Samsung agrees to pay $14 million fine for misleading Galaxy ads

Samsung has agreed to pay a $14 million fine for misleading claims that seven of its Galaxy phones were water resistant when the devices stopped working after being used in swimming pools or ocean water.

Justice Michael Murphy cleared the settlement between the tech company and the Australian Competition and Consumer Commission (ACCC) in the long-running case filed in 2019about advertisements related to seven Galaxy phone models.

The competition watchdog had alleged that Samsung had misled and misled customers with its claims about phones in more than 300 advertisements since February 2016. In court on Thursday, Samsung’s lawyer Nicholas De Young said the full calculation of the advertisements involved at 684 came.

Advertisements online, on TV and on billboards showed that the phones are water resistant and will be used at swimming pools and beaches, despite the phones not being suitable for use in pool water or salt water.

The settlement agreed is for a much smaller set of advertisements. As part of the settlement of the case, Samsung has agreed that nine advertisements for seven devices promoted for two and a half years between 2016 and 2018 were misleading.

The company has admitted that if the devices were used in saltwater or swimming pools, there was “a material prospect of corrosion damage to the phone’s charging port,” ACCC attorney Caryn Van Procter told the court.

During that time, Samsung sold 3 million of the Galaxy phone models included in the deal in Australia.

The problem would arise when people started charging their phone while there was still water in the charging port, despite a warning on the phone advising the user not to charge it. Samsung has since addressed this issue with hardware and software changes in later models of the Galaxy phone, the court heard.

While some information was provided to the court about the number of views the Facebook and Twitter ads were receiving — in the hundreds of thousands of views each — the court heard there was no way of knowing how many consumers were viewing the devices from the back of the ads. , nor how many subsequently malfunctioned with the phone due to use in pool or ocean water and then charging.

Murphy said, by agreeing to the $14 million settlement, many consumers would have used their phones in the manner depicted in the ads, relying on those statements.

He said $14 million would be a deterrent and a “real and sufficient incentive” for 14% of Samsung Australia’s profits over the past six years. He also criticized the phone manufacturer for only recently cooperating to resolve the matter after years of resisting the ACCC’s case.

He criticized the way products are often marketed in Australia, saying the federal court too often sees cases before it where products are oversold to consumers in marketing campaigns.

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Samsung was ordered to pay $14 million plus a $200,000 contribution to the ACCC’s costs within 30 days of the order.

ACCC president Gina Cass-Gottlieb welcomed the ruling.

“Samsung Australia ads promoting its Galaxy phones showed people using their phones in swimming pools and in seawater, despite the fact that this could eventually cause significant damage to the phone,” Cass-Gottlieb said.

“This fine is a strong reminder to companies that all product claims must be substantiated. The ACCC will take enforcement action against companies that mislead consumers with claims about the nature or benefits of their products.”

A Samsung spokesperson said the company had extensively tested the products with both sea and pool water, but was pleased that the case was closed.

“Samsung is committed to providing all of its customers with the best possible experience. Samsung regrets if Galaxy users have experienced an issue with their device as a result of the matters addressed in this case.”

The Samsung devices included in the settlement are the phones Galaxy S7, S7 Edge, A5, A7, S8, S8 Plus and Note8.

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