Apple responds to government probe into iPhone slowdowns

In this Sept. 5, 2014, file photo, the Apple logo hangs in the glass box entrance to the company's Fifth Avenue store in New York. In this Sept. 5, 2014, file photo, the Apple logo hangs in the glass box entrance to the company's Fifth Avenue store in New York. Photo: Mark Lennihan, Associated Press Photo: Mark Lennihan, Associated Press Image 1 of / 1 Caption Close Apple responds to government probe into iPhone slowdowns 1 / 1 Back to Gallery

Apple Inc. said it’s responding to government probes into a software update that slowed the performance of older iPhones.

The U.S. Department of Justice and the Securities and Exchange Commission are investigating whether Apple violated securities laws concerning its disclosures about a software update that slowed some handsets, people familiar with the matter told Bloomberg News on Tuesday. The U.S. government has requested information from the company, according to the people, who asked not to be named because the probe is private.

The inquiry is in early stages, they cautioned, and it’s too soon to conclude any enforcement will follow. Investigators are looking into public statements made by Apple on the situation, they added. While the slowdown has frustrated consumers, investigators are concerned the company may have misled investors about the performance of older phones.

"We have received questions from some government agencies and we are responding to them," an Apple spokeswoman said. She reiterated an earlier statement that the company "never — and would never — do anything to intentionally shorten the life of any Apple product, or degrade the user experience to drive customer upgrades."

A spokesman for the SEC declined to comment. A Justice Department spokeswoman declined to comment. Shares of the company rose less than 1 percent to $167.71 in New York trading Wednesday. Apple’s stock has been under pressure amid reports of weaker-than-expected iPhone X sales ahead of its earnings report Thursday.

Several weeks ago, Apple said a software update released in early 2017 slowed down the performance of older iPhones models as a way to avoid the phones shutting down at random. When it released the update, the company hadn’t said the software would slow down the devices. In December, Apple apologized for not clearly communicating this information and vowed to release another update to mitigate the concern.

Earlier in January, Apple Chief Executive Officer Tim Cook told ABC News that when the company put out the software update that caused the performance issues for older iPhones “we did say what it was, but I don’t think a lot of people were paying attention. And maybe we should have been clearer.”

The slowdowns occur when an older iPhone’s battery reaches a certain, unspecified point of low health and can be fixed if a user replaces the battery. As part of its public apology, Apple cut the prices of battery replacements in its stores to $29, a $50 discount.

Apple plans to release an iPhone software update, called iOS 11.3, in the next few months with new features that let users monitor the health of their batteries and protect against slowdowns. If consumers turn off the throttling, older iPhones will be more prone to randomly rebooting, Apple has said. The system affects iPhone 7 models and older, but not the iPhone 8 and iPhone X, according to the company.

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After apologizing to customers in December, Apple was sued by consumer advocacy groups and individual iPhone users in a global backlash. Government officials, including U.S. Senator John Thune, a Republican from South Dakota, have also questioned Apple about the slowdowns.

“Even if Apple’s actions were indeed only intended to avoid unexpected shutdowns in older phones, the large volume of consumer criticism leveled against the company in light of its admission suggests that there should have been better transparency with respect to these practices,” Thune wrote in a January letter to Cook.

The situation is a self-inflicted black eye on the Cupertino, California-based company. Apple has been wrestling with some other software-related issues, including processor vulnerabilities that have affected other technology companies and a login flaw that allows intruders to access files on Mac computers without a passcode.

Apple is delaying some key iPhone and Mac software features planned for release this year to focus on quality improvements, Bloomberg News reported earlier Tuesday.

This isn’t the first time the Justice Department has investigated Apple. In 2012, the department filed an antitrust suit against Apple and book publishers over the pricing of digital book downloads. In 2010 the department settled with the iPhone maker regarding anti-poaching agreements between the company and other major technology firms such as Alphabet Inc.’s Google.

In 2016, the Justice Department investigated, and then dropped a lawsuit against Apple seeking data from an iPhone connected to a mass shooting in San Bernardino, California.

©2018 Bloomberg L.P.

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