Consumers Are Suing Apple for Slowing Down Their iPhones. Did Apple Break the Law?

By Omri Ben-Shahar

Posted on January 3, 2018


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Apple Land is in turmoil. Apple admitted that its recent software updates deliberately slowed down the performance of old iPhones. The reason, Apple says, was to prevent “unexpected shutdowns” that old phones with weaker batteries might otherwise occasionally suffer. When the news broke, Apple quickly apologized for the slowdown and offered its customers discounted replacement batteries. But consumers are not appeased, and within hours class actions have been filed against Apple.

 
Image: iPhone

It appears that this slowdown practice might not be a one-time glitch, but a longstanding “planned obsolescence” tactic allegedly employed by Apple to prompt consumers to replace their devices earlier than otherwise necessary, to coincide with the launch of (and increase the demand for) new iPhone models. People rush to replace the slowed-down phones, not realizing that they only need to replace the battery, or, better yet, choose not to install the software update. These options were obscured (until now), resulting in surges of unnecessary purchases.

 

There are many problematic angles with this tactic, and in posting an apology Apple recognizes that its customers rightly feel duped. But is it illegal to accelerate the obsolescence of the phones? Has Apple violated any law, or breached its contract with consumers?

 

The language of the contract to which consumers click “I Agree” when installing the iPhone’s updated software is vague, but it seems to (unsurprisingly) grant Apple wide authority to incorporate any functionality feature. The contract—17 pages of sobering legal language—announces that Apple “does not warrant against interference with your enjoyment of the iOS software […or] that the operation will be uninterrupted or error-free.” The contract further warns that “installation of this iOS software may affect the availability and usability” of apps and services.

 

But fine print disclaimers can shield Apple from liability for unfair acts only so much. Contract law prohibits deception and concealment. The law requires merchants to act in good faith in performance of their contracts with consumers, and does not allow them to escape these obligations by tossing a bunch of boilerplate at consumers.

 

There are legal precedents holding merchants liable for knowingly inducing consumers to buy things they don’t need. Well known to many lawyers is an old case against Arthur Murray dance studio, who sold to unsuspecting clients endless unnecessary and unusable dance lessons. In one particularly egregious case, the Florida branch of the studio sold to an aging widow 2300 hours of future dance lessons, which she could not realistically utilize—all under the seductive insinuations that such prepaid commitments would elevate her to unending artistic success. The Florida court condemned such “suppression of truth” and the denial of “free exercise of rational judgment” and held that the studio can be found liable for bad faith and fraud. This is not a one off decision; courts all over the country require that merchants alert their contracting parties when they notice that these parties are making crucial mistakes.

 

Undeniably, companies sell in the market things that people don’t really need all the time, and are not breaking the law. This is the definition of a modern affluent society. But it is one thing to knowingly sell products of no practical use like “smart” water bottles (reminding you to be thirsty) or Bluetooth toasters (“to toast smarter”)—consumers can figure out in advance what they are getting and exercise restraint. It is an entirely different matter to make representations that turn out to be misleading, by merchants with superior information, pretending to provide their trusting customers reliable advice on how to get the most from their products.

 

Consumer protection law is all about the prevention of such deception by merchants. Each state has laws that prohibit unfair and deceptive acts, including the concealment of material facts, and especially representations on which consumers are known to rely. If Apple deliberately concealed the fact that the upgrades would slow down the phone, it could easily be found liable under these laws, notwithstanding its attempts to disclaim the liability in the contract.

 

Apple’s apology, surely vetted by its lawyers, attempts to put a good faith spin on the slowdown feature. It was intended to add, not subtract, features—explains Apple. The virtuous goal was to prevent abrupt shutdowns of the device and improve its function, not to slow it down and end its effective life. Perhaps true, but Apple is saying this because it knows that its actual intent could matter. Apple knows that some state laws require plaintiffs to prove that Apple had the intention to induce consumers to get rid of their slow phones prematurely.

 

The tech blogs are skeptical about Apple’s explanation that it was motivated by its unending devotion to its customers’ satisfaction. Surely, some observers suspect, Apple tested the software to know that it would slow down older phones. Is it too presumptuous to suggest that the world’s most valuable company had business models predicting how such slowdowns would affect demand for its new line of phones?

 

Ultimately, Apple’s sin is the denial of consumer choice. People understand that, in principle, iOS software upgrades could change fundamental features of the phones. But if a significant degradation is likely to occur, they want to be given the choice before installing it. Already, with every iOS upgrade, consumers are besieged with legal disclosures about esoteric stuff that does not affect their utility from the device. So why did Apple withhold the one disclosure that truly matters to consumers? Why did Apple not disclose that “this upgrade might eliminate unexpected shutdowns but will significantly slow down your device. Are you sure you want to go ahead with it?” The failure to issue such critical warning could stain Apple’s credibility with its loyal users, and may also be very costly, legally.

 

 

The preceding is republished on TAP with permission by its author, Omri Ben-Shahar, law and economics professor and Kearney Director of the Coase-Sandor Institute for Law and Economics at the University of Chicago Law School. “Consumers Are Suing Apple for Slowing Down Their iPhones. Did Apple Break the Law?” was originally published December 29, 2017 in Forbes.

 


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