iPhone battery lawsuit: Why is it so hard to collect Apple's payment?

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Apple is a world leader in both design and digital payments, but you wouldn’t know it from the clumsy website where millions of iPhone users must go to claim compensation over a battery defect. The website and the process for notifying customers about the iPhone settlement is awkward and ineffective—in short, very un-Apple like. The situation is frustrating many iPhone owners and could also bring new scrutiny of a class action process that critics’ say shortchanges consumers.

The Apple class action in question is over what the tech press has dubbed “battery-gate.” It alleges that Apple manipulated its software in ways that caused the battery of certain iPhones to suddenly drain or make the phone sluggish, prompting some users to desire a new purchase.

Following a wave of lawsuits, Apple agreed to settle the matter earlier this year. The proposed settlement calls for Apple to compensate those who bought an iPhone 6 or 7 or similar devices from that era.

The document says those who qualify “shall be sent Twenty Five U.S. dollars ($25.00) for each iPhone owned,” but notes the actual amount could be more or less based on many people file claims. The deal states Apple shall pay consumers a minimum of $310 million and a maximum of $500 million.

The financial terms are straightforward but, for consumers who want to collect, the process is not. In a poll of my iPhone-owning coworkers, most had not even seen the email announcing the settlement—likely because it went to spam folders. (If you want to search your own email for it, the subject is “Class Action Notice: In re Apple Inc. Device Performance Litigation.”)

And finding the email was just the beginning. Those who do find it are directed to this settlement page, which requires claimants to enter the serial number of the device in question—a tall order given many no longer have the iPhones they bought four or five years earlier.

The page does a have feature to look up the serial number based on your email and home address. But for some, it claimed there was no match.

Meanwhile, one colleague who attempted to submit her banking details on the site encountered a series of errors and had to switch browsers several times. She ultimately elected for a paper check.

All of this raises the question of why this process is so hard. After all, Apple keeps meticulous records of its customers and likely knows very well who purchased the devices with faulty batteries. Why didn’t the settlement call for Apple to email customers directly, which would have avoid the spam filter problem? Or better yet, why didn’t Apple offer to credit the $25 to the credit cards it keeps on file for most customers?

It’s hard not to conclude the process is clumsy because the lawyers designed it to be this way. A spokesperson for Apple declined to comment on the matter, but the recent history of U.S. class action litigation suggests this “battery-gate” suit is another example where the settlement is designed to limit recovery.

Less than 10% of consumers typically get paid

Class action lawsuits are supposed to benefit consumers by letting them sue as a group. This is a more practical option than expecting individuals to sue giant companies like Apple, especially when the money at stake is relatively low. Meanwhile, the threat of class actions can deter companies from behaving badly.

It’s a good idea in theory. But in many cases, the affected consumers—in whose name the lawsuit is brought—receive little or nothing from the legal settlement. A notorious recent example is the credit agency Equifax, which allowed Chinese hackers to steal the data of at least 143 million people in 2017. The ensuing lawsuit initially promised victims would receive $125 each but, when the dust settled, those consumers are more likely to receive $5 or nothing at all—even as the lawyers pocketed around $77 million and the company’s disgraced former CEO retired with $90 million.

Meanwhile, the vast majority of people don’t even try to collect in the first place. A 2019 survey by the Federal Trade Commission surveyed 149 class recent action suits and found the median participation rate was 9%—meaning that in most cases over 90% of people never collect.

In the case of the Apple “batterygate” class action, Laurence King, one of the lead lawyers representing iPhone owners told Fortune that “we believe the claims rate will be in line with similar consumer class actions”—in other words under 10%.

As for the lawyers, the settlement could see them collect $93 million.

In response to criticism over their fees, class action lawyers typically point out—correctly—that they bear the risk of the lawsuit, and often spend millions out of their own pockets to bring the claims. It’s also true that, in the absence of class actions, some companies’ bad actions would go unpunished, and consumers would receive nothing at all.

In the case of Apple, though, it’s hard to see how a payout rate of 10% would be acceptable given how easily the company could notify the affected customers—by email or even on their iPhones. Likewise, the prospect of collecting less than $25 (which would occur if a higher than average number of people file) would also be dissatisfying to many consumers. The battery issue has been a source of frustration for years, as has Apple’s reluctance to be transparent about it.

As for the cost of Apple compensating everyone affected, it would be negligible for a company with nearly $200 billion in cash reserves.

For now, the settlement is yet to be a done deal. It must receive a final sign-off following a so-called “fairness hearing” on December 4. If the number of iPhone owners filing claims proves to be low, or if there are concerns over the class action process, a judge could reject the deal and order the lawyers to come up with a better one.