By Rohan Vasudevan, Solicitor |
7 July 2022
One of the world’s largest and most popular smartphone manufacturers is drowning in fines, as Samsung Electronics (Samsung) has been ordered to pay penalties of $14 million for making misleading claims as to the water-resistance capabilities of a series of their popular mobile phones.
The recent case in the Federal Court brought by the Australian Competition and Consumer Commission (the ACCC) against Samsung shines a light on the importance of ensuring brands make claims which are accurate, truthful and not misleading. This matter is also a reminder of the harsh penalties that can be faced by brands if their claims breach the Australian Consumer Law (ACL).
With the rise in popularity of smart phones, many of us cannot leave a room without our devices. Whether you are in bed, at work or even at the beach, we want the world’s knowledge at our fingertips. A nightmare scenario for many users is dropping their device into water and having to scramble to soak their phone in rice in the hopes that their phone survived the dive. It is no surprise, then, that a high-value sales claim for many buyers is a device’s water-resistance capabilities.
Between 2016 and 2018, in their advertising and marketing Samsung claimed that specific models of Galaxy phones (including the S7, S7 Edge, A5, A7, S8, S8 Plus and the Note 8) were fine to use even when completely submerged in up to 1.5m of water for as long as 30 minutes. While some of the company’s advertisements outlined that the phone would survive if ever dropped in the kitchen sink or even the toilet, Samsung went one step further and featured numerous advertising claims outlining that their Galaxy devices were water-resistant even when used in a swimming pool and at the beach.
No Day at the Beach
Over a period of approximately two years, Samsung published numerous advertisements across social media (such as Facebook, Twitter and Instagram), billboards, on its website and in-store which all contained misleading claims that Galaxy phones were appropriate to use in salt water and pool water. The advertisements ranged from social media posts to entire articles, stating that Galaxy phones had “full waterproof protection” meaning that the phones were capable of never leaving your side, even when you went for a dip in the pool. In fact, the company published advertisements that actively encouraged customers to use their phones when swimming in water. One post featured a person in the ocean on a surfboard with the caption “when I get a phone call but I’m at the beach …can’t get over how seamlessly my phone fits into my lifestyle these days loving the size and versatility of my #GalaxyNote8”.
An article entitled “I Jumped Into The Pool With My Phone”, which was posted to Samsung’s website, outlined a story about a customer who touted that their Galaxy phone could be used to take photos underwater. The article stated that “this body armour for your Galaxy says ‘bring it on’ to the shower, beach, snow, dirt and, yep, even the pool”. Similarly, Samsung posted an image of their newly released Galaxy S8 phone with the caption “There’s an underwater selfie in your future. The new Galaxy S8 is on sale now”.
Into Deep Water
In their advertising, Samsung outlined that previously phones relied on rubber seals to protect a device’s ports and internals but their new design meant that the Galaxy phones now contained a built-in water-resistant coating that stopped its devices being damaged. As such, it was not relevant that parts of the phone, such as the phone’s ports, were exposed to water because the water-resistant coating meant that water did not affect the phone’s functionality.
On top of this, Samsung had Australian surfer Sally Fitzgibbons as a brand ambassador. The surfing icon outlined in an ad that “the new smartphone Galaxy S7 is water resistant – making it a great beach companion” and the surfer also said “Samsung’s technology has helped me feel at home on the sand or in the surf”.
More than 3.1 million Galaxy phones were sold across Australia in the period between 2016 and 2018. It is no surprise that customers were shocked when they tried to use their brand-new water-resistant phone only to have the phone stop working a short time later.
This is especially so given the prominence of the water-resistant messaging used to sell Galaxy phones. The ACCC received a tidal wave of reports, from angry customers, with numerous claims that the Galaxy phones had problems after being exposed to water and even stopped working completely.
Eventually Samsung did admit that when their Galaxy phones were used in chlorinated water (i.e. pool water) or salt water, the charging port of the phones would corrode and the phones would essentially stop working. Samsung’s parent company, Samsung Electronics Co., Ltd., tried to mitigate the effect of the charging port corrosion issue, and Galaxy phones did have warnings on screen telling users not to charge the phone when wet. However, numerous campaigns continued to prominently feature customers using the phone in pools and at the beach, with images of the phone being used even after being soaked. In other words, the messaging used in the advertising was inconsistent with the actual recommended usage of the products.
The number of complaints about the phones rose and, accordingly, the ACCC initiated proceedings against Samsung in the Federal Court in 2019.
Although Samsung did outline that the phones were extensively tested in both sea water and pool water, the in-market results did not match what was claimed in advertising. The Federal Court outlined that many customers bought a Galaxy phone after seeing an advertisement and relied on the representations made meaning the expectation was that the functionality of the phones would not diminish after being used underwater, and in various different types of water.
How did it resolve?
The Federal Court ordered Samsung to pay $14 million in penalties for their misleading conduct. The large fine is a clear warning to other brands that claims, especially very strong claims such as Samsung’s, must be entirely accurate and made with strong substantiation and, perhaps most importantly, without significant caveats that affect their impact. Simply, brands cannot publish claims that are misleading or over exaggerate a product’s performance, capacities or features.
If you would like further information on advertising regulations, including clearance advice and in-market claims, please contact one of our experts.