Apple will pay $113 million to settle an investigation by nearly three dozen states into the tech giant's past practice of slowing customers' old iPhones in an attempt to preserve their batteries.
The company's much maligned throttling efforts drew nationwide scorn when they came to light in 2017, with some consumers seeing it as an attempt to nudge them into buying newer, more expensive devices. States led by Arizona, Arkansas and Indiana soon opened a probe of the matter, and on Wednesday, they secured a financial penalty and legal commitment from Apple to be more transparent in the future.
"Big Tech must stop manipulating consumers and tell them the whole truth about their practices and products," Arizona Attorney General Mark Brnovich said in a statement. "I'm committed to holding these goliath technology companies to account if they conceal the truth from their users."
Arkansas will receive $4,295,115 under the settlement, Arkansas Attorney General Leslie Rutledge said.
"Mobile phones have become an essential part of our daily lives," Rutledge said. "Arkansans will not be taken advantage of by any businesses attempting to deceive them and I will not hesitate to stand up to companies taking advantage of hard working Arkansans, no matter how large."
Investigators from 34 states and the District of Columbia, including Democratic and Republican attorneys general, joined the settlement. Apple declined comment for this story, and its agreement with the states does not require it to admit guilt. The company in 2018 tweaked its settings to make its battery-management practices clearer to users.
In the years before Silicon Valley found itself in the government's crosshairs -- and Tim Cook, the chief executive of Apple, would be regularly called to Congress to testify -- the crisis emerged as a signature challenge for the iPhone giant. The saga drew national headlines in 2017, as iPhone users began to discover that some of their older devices experienced slowdowns after they updated to a newer version of iOS, Apple's mobile operating software.
That December, Apple acknowledged the practice, explaining that it had tweaked its technology starting a year earlier so that some older models, including the iPhone 6S, did not shut down unexpectedly or experience other malfunctions because of excessive demands on their dated batteries. The widespread blowback also prompted Apple to issue a public apology -- a rarity for the tech giant -- and to begin offering battery-replacement discounts for consumers.
The company's mea culpa hardly satisfied critics, including in Congress, which at the time sharply criticized Apple for throttling devices. Others filed lawsuits and initiated a flurry of regulatory proceedings against the iPhone maker that only now are reaching their conclusion. This March, Apple settled a multi-year class-action lawsuit by agreeing to pay $500 million, much of which it has set aside for select iPhone users to receive $25 in refunds. (The company, however, did not have to admit fault even as it ended the litigation.) A month earlier, French regulators fined Apple roughly $25 million, arguing the company should have been more forthcoming about its practices.
In the United States, the nearly three dozen states shared a frustration with Apple's lack of transparency and embarked on their own investigation. A complaint filed Wednesday in Arizona lays bare their concerns that Apple had provided "misleading information" about its iOS updates, particularly through hard-to-understand technical notes about battery management.
Apple's approach ultimately left many users feeling as if the "only way to get improved performance was to purchase a newer-model iPhone from Apple," the Arizona complaint contends.
Along with the financial penalty, the states also have required Apple to clarify -- online, and on iPhones themselves -- its practices about battery health and power management.
A 2018 update to iOS allows users to check the health of their batteries and disable performance throttling. It is tucked away in users' device settings.
APP STORE FEES CUT
Separately, Apple on Wednesday announced a big discount for some smaller developers, offering to cut fees by 50% for companies that make less than $1 million in revenue. But Apple's critics say the move will do little to improve competition and innovation on the App Store.
Apple collects a 30% payment processing fee for most digital revenue earned on the App Store, which it will cut to 15% for smaller developers. Critics, including many developers, call the fee exorbitant, comparing it to the roughly 2% charged by competing payment processors. Apple's own apps and services are exempt from the fee, and enjoy other marketing benefits.
The fee cut addresses a major issue called out by developers and lawmakers investigating Apple over accusations of anticompetitive tactics.
Apple fees are high enough to discourage other revenue models for most mobile apps, according to companies that operate on Apple's App Store. While reducing fees will help a small number of developers, it won't change the business fundamentals of the App Store, they say.
"I think this is a really clever Machiavellian ploy that I hope doesn't work," said David Heinemeier Hansson, co-founder of the email service Basecamp, which offers an iPhone app. The move will have such little impact, Hansson called it "almost a joke."
Information for this article was contributed by Reed Albergotti of The Washington Post.