Apple to pay up to US$500 million to settle slow iPhones lawsuit

Apple Inc. has agreed to pay up to US$500 million to settle litigation accusing it of quietly slowing down older iPhones as it launched new models, to induce owners to buy replacement phones or batteries, Reuters reports.

The preliminary proposed class-action settlement requires approval by US District Judge Edward Davila in San Jose, California.

It calls for Apple to pay consumers US$25 per iPhone, which may be adjusted up or down depending on how many iPhones are eligible, with a minimum total payout of US$310 million.

Apple denied wrongdoing and settled the nationwide case to avoid the burdens and costs of litigation, court papers show.

The settlement, disclosed on Friday night, covers US owners of the iPhone 6, 6 Plus, 6s, 6s Plus, 7, 7Plus or SE that ran the iOS 10.2.1 or later operating system. It also covers US owners of the iPhone 7 and 7 Plus that ran iOS 11.2 or later before Dec. 21, 2017.

Consumers contended that their phones’ performance suffered after they installed Apple software updates. They said this misled them into believing their phones were near the end of their lifecycles, requiring replacements or new batteries.

Apple attributed the problems mainly to temperature changes, high usage and other issues, and said its engineers worked quickly and successfully to address them. Analysts sometimes refer to the slowing of iPhones as “throttling”.

Lawyers for the consumers described the settlement as “fair, reasonable, and adequate”.

They called payments of US$25 per iPhone “considerable by any degree”, saying their damages expert considered US$46 per iPhone the maximum possible.

The lawyers plan to seek up to US$93 million, equal to 30 percent of US$310 million, in legal fees, plus up to US$1.5 million for expenses.

Following an initial outcry over slow iPhones, Apple apologized and lowered the price for replacement batteries to US$29 from US$79.

The case is In re Apple Inc Device Performance Litigation, US District Court, Northern District of California, No. 18-md-02827.

Stock surge

The company's shares surged 6.9 percent on Monday, helped by a broad Wall Street rebound and an upgraded rating from an analyst who said the iPhone maker’s stock had become oversold following last week’s rout related to fears about the new coronavirus.

Oppenheimer upgraded its rating on Apple to “outperform” from “perform”, saying the Cupertino, California-based company was more prepared than its competitors to absorb the impact of the global health crisis. Apple’s stock tumbled over 16 percent from its record high on Feb. 12 through Friday.

Monday’s bounce put Apple’s stock on track for its largest one-day gain since December 2018. The company relies heavily on China, where the coronavirus has hit production at its factories and kept consumers away from retail shops.

“Our limited checks indicate Apple will prove more resilient than others as firms worldwide navigate changing supply chains and customer demand uncertainty,” Oppenheimer analyst Andrew Uerkwitz wrote in a client note.

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