (iOS 10.2.1) has actually caused other problems, such as a reduction in the speed of response and the functionality of the devices, which users have not been warned about. The company has also been charged with a second infringement of the Consumer Code, which revolves around batteries. According to the AGCM, in fact, until December 2017 Apple "did not provide consumers with adequate information about some of the essential characteristics of lithium batteries, such as their average life and deterioration, as well as about the correct procedures for maintaining, verifying and replacing batteries to preserve the full functionality of the devices."

Apple was hit with a fine of €5 million for each of the infringements found, for a total of €10 million. The AGCM has published the full text of the charges against Apple.

Obligation to inform Italian consumers

In addition to fines, the AGCM has told Apple and Samsung to notify their users of the results of the inquiry by publishing "on the Italian page of their website a notice informing the public of the Authority's decision," complete with a link to the decision itself.

Sara Brunelli writes for Computerworld Italia. 

IDG Insider

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