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Samsung fined $14 million for misleading water resistance claims

04 July 2022

3 min read

#Technology, Media & Telecommunications

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Samsung fined $14 million for misleading water resistance claims

Samsung Electronics Australia Pty Ltd (Samsung) has admitted to misleading consumers about the water resistance of certain Galaxy phones and been ordered to pay $14 million in penalties, following joint submissions by both Samsung and the Australian Competition & Consumer Commission (ACCC).

What happened?

In 2019, the ACCC commenced Federal Court proceedings against Samsung alleging false, misleading and deceptive representations about the water resistance of 15 Galaxy phone models. The proceedings related to various TV, digital, in-store, billboard and other advertisements by Samsung in the period from March 2016 to October 2018, in which it claimed that certain Galaxy phones were water resistant to 1.5 metres for 30 minutes and showed the phones being exposed to ocean and pool water (the Claims). The advertisements can be viewed here.

The ACCC alleged that Samsung:

  • did not test (or sufficiently test) to determine how exposing the phones to water could affect its usable life
  • knew that using certain Galaxy phones in non-fresh water (i.e. chlorinated or salt) could cause damage
  • denied consumer warranty claims when phones were damaged by use in water.

As such, the ACCC considered that Samsung did not have a reasonable basis on which to make the Claims, and that they were false, misleading and deceptive because the phones were not suitable for use in all types of water and such use would damage them.

Conduct that is liable to mislead people as to the nature, characteristics or suitability for the purpose of any goods is prohibited by Australian Consumer Law. Conduct that breaches this prohibition is also likely to breach other provisions, which prohibit misleading or deceptive conduct and false or misleading representations about goods and services.

What was the decision?

Ultimately, Samsung admitted that it made false or misleading claims about the water resistance of the S7, S7 Edge, A5 (2017), A7 (2017), S8, S8 Plus and Note 8 Samsung Galaxy phones in nine ads over two and half years, knowing that submersion of those phones in pool or salt water could lead to corrosion of the charging port if charged while wet. The ACCC noted that Samsung’s parent company was still working on resolving the corrosion issue at the time the Australian campaign launched.

There were over 3.1 million sales of these phones in Australia.

The penalty

Most of the Claims made by Samsung were made before changes to increase the financial penalties – from $1.1m to the greater of $10 million, three times the value of the benefit or 10 per cent of annual turnover – under the Australian Consumer Law came into effect. This meant that the penalties applicable to the Claims were lower than what they would be for the same conduct if it occurred today. 

Key takeaways

The decision is a reminder of the importance of truth in advertising, and of the Court’s willingness to use fines as a deterrent. The ACCC has made clear that consumer issues relating to deceptive advertising and marketing practices in the digital economy remain an enforcement priority. Advertisers should also be mindful of the self-regulatory standards laid down by the Australian Association of National Advertisers, which also prohibit misleading or deceptive advertising in marketing to children, for food and beverages and in relation to environmental claims.

Aside from the risk of penalties due to enforcement action, misleading advertising claims can seriously impact a brand’s reputation and customer trust, which can take years to rebuild.  Advertisers must be able to be substantiate factual claims, keeping in mind that small print or disclaimers cannot be relied on to correct an overall misleading message.

Before making a claim about a product or service, businesses should ask themselves two questions: Is it true? Can I prove its true?

If you have any questions about your advertising, contact us below or get in touch with our team here.

Authors: Ian Robertson & Georgia Milne

The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

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