Australian consumer regulator sues Samsung alleging misleading advertising

VIDEO: REUTERS
The Australian Competition and Consumer Commission said that since around February 2016 Samsung advertisements depicted the phones as suitable for use in oceans and pools.
The Australian Competition and Consumer Commission said that since around February 2016 Samsung advertisements depicted the phones as suitable for use in oceans and pools.PHOTO: AFP

SYDNEY (REUTERS) - Australia's competition regulator said on Thursday (July 4) that it is suing the local unit of South Korea's Samsung Electronics, alleging it misled consumers by promoting its Galaxy smartphones as water resistant.

The suit, which if successful could result in multi-million-dollar fines, centres on more than 300 advertisements in which Samsung showed its Galaxy phones being used underwater in swimming pools and the sea.

The Australian Competition and Consumer Commission (ACCC) said the world's largest producer of smartphones had not conducted sufficient testing to know the actual effects of fresh water or saltwater exposure on its phones.

"The ACCC alleges Samsung's advertisements falsely and misleadingly represented that Galaxy phones would be suitable for use in, or for exposure to, all types of water... when this was not the case," ACCC chairman Rod Sims said in a statement.

Samsung on its website said it stands by its advertising, complies with Australian law and will defend the case.

The suit is another blow for the electronics giant which suffered reputational damage in 2016 when its Galaxy Note 7 smartphones suffered a costly recall after being found to be fire-prone.

The firm, also the world's biggest maker of memory chips, is due to announce preliminary quarterly earnings on Friday. It is widely expected to post a profit plunge due to chip price falls.

The ACCC said consumers damaged their phones when exposing them to water and that Samsung had refused to honour warranty claims, which the company denied.

The ACCC also said Samsung's advice to some Galaxy model users that the phones were not suitable for beach or pool use suggested the firm considered water could cause damage.

"Samsung showed the Galaxy phones used in situations they shouldn't be to attract customers," Mr Sims said. "Samsung's advertisements, we believe, denied consumers an informed choice and gave Samsung an unfair competitive advantage."

The ACCC alleges law breaches occurred in more than 300 advertisements. If proven, each breach after Sept 1, 2018, can attract a fine of up to A$10 million (S$9.5 million), triple the benefit of the conduct or as much as 10 per cent of annual turnover.

Breaches prior to Sept 1, 2018, can attract penalties as high as A$1.1 million.