For one of the biggest companies in the world, it’s a drop in the ocean. But when the Australian federal court ordered Samsung to pay $14 million for false advertising, it still delivered a blow to the company’s reputation in one of its most important markets.

Justice Michael Murphy gave the go-ahead to the settlement figure after a three-year-long campaign between Samsung and the Australian Competition and Consumer Commission (ACCC).

The national regulator alleged that the company had misled the public by saying that several of its models were waterproof when the opposite was true.

After a long battle, the ruling represents a victory for consumer rights Down Under.

The lawsuit

The driving force behind the lawsuit was Australia’s consumer watchdog, the ACCC. National regulators like this form an essential part of the fight for consumer rights. Say you sign up to a website because of a special promotion – no deposit casino bonuses or a free trial for premium content are two good examples – regulators make sure that the consumer gets their part of the deal.

The same applies to advertising campaigns. If a company misleads the general public, and people buy a product or service because of the false promise, then the regulator kicks into action. In Australia, this happened in 2019 when the ACCC sued Samsung over its claim that seven of its models were waterproof.

The case centred around more than 300 adverts broadcast from February 2016 onwards. In them, the ACCC said that Samsung ‘misled and deceived customers’ with claims that its devices were water-resistant up to 1.5 metres for 30 minutes.

The ads appeared in various mediums, including social media, TV, and billboards, and showed people using them at pools and beaches. One ad showed a man using a Samsung phone while afloat on an inflatable pool toy, while another even showed a phone being used underwater.

The ACCC said at the time that Samsung had not sufficiently tested its phones to back up these claims and had, in fact, turned down warranty claims from people whose phones had been damaged by water use.

In response, Samsung said it ‘stood by its marketing and advertising’, saying that they provided free remedies for customers consistent with Australian Consumer Law.

Back then, neither party could have had any idea that the legal proceedings would stretch over three years, but the COVID-19 pandemic held back the case so long that the court only reached a decision in June 2022.

 How the court reached its decision

The case boiled down to a specific problem the Samsung devices had experienced after water exposure. The ACCC’s barrister, Caryn Van Procter, named it as ‘damage by corrosion to the charging port of the phone’.

When users went to charge the phone while water was still in the port, it would cause material harm to it, despite the company’s ads claiming otherwise.

Samsung’s defence included the fact that there was a warning light on the device when this happened, but even this fact was inconsistent with the ads, which contributed to the sale of around three million units.

Judge Michael Murphy approved the $14 million settlement figure agreed between the two parties, saying that many customers would have relied on the ads when buying and using the phones. He said the figure would ‘act as a deterrent’ and was a ‘real and sufficient sting’ to Samsung Australia’s annual profits over the last six years.

Murphy criticised the Australian advertising industry in his closing comments, saying that too many federal court cases are about products being missold to consumers in marketing campaigns. In Samsung’s case, he chastised them for only agreeing to resolve the case after years of legal work from all parties involved.

Samsung’s reputation

With global profits of over $31 billion in 2021, Samsung won’t be hurt financially from this case, but it may dent their reputation in a key market.

The company received encouraging survey results in early 2022, with YouGov users voting it Advertiser of the Month for February. However, the court ruling since then is an official proof that Samsung’s marketing campaign has misled people – a cardinal sin in such a competitive smartphone market.

That said, in today’s world of fast-moving coverage, it may be that the Australian public quickly moves on from this controversy. Samsung will certainly hope so as it strives to compete with Apple for the top spot in the mobile provider charts.