Aussie watchdog gets green light to serve “error 53” legal action on Apple’s home turf

ACCC set to serve Apple in the US with legal action over its alleged misleading or deceptive conduct in Australia

The Australian competition watchdog has been given the all clear by the Federal Court of Australia to serve legal action over the local fallout of Apple’s “error 53” incident against the company in its home country.

On 21 April, Australian Federal Court Justice Moshinsky ruled that the Australian Competition and Consumer Commission (ACCC) should be able to serve court documents on Apple US in the United States over allegations the company engaged in misleading or deceptive conduct in Australia.

The move comes just weeks after the ACCC revealed it had commenced legal proceedings against the California-based tech giant and its local subsidiary, with the industry watchdog seeking pecuniary penalties, injunctions, declarations, compliance program orders, corrective notices, and costs against Apple.

Proceeding were subsequently brought against Apple Pty Ltd, the company’s Australian corporate entity, as well as Apple Inc (Apple US), its US-based parent company.

However, while the ACCC has served the originating application and its statement on Apple Australia locally, according to Federal Court documents, Apple US has not provided an address for service in Australia, even though court documents have been provided to a senior lawyer at Apple US.

Consequently, the ACCC sought leave to serve the court documents out of its jurisdiction in Australia, on Apple US in its home country.

In a decision dated 21 April, Moshinsky ruled that it is appropriate to give the ACCC leave to serve the court documents on Apple Inc in the US, out of jurisdiction.

“It is proposed to serve the court documents in the USA,” Moshinsky stated. “The proposed method of service is to use a private service agent retained through a firm of lawyers based in San Francisco.

According to Moshinksy, the ACCC has a “prima facie” case for the relief claimed against Apple US in the proceeding.

“There are two aspects to the case brought by the ACCC against Apple US,” Moshinsky said. “The first aspect concerns an alleged false or misleading representation by Apple US on the Apple website.

“The second aspect of the ACCC’s case against Apple US is as follows. It is alleged that Apple US is liable for certain conduct of Apple Australia on the basis that Apple Australia engaged in the relevant conduct both on its own behalf and on behalf of Apple US.

“In my view, it is appropriate in the circumstances to make such an order…the allegations against the respondents are closely intertwined. It is desirable that the claims against both respondents proceed together in the one proceeding,” he said.

The substance of the ACCC’s claims against Apple Australia and Apple US revolve around claims the companies made in relation to a fault, known as “error 53”, experienced by some iPhone and iPad users from September 2014 to at least February 2016, which rendered their devices inoperable.

The error 53 software fault occurred when those iPhone or iPad users attempted to update the iOS software on their device by connecting their device to Apple iTunes through a personal computer, according to the ACCC’s application.

“Apple US represented that iOS8 and iOS9 would improve the functionality and performance of iPhones and iPads,” the ACCC’s concise statement supporting its application said.

“When the iPhone or iPad users downloaded, and attempted to install, iOS8 or iOS9 on their device by connecting it to Apple iTunes through a personal computer, an error message appeared on Apple iTunes stating that the device could not be restored, and the device had stopped functioning.

“This occurrence was commonly referred to as ‘bricking’,” it said.

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According to the ACCC, the error 53 software fault occurred where, as part of the iOS software installation process, a change was detected in the connection between the “Touch ID” and other components of the device.

Many of the Australian consumers who experienced the error 53 software fault sought after-sales support from Apple Australia, through its retail stores or via its telephone support service, and requested a remedy for their bricked iPhones and iPads, the ACCC said.

The Commission alleges that, between February 2015 and February 2016, Apple Australia represented to certain consumers that, if a component of their iPhone or iPad had previously been repaired, serviced or replaced by someone other than Apple Australia or a service provider authorised by Apple Australia or Apple US, no Apple entity was required to, nor would, provide a remedy for the error 53 software fault at no cost.

The crux of the ACCC’s allegations is that the representations by Apple Australia, under the guidance of Apple US, in this matter were misleading or deceptive.

The ACCC does concede, however, that in February 2016, Apple US released an iOS software update which, if downloaded and installed by consumers whose iPhones and iPads had been bricked as a result of the error 53 software fault, restored the functionality of the device.

However, in addition to the consumers who experienced the error 53 software fault, some consumers with iPhones experienced faults relating to a component of their iPhone, which led Apple US to initiate recall programs for the affected iPhones, conducted in Australia through Apple Australia, according to the ACCC.

Regardless, the ACCC alleges that Apple Australia and Apple US engaged in conduct that was “misleading or deceptive (or likely to mislead or deceive) in contravention of s 18 of the Australian Consumer Law”.

The ACCC also alleges that, in connection with the supply of goods or services, Apple made false or misleading representations as to the existence, exclusion or effect of guarantees, rights and remedies.

Likewise, the ACCC alleges that the error 53 software fault representations and the error 53 software fault website representation were “misleading or deceptive, likely to mislead or deceive and/or false”.

The reason for this, according to the ACCC, is because Apple’s iOS8 and iOS9 software updates supplied to Australians were subject to consumer guarantees which required that they be of “acceptable quality and be reasonably fit for the purposes for which Apple US represented they were reasonably fit”.

However, the ACCC alleges that the iOS8 and iOS9 software updates, when downloaded to a consumer’s iPhone or iPad, in some circumstances, caused those devices to cease functioning.

As such, the ACCC claims that the consumers whose devices ceased functioning because of the error 53 software fault were entitled to a remedy from Apple US, under Australian Consumer Law.

The case continues.