AppleCare Protection Plans – Why You Shouldn’t Buy Them

Just something I need to get off my chest!

Disclaimer: The following article is my opinion only and does not constitute legal advice.

So I’m on the Apple Australia website looking to purchase a new iMac the other day. I get to the configure page and look at the AppleCare Protection Plan section to decide whether or not I should purchase it, a position many people find themselves in.

What is the AppleCare Protection Plan?

According to Apple:

“[T]he AppleCare Protection Plan gives you direct, one-stop access to Apple’s award-winning telephone technical support for questions about Apple hardware, OS X, iLife, and iWork. And you get global repair coverage for your Mac — both parts and labor — through convenient service options [for up to three years from the date of purchase].”

In short, the Protection Plan gives you telephone and hardware support for the first three years.

Sounds great, right? Well, not really. Here is where it gets interesting.

What happens if I don’t purchase the Protection Plan?

Apple provides complimentary telephone technical support for 90-days from the date of purchase and a one-year limited warranty. Apple conveniently demonstrates this by using the following graphic:

overview-applecare-coverage-cto-3yr

So naturally after looking at the graphic you’d be thinking that after 90 days you no longer get telephone support, and after one year you no longer get hardware support, right? Wrong.

The key part of the graphic is the sentence at the bottom which states that the Protection Plan benefits are in addition to rights provided under consumer law.

How many ordinary consumers would know what their rights are provided by consumer law? I would argue very few, and this plays into Apple’s hands.

The ordinary consumer, after seeing the above graphic and reading the blurb, would be (rightly) concerned that, after forking out between $1,400 – $3k+ for their new computer, that they will be unprotected if they have a hardware problem more than 12 months after purchase. So you buy the Protection Plan to, as the name implies, protect your investment beyond the one year complimentary coverage and up to three years. This is exactly what nearly everyone I know who buys an iMac does – adds on $268 to the purchase price and buys the Protection Plan.

What most people fail to recognise is exactly what rights they have under Australian law.

Australian Consumer Law

For some great bedtime reading, the full text of the Australian Consumer Law (ACL) can be found here in Schedule 2 of the Competition and Consumer Act 2010.

The ACL provides one national law for fair trading and consumer protection. The relevant sections of the ACL cover what are termed Consumer Guarantees. The Australian Government has published a handy guide on them which you can view here.

Consumer guarantees provide consumers with a set of rights for goods (or services) they acquire. The main guarantee for this example is that the goods supplied are of acceptable quality (section 54). Goods are of acceptable quality if they are:

  • fit for all the purposes for which goods of that kind are commonly supplied; and
  • free from defects; and
  • durable;

having regard to the nature of the goods and the price paid. For example, a fridge should last longer than a toaster and an expensive fridge should last longer than a cheap one.

If a good fails to meet a guarantee, the consumer will have rights against the supplier (or manufacturer in some cases) who will have to provide a ‘remedy’. The remedy can be anything from a repair to a replacement or refund, or even compensation.

So you’re thinking great, I’ve got rights under the ACL that my new iMac (or any other good within certain limitations) needs to be of acceptable quality. But the key thing absent from the legislation is how long does your new iMac need to be of acceptable quality. This is where the ACL is a little blurry.

The Australian Competition & Consumer Commission in its brochure Warranties and refunds, a guide for consumers and business states at page 20 that there is no set time limit to a remedy, but instead it all “depends on what would be reasonable, given the cost and quality of the item.”

“WHAT THE HELL DOES THAT MEAN?” I hear you ask. Well the only guidance we’ve been given so far comes from the Government themselves in the above referenced guide which provides the following example at page 11:

“A consumer buys a plasma television for $6000. It stops working two years later. The supplier tells the consumer they have no rights to repairs or another remedy as the television was only under the manufacturer’s warranty for 12 months. The supplier says the consumer should have bought an extended warranty, which would have given five years’ cover.

A reasonable consumer would expect more than two years’ use from a $6000 television. Under the consumer guarantees, the consumer therefore has a statutory right to a remedy on the basis that the television is not of acceptable quality. The supplier must provide a remedy free of charge.”

Until we have an actual case regarding a computer brought before the courts (unlikely) or the Government provides a larger range of examples, the question we need to ask ourselves is how long a reasonable consumer would expect their $1,400-3k+ computer to last before having a hardware problem.

I would argue this period is at least 2 years. Apple Australia seem as though they agree with me. In a recent post published in March of this year, MacTalk Australia state that:

“Apple Australia have quietly changed the way it will be treating iPhone, iPad and Mac repairs at its Genius bars and Authorised Apple Repair Centres. Apple are introducing a “variable warranty” to its main line of products, which effectively extends the warranty of Apple products to 24 months, to bring it in line with Australian Consumer Law.”

What this means is that even if you didn’t buy the Protection Plan, Apple will repair your product if it has a problem up to 24 months after purchase. Apple have so far refused to comment on the report. In reality the graphic above should now look something like this:

overview-applecare-coverage-cto-3yr2

Not so attractive to a prospective consumer now, is it?

If you don’t use the telephone support and purely want to cover the hardware, you’re essentially paying $268 for one-year of extended coverage – the period after your consumer law rights end (2 years after purchase) to the end of the period offered by Apple (3 years after purchase).

In addition, the more you increase the spec of your iMac (or other computer) and the more expensive it is to purchase, arguably the longer your consumer law protection should be – i.e. a top of the range spec’d iMac for $3500 should last longer than the entry level $1,400 model. My personal view is that for any computer today costing more than $2,000 a reasonable consumer would expect it to last at least 3 years without having a hardware problem. $2,000 and above today is reasonably expensive for a consumer laptop or computer and so you expect better quality and a longer operating life.

If that is the case, as soon as you get to a $2,000 iMac, Apple’s Protection Plan is essentially worthless unless you value telephone support. Apple know this, which is why they are dragging their heels by:

  1. Not publicly acknowledging what their own internal lawyers would have advised them before the reported policy change – that is that the ACL provides consumers buying their products with rights up to 24 months after purchase; and
  2. Not changing the above graphic to reflect a consumers’ statutory rights acknowledging the 24 month protection from the date of purchase.

Why I get annoyed

Say you’re the ‘average’ consumer browsing Apple’s website and you’re going through the motions of buying a new iMac. I like to think of my Mum or Dad doing the browsing. When you read the AppleCare Protection Plan and see the graphic, you’re going to immediately think to yourself “Shit, if I don’t buy this and my computer dies 13 months after purchase, I’m buggered!” and so you immediately add an extra $268 to your purchase price for what you think is an extra 2 years of hardware coverage, but is, at best, only an additional 1 year.

Yes consumers should know what their rights are under the law and ignorance is no excuse, but even after reading the legislation it is still not clear exactly how long a consumer is protected for when they buy goods such as an iMac. The consumer needs to know “what is reasonable, given the cost and quality of the item.” Well, how long is a piece of string?

What I did about it

I’ve currently held off purchasing a new iMac until Apple improves their approach to the Protection Plan. I emailed Tim Cook, the current CEO of Apple, the following:

From: Nicholas Leach
Subject: Australian AppleCare Protection Plan
Date: March 25, 2013 9:07:20 PM PDT
To: tcook@apple.com

G’day from Down Under Tim,

Firstly let me say I’m a very happy existing Apple customer and I’m looking forward to what products lie ahead from you and your team. In our household we’ve got an iMac, 2 iPhones, an iPad, a MacBook Air and 2 iPods.

I’m currently ready to purchase a new 27-inch iMac. I normally purchase the AppleCare Protection Plan, but noticed today that the Australian on-line store is still showing the limited warranty as 12 months, instead of 24 months as reported to bring the warranty in-line with the Australian Consumer Law.
As you may be aware, there is no set period of coverage defined under the ACL, it simply states that consumers’ rights apply for the amount of time “reasonable to expect, given the cost and quality of the item.”

Arguably for iMacs and other Apple computers this period is 24 months, which is probably the legal advice that Apple received which led to the internal email advising Staff that hardware will now be covered automatically in the 13-24 month period, even without an AppleCare Protection Plan in place.

All I would ask is that this policy change is reflected on the Australian Apple Store.

would like to purchase an AppleCare Protection Plan for my new iMac, but as it stands I have a 12 month limited warranty by Apple and a statutory warranty up to 24 months. Why would I pay for an AppleCare Protection Plan that also covers the period between 12 and 24 months when I get this free under the ACL?

Can the AppleCare Protection Plan now be updated to cover the non-statutory period – i.e. protection from 24 – 48 months?

I, along with many other Apple customers, will then be happy to pay for it. As it stands presently it just feels as though we are paying double for that overlapping 12 month period with the statutory warranty.

Hoping you’ll do the right thing by your Australian customers,

Nick”

In fairness to Apple, my email was read by someone and I received an email from a member of the Executive Relations Team. We had a phone call and, while they acknowledged that I made a fair point, they were reluctant to say what, if any, changes would be made to their Protection Plan or Apple Store policies.

Also in fairness to Apple I should say that they are not the only computer seller operating like this in Australia. Dell uses this graphic when purchasing one of their XPS desktops:

3296-store-banner-insp-dt-essential-314x314

Again, one year is ‘included’ in your purchase and you can purchase an ‘additional’ hardware warranty, in home service and remote diagnostics for up to 3 years after purchase.

The difference in this case is that Dell is arguably at the ‘lower end’ of the PC market (depending on the model of course, but generally speaking) and Apple at the ‘premium’ end, so it may well be that if you buy a $999 desktop PC from Dell, a one year warranty might actually be reasonable given the cost and quality of the item.

Apple has history in this area

Apple were fined €900,000 back in December 2011 by Italy’s Antitrust Authority for circumventing consumer protection laws. Italian and European Union regulations give consumers the right to a 24-month warranty from vendors. Apple did not advise consumers about their warranty rights and instead pushed them to buy the AppleCare Protection Plans.

Late last year EU Justice Commissioner Viviane Reding said that Apple still wasn’t informing customers correctly about their warranty rights in the EU:

“In at least 21 EU Member States Apple is not informing consumers correctly about the legal warranty rights they have. This is simply not good enough.”

Apple sold just under 4 million Macs in Q2 2013, and if even a quarter of those people purchased the Protection Plan Apple would be making more than AU$1 billion per year alone from the Protection Plans. One billion dollars.

Little wonder a €900,000 fine doesn’t get them changing their behaviour then.

Changes Apple made to the Italian Apple Store following the fine

Apple’s Italian Store now does NOT display the above graphic highlighting the 90-day and 1 year hardware warranty and the ‘benefits’ that are provided by the Protection Plan, and instead states the following (as translated by Google):

“For three years from the original date of purchase of your computer, the AppleCare Protection Plan gives you direct telephone access to Apple technical support experts are ready to answer your questions on Apple hardware, OS X, iLife, and iWork. And all over the world can count on Apple hardware on-site for your Mac.

The AppleCare Protection Plan benefits are added to the two-year warranty from the seller under the Italian legislation to protect consumers. Under the Consumer Code, consumers are entitled to obtain free of charge from the dealer the repair or replacement of products that have a lack of conformity within 24 months from delivery. For more details, click here.”

So now in Italy at least (as a result of litigation) Apple clearly tells consumers that they have a 24 month statutory warranty. Little wonder they don’t show the graphic though, because it doesn’t look nearly as impressive when you’re paying €179 for essentially one year of protection. Also note that instead of saying:

“Every Mac comes with complimentary telephone technical support for 90 days from your Mac purchase and a one-year limited warranty. With the AppleCare Protection Plan, you can extend your service coverage to three years from the computer’s purchase date.”

they now just say:

“For three years from the original date of purchase…”

This is just clever marketing to try to hide the fact that they get essentially 1 year of coverage when they buy the Protection Plan.

What I would like to see happen here in Australia

As I said in my email to Tim Cook, it would be nice firstly if Apple told consumers clearly that they have (arguably) a two year statutory warranty under the ACL. Secondly it would be nice then if Apple, instead of saying that your $268 buys you protection from between 12 to 36 months after purchase, thereby overlapping for 12 months with the statutory protection, instead STARTED the Protection Plan when your statutory rights expired – i.e. at 24 months. This way when you buy your new $1,400-3k+ iMac and buy the Protection Plan, you really are getting exceptional coverage by getting  support up to 4 years after the date of purchase.

What will likely happen

Apple will likely remove the warranty graphic, keep the price the same for the Protection Plan and not inform consumers of their rights, instead keeping the line “AppleCare Protection Plan benefits are in addition to rights provided under consumer law.”

They will remove any reference to 90 days or 1 year complimentary coverage and replace it with the same line as the Italian Apple Store: “For three years from the original date of purchase…”

Why not just do the right thing by your customers?

I get really annoyed when large organisations like Apple take advantage of their customers or try to ‘pull the wool over their eyes’.

By showing a graphic and telling consumers that they can ‘pay’ for hardware coverage from 12 months after purchase onwards I personally find misleading, especially if it is now internal Apple policy and their own Staff have been advised that they will cover items up to 24 months after purchase without question. Also the reference to ‘complimentary 90-day and one-year’ coverage is also misleading because you get 24 months coverage (arguably) provided by law. THE LAW PROVIDES COMPLIMENTARY 24 MONTH COVERAGE!

Communicate this to your customers, clearly outline when buying exactly what a consumers’ rights are, and make the purchase of Protection Plans worthwhile by beginning the coverage when the statutory protection ends OR cut the cost in half because the Protection Plan really only covers you for a 12 month period.

In summary

AppleCare Protection Plans are really only worth purchasing if you’re going to utilise telephone technical support. Otherwise use your consumer rights to get coverage up to 24 months after purchase (and arguably beyond) and show Apple that you’re not going to be f**ked over.

What the Government can do to help

  1. Clarify exactly what is meant by “reasonable, given the cost and quality of the item.” – i.e. provide more examples;
  2. Consider legislating a minimum warranty period for consumer goods just as they do in the EU – 24 months at a minimum OR longer if the goods are of a type where it would be expected (fridges, washing machines etc…);
  3. When imposing a fine such as that imposed in Italy, the fine should be proportionate to the gains the company made from the conduct – i.e. Apple worldwide are making ~ AU $1 billion per year if even 25% of their Mac customers alone purchase the Protection Plan. A €900,000 fine is nothing compared to the revenue stream.

Thus ends my AppleCare Protection Plan rant.

Update:

Apple did make changes the AppleCare Protection Plan section of the Australian Apple Store.

As I hypothesised above, Apple have:

  1. Removed the warranty graphic; and
  2. Begin the section by stating that a purchaser is covered “For up to three years from your computer’s original purchase date…”

In addition, Apple reduced the price (at least for 27-inch iMacs) for the Protection Plan from $268 to $189.

So the above summary still applies. Spend the $189 if you’ll use the telephone support, otherwise save the dosh and rely on your rights under the Australian Consumer Law.

11 Comments on “AppleCare Protection Plans – Why You Shouldn’t Buy Them

  1. Very useful information (opinion). Not many people know their consumer rights.

    A return email from the Executive Relations team is heartening. A follow up phone call is unusual in this day and age.

    • Thanks! I agree it’s surprising how many people aren’t aware of their rights – but when they are as vague as our current consumer law is (‘reasonable period given cost and quality of item’) – who can blame them for not wanting to know them?

      I was quite surprised that I received a reply from Apple so quickly, but I’ve often found if you’re complimentary and courteous in the drafting of the letter/email, that they are pretty responsive. Ultimately though I wasn’t successful in achieving anything in this instance – that’s why by making the post I was just hoping to bring a little more attention to the issue…

  2. Nicholas, that was great thank you! I am about to make the purchase of an iMac and have been debating. After reading your view, you make may valid points. I think I won’t worry about the Apple Care Plan and take my chances. I am a fighter so should anything go wrong, I will fight Apple if required. Given I have about $10k worth of the products and software I will ensure I am looked after in the need arises.

    Thanks for collating this data and sharing with fellow Aussies.

  3. Thanks for the article. I had my 27″ thunderbolt monitor repaired and my Macbook Pro repaired under these laws around 24 months after purchase. The warranty on a 27″ iMac has now been reduced to $149. I know the consumer laws should cover me for the third year as well, but I’m leaning toward buying the cover to guarantee that 3rd year, as $149 is way cheaper than it used to be.

  4. Hi Nicholas, I have a MacBook 15” with retina which cost me 3k, do you think apple will cover it for more than 2 years? Thank you

    • Hi Chao,

      I am not able to provide you with legal advice, so the following is my opinion only:

      Under the ACL, a supplier or manufacturer guarantees that your MacBook will be of acceptable quality.

      ‘Acceptable quality’ means, amongst other things, that it will be free from defects for a reasonable time after purchase.

      A ‘reasonable time’ depends on the (i) nature of the item (e.g. a MacBook is expected to last longer than a toaster), (ii) the price of the product (an expensive, top-of-the-range 15″ MacBook would be expected to last longer than an entry level MacBook Air), and (iii) any other relevant facts (such as how you’ve used the MacBook).

      Apple themselves state:

      Apple will provide its own remedies equivalent to those remedies in the consumer guarantee provisions of the Australian Consumer Law at any time within 24 months of the date of purchase. For the avoidance of doubt, Apple acknowledges that the Australian Consumer Law may provide for remedies beyond 24 months for a number of its products.

      So Apple provide a 24 month guarantee with every purchase, and for some products even longer. What products have a longer guarantee? Arguably on the more expensive or high-end products, which I would argue includes your $3,000 MacBook.

      For more information see this document published by Consumer Affairs Victoria.

      Hope that helps!

      Nick

  5. Hi Nick,
    Your article gave me understanding to my recent experience and opened my eyes for further purchases.
    i had just purchased a Mac Pro 15 retina 500GB ($3700) and thought it would add the applecare for $350approx. Good insurance bought from a reseller.
    Next week. I was in the genius bar getting my older laptop(2013) looked at for the cost of repair so i could give it to my son. The genius bar rep. kindly informed me, that the offending part( logic board) and such was still covered under warranty and the repair would be carried at no cost. ($792). The laptop was over 2years 6months and no applecare. he then went on to inform me that the part would be further covered after the repair..
    I had been to two apple store repairers prior and was told no warranty exists and cost of $98 to open and quote. it pays to go to the genius bar, i am very impressed with the store and the products they stand behind.
    And thank you for explaining the reason.

    • Hi Don,
      Thank you for sharing your first-hand experience, and I’m glad to hear that Apple looked after you!

  6. This is very interesting. Having come from Canada, I’m so used to the big companies bending us over and having their way with us…..

    I contacted apple about the statement that reads on their website http://www.apple.com/au/legal/statutory-warranty/

    “Australian consumer law – Claim period – A reasonable period from date of delivery until the failure becomes apparent. Without limiting consumers’ rights, Apple will provide its own remedies equivalent to those remedies in the consumer guarantee provisions of the Australian Consumer Law at any time within 24 months of the date of purchase. For the avoidance of doubt, Apple acknowledges that the Australian Consumer Law may provide for remedies beyond 24 months for a number of its products.”

    They basically told me to ask the Australian Government through the links provided at the bottom of the page, http://www.consumerlaw.gov.au/

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