Apple sued over 'error 53' iPhone shutdowns

An Australian regulator is suing Apple Inc. AAPL -0.52% over software which disabled iPhones and iPads that had been serviced outside Apple stores after users downloaded updates.

The Australian Competition and Consumer Commission alleges Apple violated Australia’s consumer law by shutting down or “bricking” the devices, and then telling customers the company wouldn’t fix the problem at no cost because their devices had been previously serviced by third-party providers. The errors appeared from September 2014 to at least February 2016.

Apple last year said “Error 53” was a mistake that was designed to be a factory test and apologized for the inconvenience, posting instructions on its website for consumers to fix the problem. Initially, however, Apple said Error 53 was necessary to protect consumers’ devices if a fraudulent fingerprint sensor was used.

The regulator, which filed the lawsuit in the Federal Court of Australia, is seeking monetary penalties, though it is too early to tell how much Apple could be ordered to pay if it is found liable. Penalties of up to A$1.1 million ($829,000) per breach could be assessed, though it would be up to the court to define how many breaches occurred. 

While some Apple users took comfort that the company was taking steps to protect consumers’ devices in case they were stolen, others saw Error 53 as an attempt to prevent customers from going to third-party providers to have their devices repaired.

Rod Sims, chairman of the ACCC, said the lawsuit seeks to go beyond the Error 53 issue. The suit challenges Apple’s overall policy of requiring customers to pay for repairs to defective components if their device was previously serviced by a third party.

“It’s fair to say we haven’t observed similar behavior by other manufacturers,” Mr. Sims said in an interview, adding that it is often cheaper for customers to seek repairs from third-party shops. “Apple seems to have a particular way of doing things.”

Apple didn’t immediately respond to a request for comment.

The Australian Consumer Law provides that when a customer purchases a product, there is a guarantee the product will be “reasonably fit” for its intended purpose. Error 53 rendered the iPhones and iPads unusable, and customers should be entitled to a remedy from Apple under the law, the ACCC argues.

The guarantee is “not extinguished because a consumer has goods repaired by a third-party repairer,” Mr. Sims said. “We want manufacturers to know that and we want consumers to know that.”

The suit isn’t Apple’s first brush with the Australian regulator. In 2012, the Federal Court ordered Apple to pay A$2.25 million in civil penalties for misleading advertising for its “iPad with WiFi + 4G” promotion. However, the devices couldn't connect to any networks promoted as 4G in Australia, the regulator alleged.

Apple is coming off a strong December quarter, with the new iPhone 7 boosting iPhone shipments by 5%. Total revenue grew 3% to a record $78.4 billion. The result comes after three straight quarters of falling revenue, leading to concerns Apple has been losing momentum to competitors such as Samsung Electronics Co.