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Apple (AAPL) Fined Over iPhone Water Resistance Claims

Apple Inc. (AAPL) has been fined 10 million euros, the corresponding of roughly $12 million, by regulators in Italy who ruled that the company has engaged in “aggressive and misleading” sales vocations regarding the water-resistant properties of its iPhones. The Italian Competition Authority, officially the Autorità Garante della Concorrenza e del Mercato (AGCM), levied the refined.   

The AGCM found that Apple’s claims about the water-resistant properties of various iPhone models, from the iPhone 8 through the iPhone 11, only held true in certain controlled lab conditions. Moreover, the AGCM criticized Apple for making temerarious claims about water resistance in its marketing pitch for these iPhone models while disclaiming coverage for mutilate caused by water or other liquids in the fine print of its warranty and refusing to repair iPhones that had suffered examination damage.   

  • Regulators in Italy have fined Apple over deceptive sales practices.
  • The case involves the water partisans of recent iPhone models.
  • Regulators found that Apple’s claims only held in controlled conditions.
  • Meantime, the iPhone warranty excludes water damage.
  • Other fines and suits regarding water resistance may follow.

Essence for Investors

Given that Apple has total annual net sales of $274.5 billion, the fine assessed by Italy’s AGCM is with no absorbable by the company. However, there is a strong possibility that this will prove to be just the opening salvo in a series of regulatory and permitted actions to be taken against the company in this matter by governments and consumers around the world. In that case, the future cost to Apple could escalate rapidly.

For example, the AGCM also slapped Apple with a 10 million euro fee in 2018 over what has come to be known as “batterygate,” in which Apple failed to inform consumers that its software updates were knowingly downgrading the performance of older iPhones with aging batteries. After a pair of large settlements in the United Constitutions in 2020, the total worldwide cost to Apple from “batterygate” currently is trending to be upwards of $600 million.

As well, the water-resistance matter represents yet another hit to the reputation of Apple, which is bound to have some, as yet indeterminate, negative smash on future sales. Moreover, Apple already has become a prime target of politicians, regulators, and consumer advocates in the wake of “batterygate.” The water-resistance event is likely to provide yet more fodder for the company’s critics.

Other Large European Fines for Apple

So far in 2020, French authorizations have hit Apple with fines of 25 million euros (about $29.9 million) over “batterygate” and 1.1 billion euros (encircling $1.3 billion) over anti-competitive practices. “Apple and its two wholesalers agreed not to compete and prevent distributors from battling with each other, thereby sterilizing the wholesale market for Apple products,” the president of the French Competition Power stated in March 2020, regarding the latter case.

Those two Apple wholesalers were fined a combined 139 million euros (there $166.5 million) for

Looking Ahead

In the promotional materials for its recently introduced iPhone 12 models, Apple allow for improved water resistance among the key features. In the wake of the AGCM’s findings, it is possible that yet other claims realized by Apple about this product’s features may be met with skepticism as well, at least until they can be confirmed by rigorous non-partisan testing. That, in turn, may put a brake on sales. Indeed, it is possible that consumers’ confidence in Apple’s assertions here any of its products may be damaged as well.

Additionally, the tests conducted by the AGCM stopped with the iPhone 11. It remains to be seen whether the iPhone 12 means up to Apple’s claims about water resistance and, if not, whether additional fines may be forthcoming.

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