Samsung agrees to pay a $14 million fine for seven misleading advertisements.
The electronics company also has to pay an additional $200,000 contribution to the competition watchdog.
ACCC chair Cass-Gottlieb considers Samsung’s case as a warning to businesses to affirm products’ claims.
South Korean Multinational Electronics Corporation Samsung Fines $14M
Upon being sued for their deceptive advertisement, Samsung has agreed to pay a $14 million penalty. This is after the electronics company asserted that seven of its Galaxy phones are water-resistant when the gadgets could stop working if used in swimming pools and ocean water.
The compensation between the South Korean multinational electronics corporation and the Australian Competition and Consumer Commission (ACCC) was approved by Justice Michael Murphy. Samsung and ACCC’s issue has been a long-running case established in 2019 concerning the ads related to seven Galaxy phone models.
The competition watchdog alleged Samsung misled and deceived customers with its claims about phones across more than 300 advertisements since February 2016. In online, TV, and billboard advertisements, the phones were shown to be water-resistant and used at pools and beaches, even if the electronics are unsuitable for pool water or salt water. On Thursday, Samsung’s legal counselor, Nicholas De Young, said in court that the total calculation of affected promotions was 684.
Samsung has also admitted that if the promoted phone units are used in salt water or pools, there is a material possibility of damage by corrosion to the phones’ charging port, ACCC’s barrister, Caryn Van Procter, told the tribunal.
At that time, the electronics corporation marketed 3 million Galaxy phone models mentioned in Australia’s agreement. The device problems come when people try to charge their phone while it still has water in its charging port, despite a warning on the phone notifying the user against charging it. Since this case came up, the company fixed this through hardware and software changes in later Galaxy phone models.
While some of the provided pieces of evidence to the court regarding the number of views the Facebook and Twitter ads received, the court heard that it is impossible to know how many consumers had retrospectively purchased the device. The ads are also unaware of how many people had a phone malfunction due to later using it in a pool or sea water and then charging the device.
Justice Murphy Criticizes Samsung’s Lousy Cooperation, ACCC Chair Warns Corporations
In consenting to the $14m settlement, Justice Murphy also said that many consumers would have used their gadgets similarly represented in the ads, trusting its representations. According to him, the $14 million is a “real and sufficient sting” to Samsung Australia. The amount of compensation would act as a deterrent to the company’s 14% of profit over the last six years.
The jurist has condemned the electronics company for only cooperating with the matter’s resolution after years of resistance to the ACCC’s case. He also criticized how products marketed in Australia are often seen in the federal court cases brought before it where products are oversold to consumers in marketing campaigns.
Aside from the $14 million payment, Samsung was ordered to contribute an additional $200,000 to the ACCC’s costs within 30 days of the order. ACCC’s chair, Gina Cass-Gottlieb, accepted the ruling and reiterated the issue on Samsung Galaxy phones that drove the case and caused the company’s huge penalty.
Cass-Gottlieb sees Samsung’s penalty may serve as a warning to businesses that all their products’ claims must be substantiated. The competition watchdog will persist in taking enforcement motions against companies that delude customers through misleading assertions about the nature or benefits of their products.
On the other hand, a spokesperson of Samsung expressed that they properly tested their products in sea and pool water but accepted getting the case close.