The Product Ecosystem and Planned Obsolescence: Apple’s Threats to Consumer Rights

/ Consumer Protection, Consumer Technology / By

Aphrodite Stamboulos*1

I. Introduction

Over the last few years, the top technology companies of Silicon Valley have been dominating headlines as the government has conducted more hearings and investigations into their business practices, particularly those that have allowed them to dominate consumers and the market.2 Despite all of these investigations and hearings, two business practices have yet to be questioned: the formation of product ecosystems and planned obsolescence. The former refers to a group “of several devices that ‘talk’ to each other”3 while the latter is “the phenomenon of deliberately shortening the durability of products.”4 Additionally, there has not been an investigation into the relationship of these concepts with consumer rights. Part II of this Note will briefly define consumer rights. Part III will analyze Apple’s use of product ecosystems and planned obsolescence concerning consumer rights. The legal ramifications Apple has faced for its use of planned obsolescence will be explained in Part IV. Ultimately, this Note argues that Apple’s ecosystems and planned obsolescence violate the consumer rights to choose and the right to be informed.

II. Consumer Rights and Protections

Although there are a wide array of laws, statutes, and other legal protections for consumers, most relevant to this Note is Congress’s amendment to the Federal Trade Commission Act in 1938 that made “[u]nfair methods of competition in commerce, and unfair or deceptive acts or practices in commerce… unlawful.”5 Importantly, this amendment mentioned that this is for “the interest of the public,”6 indicating that Congress had consumers in mind when crafting this amendment. These concepts were expanded upon by President John F. Kennedy in a 1962 address to Congress in which he laid out four consumer rights: “the right to safety, the right to be informed, the right to choose and the right to be heard.”7 Pertinent to this Note are the consumer rights to be informed and to choose.8 The former requires that consumers are given “all the facts they need to make informed choices” and “protected against fraudulent, deceitful, or misleading information, advertising, labeling, or other practices.”9 The latter requires that consumers have the ability to pick between “a variety of products and services at competitive prices.”10

III. Apple’s Use of Product Ecosystem and Planned Obsolescence Tactics

To better explain the concept of a product ecosystem, this Note looks at Apple’s ecosystem. Apple offers a host of products, from the iPhone to the iMac to the Apple Watch, that each share information with the others.11 Consumers benefit from access to information on one product that was first input on a different product. This can also be to the detriment of consumers because information can only be transferred between products in the ecosystem.12 This tactic makes it difficult for consumers to switch technology brands and for competitors to enter the market.13 Product ecosystems thus call into question a consumer’s right to choose by restricting access to competing goods.14

Apple began to lay the groundwork for its business model with the release of the third-generation iPod in 2003.15 This technology made Apple the first to link its hardware, the iPod, and software, the iTunes Music Store, to allow people to legally download music.16 Many consumers, who were attracted by this value, purchased the iPod. However, “Apple restricted how content was downloaded [onto the iPod]… and made this music only playable on” Apple products.17 As a result, Apple was able to trap their consumers into their “multi-channel platform by imposing high switching costs.”18 Apple has maintained this practice over the years to keep an iron grip on its consumers and, consequently, limit its consumers’ right to choose.

Apple’s business relies on selling its products to a consumer and so, “value is monetized by a one-time payment.”19 However, like all businesses, “Apple has an interest in steady sales.”20 This is where the tactic of planned obsolescence comes in. Using the iPod as an example again, Apple could build its product knowing that it would need “expensive battery replacement”21 (which it has admitted to doing to iPhones)22 or create “incompatibility of new and old products,”23 which it has also done.24 This element of its business, sustained by its product ecosystem, further puts consumers in a difficult position. They can either lose the time and money they have put into their current Apple device when it becomes run down by buying from a different company or pay whatever price Apple sets for the new device.

IV. Jurisprudence on Apple’s Planned Obsolescence

Apple’s use of planned obsolescence was uncovered in the multistate class-action suit Bilic et al. v. Apple Incorporated (2018). The plaintiffs alleged that “Apple fraudulently sold Subject Apple Devices with defective batteries, and then sent out software ‘updates’ to effectively decrease the performance capabilities of the Subject Apple Devices well below the performance capacity advertised.”25 As a result, the plaintiffs incurred “significant out-of-pocket costs… to repair or replace their Subject Apple Devices following the manifestation of the Slowdown Function or battery issues.”26 The complaint attributes this action to Apple’s “financial pressure to maintain revenues and boost sales for each successive version of the iPhone, iPad, and iPod, even when the features and performance of each newer model is substantially the same as the previous model.”27 The court awarded the plaintiffs $500 million in damages for Apple’s actions, and Apple was found to have violated numerous state statutes in addition to Common Law Fraud and Negligent Misrepresentation.28 What is important about those two allegations is that they involve the fact that Apple knowingly, and recklessly, made false representations about its products that they knew its consumers would rely upon when deciding whether or not to purchase an Apple device.29 Evidently, that action violates the consumer’s right to be informed.

In addition, the consumer’s right to be informed was violated when Apple did not disclose the “Battery Issue” to consumers who “would not have bought, or would have paid substantially less for” their Apple devices.30 Similar allegations were made in the State of Arizona v. Apple Incorporated (2020) class action lawsuit.31 This time, the lawsuit’s consent to judgment outlines what Apple must do to better notify consumers of the quality of its batteries and any effects software updates may have on the device.32 

Both Bilic and State of Arizona brought up Apple’s justification for using its software to slow devices. Apple claimed a “‘very small number of iPhone 6s devices’” had battery problems, which the class actions proved “was deliberately misleading.”33 Although the exact number of devices impacted by battery problems is unknown, Bilic’s settlement included compensation for anyone who “bought any product in the iPhone 6 and 7 lineup.”34 Furthermore, “[i]nstead of recalling all Subject Apple Devices, Apple modified the iOS so that it reduced the Subject Apple Devices’ processing speeds in an effort to prevent their batteries from causing erratic operation and unexpected shutdowns.”35 However, as previously stated, its justification violates the consumer’s right to be informed.

V. Jurisprudence on Apple’s Product Ecosystem

Apple’s product ecosystem was first called into question in the class- action iPod iTunes Antitrust Litigation (2014). The plaintiffs, who had purchased the third-generation iPod, alleged that Apple aimed “to exclude competitors from the market” by making “the audio files purchased from the iTMS [iTunes Music Store]… incompatible with other audio players.”36 They also asserted that Apple “uniformly charged consumers supracompetitive prices based on its purported monopoly position.”37 Ultimately, the jury voted in favor of Apple. 

Recently though, its ecosystem has once again been called into question in the class-action complaint Lepesant et al. v. Apple Incorporated, filed in November of 2021. The complaint “accuses Apple of hatching a scheme to ensure that no software [is] used on its” devices without its approval, “forcing app developers to work through its App Store while also taking a cut of their sales.”38 As a result, “consumers [are charged] an extra 30% for every app.”39 The plaintiffs further argue “Apple’s motive for its anticompetitive conduct was simple: Apple did not want its iOS device-related revenue stream to end when a consumer bought an iOS device.”40 If Lepesant is ruled in favor of the plaintiffs, the right to choose will be violated.

VI. Conclusion

Apple has shown disregard for consumers’ rights to be informed and to choose through the use of its product ecosystem and planned obsolescence. The creation of this ecosystem restricts choices due to “high switching penalties” by making content only available on its devices.41 By effect, this shrinks competition, which consequently reduces consumer choice, and ultimately violates the consumer’s right to choose. Regarding its tactic of planned obsolescence, Apple violates the consumer’s right to be informed by not telling their customers about the quality of their product. Despite these clear violations, what action the government may take and when they may take it to protect consumers’ rights, as well as its implications, remains to be seen.

  1. * B.S. Candidate for Marketing, Fordham Gabelli School of Business at Rose Hill, Class of 2025. It has been an honor to be a part of the Fordham Undergraduate Law Review as a writer for their online journal publication. I would like to give thanks to the FULR Editorial Board, my friends, and my family, all of whom have provided endless support and advice.
  2. E.g., Mike Isaac, 13 Ways the Government Went After Google, Facebook and Other Tech Giants This Year, N.Y. Times (Dec. 16 2020), https://www.nytimes.com/interactive/2020/technology/tech-investigations.html.
  3. Enrique Dans, Apple’s Smart Use Of Its Product Ecosystem Just Got Smarter, Forbes (Apr. 28, 2021), https://www.forbes.com/sites/enriquedans/2021/04/28/apples-smart-use-of-its-product- ecosystem-just-gotsmarter/?sh=16b32b5a217f.
  4. Larry A. DiMatteo et al., Comparative Warranty Law: Case of Planned Obsolescence, 21 U. Pᴀ. J. Bᴜs. L. 907, 908-9 (2019).
  5. Federal Trade Commission Act., Pub. L. No. 755-447, § 3, 52 Stat. 111, 111-12.
  6. Id.
  7. Anne Fleming, Consumer rights are worthless without enforcement, The Conversation (Mar. 15, 2019), https://advance-lexis-com.avoserv2.library.fordham.edu/api/document?collection=news&id =urn:contentItem:5VN3-3D21-JB75-9339-00000-00&context=1516831.
  8. See generally Exec. Order No. 14036, 86 Fed. Reg. 36,987 (July 14, 2021); see generally Carolyn L. Carter, A 50-State Report on Unfair and Deceptive Acts and Practices Statutes, National Consumer Law Center (2009), https://www.nclc.org/images/pdf/car_sales/UDAP_Report_Feb09.pdf.
  9. Kara D. Nottingham et al., The Role of International Consumer Policy in Fostering Innovation and Empowering Consumers to Make Informed Choices, 30 Iɴᴅ. Iɴᴛ’ʟ & Cᴏᴍᴘ. L. Rᴇᴠ. 1 (2019).
  10. Albert N. Shelden, Product Distribution and Marketing, State Consumer Protection Laws and Unfair Competition (2002).
  11. See macOS-Continuity-Apple, Apple, https://www.apple.com/macos/continuity/.
  12. Johnna Montgomerie et al., Owning the consumer—Getting to the core of the Apple business model, 37 Aᴄᴄᴏᴜɴᴛɪɴɢ Fᴏʀᴜᴍ 290, 291 (2013).
  13. Abe Harraf, Business Ecosystems and Innovation: The Potential Downsides of Shared Value Creation, 21 Gʀᴀᴢɪᴀᴅɪᴏ Bᴜs. Rᴇᴠ. 1 (2018).
  14. Id. at 7.
  15. Montgomerie et al., supra note 12, at 291-93.
  16. Id.
  17. Id. at 293-4.
  18. Id.
  19. Tim Kessler et al., Planned Obsolescence and Product-Service Systems: Linking Two Contradictory Business Models, 8 Jᴏᴜʀɴᴀʟ ᴏғ Cᴏᴍᴘᴇᴛᴇɴᴄᴇ-Bᴀsᴇᴅ Sᴛʀᴀᴛᴇɢɪᴄ Mᴀɴᴀɢᴇᴍᴇɴᴛ 29, 33 (2016).
  20. Id.
  21. Id. at 33.
  22. Tony Romm, Apple to pay $113 million to settle state investigation into iPhone ‘batterygate’ , Washington Post (Nov. 18, 2020), ​​https://www.washingtonpost.com/technology/2020/11/18/apple-fine-battery/.
  23. Kessler et al., supra note 19, at 34.
  24. Id. (“The second generation of Apple’s in-ear head-phones with remote control and a microphone as new features” did not “work properly with” older Apple devices. They did “not work at all with the first generation of the iPod shuffle, and do solely play back audio for the second and third generation. From the fourth generation on however, all features work properly.” Thus, consumers who want to take advantage of these new features “only have the option to buy a newer” iPod.)
  25. Class Action Complaint and Jury Demand, Bilic v. Apple, Inc., No. 5:18-cv-00449 (N.D. Cal. Jan. 19, 2018).
  26. Id at 5:3.
  27. Id at 5:2.
  28. Romm, supra note 22.
  29. See also Michael M. Krauss, Common Law Fraudulent Misrepresentation and Negligent Misrepresentation, Business Disputes: Claims and Remedies, (2015); Glenn D. West, That Pesky Little Thing Called Fraud: An Examination of Buyers’ Insistence Upon (and Sellers’ Too-Ready Acceptance of) Undefined ‘Fraud Carve-Outs’ in Acquisition Agreements, 69 Business Lawyer 1049, 1055 (2014).
  30. Class Action Complaint and Jury Demand, Bilic v. Apple, Inc., No. 5:18-cv-00449, 34:24-26 (N.D. Cal. Jan. 19, 2018).
  31. Romm, supra note 22.
  32. Consent to Judgment State of Arizona v. Apple Inc, 4, Nov. 18 2020.
  33. Class Action Complaint and Jury Demand, Bilic v. Apple, Inc., No. 5:18-cv-00449 (N.D. Cal. Jan. 19, 2018).
  34. Adi Robertson, Apple agrees to pay $500 million settlement for throttling older iPhones, The Verge (Mar. 02, 2020), https://www.theverge.com/2020/3/2/21161271/apple-settlement-500-million-throttling-batterygate-class-action-lawsuit.
  35. Class Action Complaint and Jury Demand, Bilic v. Apple, Inc., No. 5:18-cv-00449 (N.D. Cal. Jan. 19, 2018).
  36. Dr. Thibault Schrepel, The “Enhanced No Economic Sense” Test: Experimenting With Predatory Innovation, 7 N.Y.U. J. ᴏғ Iɴᴛᴇʟʟ. Pʀᴏᴘ. & Eɴᴛ. Lᴀᴡ 30, 66 (2018).
  37. Apple ipod itunes Antitrust Litig., 2008 U.S. Dist. LEXIS 107127 (N.D. Cal. 2008).
  38. Nadia Dreid, Apple Hit With Another Antitrust Suit Over App Store, Law 360 Legal News – Corporate, (Nov. 15, 2021). https://advance-lexis-com.avoserv2.library.fordham.edu/api/document ?collection=news&id=urn:contentItem:6440-D0Y1-DYBF-K4K4-00000-00&context=1516831.
  39. Class Action Complaint and Demand For Jury Trial, Lepesant et al. v. Apple Inc., No. 3:21-cv-08819, (N.D. Cal. Nov. 12, 2021).
  40. Id.
  41. Montgomerie et al., supra note 12, at 291.
css.php