Apple Reaches $113M Settlement for Batterygate Lawsuit

Reuters reported that Apple reached a $113 million settlement in a lawsuit, headed by Arizona Attorney General Mark Brnovich, with 33 states and the District of Columbia. The states alleged that the tech company hid battery issues by slowing the iPhone's performance through software updates on its older phones, which eventually caused consumers to purchase newer, more expensive models. AG Brnovich asserted that rather than allowing iPhone users to replace their batteries or disclosing “unexpected shutdowns” or “unexpected power-offs (UPOs)", Apple misrepresented and concealed information "about iPhone battery health and performance and about its iOS software updates that throttled back the performance of iPhone devices." Thus, Apple engaged in "unfair and deceptive acts and practices, which violated the Arizona Consumer Fraud Act (CFA) and Arizona Revised Statutes."

The case is separate from Apple's $500 million settlement for a proposed class-action lawsuit, Bilic, et al., v. Apple, Inc., filed on Jan. 19, 2018, in the U.S. District Court for the Northern District of California alleging the same issue.

In several press releases in 2014 and 2016 for iPhones 6/6 Plus and iPhones 7/7 Plus, respectively, Apple advertised the mobile device batteries as “the Best Battery Life Ever in an iPhone,” "more power and performance with the best battery life ever in an iPhone,” and "the most powerful chip ever in a smartphone.” However, iPhone consumers began experiencing and "complaining about unexpected shutdowns." The lawsuit claimed that "These shutdowns were tied to issues with the iPhone batteries, which would sometimes show available power dropping dramatically from 50% to 30% or lower. Apple confirmed that these UPOs were indeed battery-related, like the prior iPhone 5 UPOs. However, Apple limited the amount of battery information available to its consumers, which prevented consumers from being able to ascertain the true reason they were experiencing UPOs."

A consumer watchdog organization affiliated with the Chinese government raised concerns about the iPhone's battery drain issue to Apple. While millions of users across the world experienced the same problem, Apple’s statement of December 1, 2016, was published only on the company’s Chinese support page:

"After hearing reports from iPhone customers whose devices unexpectedly shut down, we thoroughly looked into these reports and collected and analyzed devices. We found that a small number of iPhone 6s devices made in September and October 2015 contained a battery component that was exposed to controlled ambient air longer than it should have been before being assembled into battery packs. As a result, these batteries degrade faster than a normal battery and cause unexpected shutdowns to occur. It’s important to note, this is not a safety issue." 

Apple iPhone 6 opened to expose battery.

A few days later, Apple added to its Chinese support page that it "launched a worldwide program to replace affected batteries, free of charge." Yet, Apple never verified that a battery replacement would resolve the UPO issue. The lawsuit stated that "To the contrary, Apple actively worked to prevent consumers from replacing their iPhone batteries (even at full, out-of-warranty cost) unless the batteries failed Apple’s own diagnostic test. To make matters worse, Apple’s diagnostic test did not account for the problem that Apple knew was causing the UPOs. Thus, Apple was providing misleading information to consumers about the state of their batteries and, based on that misleading information, discouraging and preventing battery replacements." 

The plaintiffs argued that rather than disclose the UPO or battery issues, Apple ultimately developed a scheme to conceal problems quietly through an iOS software update that "limited the phones’ hardware performance (e.g., throttle) so that the phones could not demand the power levels that were exceeding the abilities of problem batteries, which were, in turn, causing the UPOs." Initially, the updates were applied to the iPhone 6 generation but eventually "were delivered to Apple’s 'entire install base' and were not phone specific."

Finally, in late-December 2017 after several consumers discovered throttled iPhones, Apple vaguely admitted to reducing the system's performance via iOS updates and attempted to respond to users' concerns by:

1. reducing the price for out-of-warranty replacement batteries for these phones from $79 to $29; 
2. promising to issue a new iOS update “with new features that give users more visibility into the health of their iPhone’s battery, so they can see for themselves if its condition is affecting performance”
3. vaguely ensuring that it was “working on ways to make the user experience even better . . . .”

By the end of March 2018, it allowed users to turn off the throttling mechanism on their devices. During this period, however, Apple experienced a peak in new phone sales. AG Brnovich said that "many consumers decided that the only way to get improved performance was to purchase a newer-model iPhone from Apple." Thus, "Apple’s unfair and deceptive acts and practices described above artificially increased Apple’s iPhone sales, potentially by millions of devices per year."

Reuters stated that "The settlement includes $5 million to Arizona, $24.6 million to Apple’s home state of California and $7.6 million to Texas. The latter two states have the nation’s Nos. 1 and 2 affected iPhone user bases. Brnovich said the penalty in his state would help fund more investigations into tech and other companies."

In an interview, Brnovich said, "My colleagues and I are trying to get the attention of these big tech companies, and you would hope a multimillion-dollar judgment with more than 30 states will get their attention...Companies cannot be disingenuous and conceal things.”