Oorja Newatia

INTRODUCTION

Smartphone makers like Apple and Samsung are gradually phasing out in-box accessories from mobile phones. This is being done in the name of sustainability and promoting better recycling habits among users. This piece argues that this justification is a mere greenwash and the need of the hour is standardised charging cables. In this regard, it is important to note a recent judgment of a Brazilian court which has imposed a penalty on Apple and banned selling iPhones that do not come with a power adaptor. The article contends that the judgment overlooks environmental concerns and may lead to the bundling of goods, forcing consumers to pay a higher price. It analyzes how the Nudge Theory, a concept in behavioral economics, can be utilized by smartphone makers to cater to the needs of consumers and promote sustainability. It is further argued that to prevent potential anti-consumerist practices by smartphone companies standardised USB connectors should be made mandatory.

WHAT’S IN THE BOX?

Apple has been mired in controversy for anti-competitive and restrictive trade practices lately. After being fined $113 million to settle consumer claims against the “Batterygate” controversy, in yet another setback, a Brazilian court has fined Apple $20 million for selling iPhones without chargers. This came a few days after the Justice Ministry fined the California-based company to cancel sales of the iPhone 12 and newer models and suspend the sale of any iPhone model that does not come with a charger. Lacking an essential component, the Ministry averred, was “a deliberate discriminatory practice against the consumers.” The claim that such a practice was adopted to reduce carbon emissions was outrightly rejected as greenwashing on the basis of a lack of evidence of such a benefit to the environment.

In addition to this, the intention behind this practice of not including outlet chargers with mobile phones is questionable given that removing chargers makes packaging slimmer, allowing companies to ship nearly twice as many phones in shipping containers. Apple also saw a substantial reduction in shipping costs once it stopped bundling chargers with iPhones. Another argument against this so-called “environmental” initiative of not selling chargers with mobile phones is that buying chargers separately would imply greater packaging waste and carbon emissions from deliveries. Thus, in essence, carbon footprints are not being reduced, but rather spread out evenly. It was argued by the Justice Ministry that Apple could consider alternatives such as adopting USB-C cables and chargers to accomplish its aim of reducing e-waste. This alternative would have saved consumers an economic cost.

POTENTIAL FALLOUT: ANTI- CONSUMERISM

The current practice of not selling chargers with the iPhones which began in October 2020 inevitably forces consumers to purchase a second product to make the first work. That being said, the decision of the Sao Paulo Court, though it aims to protect consumer rights, may lead to an economic cost being imposed on iPhone consumers. Given that charging iPhones with power adapters other than an Apple USB power adaptor can lead to grave injury or death, as per Apple’s current practice of not including chargers, it is certain that consumers need to purchase an iPhone power adaptor separately to make the iPhone work. The biggest concern that stems from this decision is the bundling of the smartphone and the power adaptor at a price higher than what would be charged for only the smartphone. If Apple decides to bundle the adaptor along with the iPhone, to avoid penalties similar to those imposed by the Brazilian Court, it is likely that the company will charge higher, increasing costs and at the same time forcing repeat consumers to pay again for a power adaptor that they already have lying around in their home. This restrictive trade practice of bundling at a higher price runs contrary to the idea of consumer welfare. Furthermore, bundling may not be environmentally sound taking into account the amount of e-waste that will be generated by piling chargers. In addition to this, it is not clear whether Apple reduced the prices of the iPhone when it stopped selling the charger along with it.

This restrictive trade practice of bundling goods for all intents and purposes is considered discriminatory against consumers in several jurisdictions including India. In India, section 41(2) of the Consumer Protection Act, 2019 prescribes any trade practice which requires the consumers to buy, hire or avail of any goods or services as a condition precedent for buying other goods or availing of other services. Despite this provision in the Indian law, Apple may not be inclined to sell chargers along with iPhones because of its dominant position among the economic elite who prefer to purchase iPhones regardless of whether they have to pay extra for a power adaptor. Thus, the smartphone companies cannot be compelled to sell chargers with the mobile phones since it may lead to further consumer discrimination in the form of bundling, in addition to environmental concerns.

The judgment is also inadequate since it neglects the working of the Snob Effect which refers to the desire to own unique commodities which have a prestige value.^[1] Apple’s market share in Brazil is approximately 14% . A study  shows that owning an iPhone is the best indicator of income. It can be argued that Apple caters to a completely different segment of the Brazilian economy over which it has monopoly power. This 14% of the population opts for iPhones because of their exclusivity and high range which comes due to the creation of a sprawling ecosystem of software and services which interact with each other and allows an individual to do more with the products if they continue to invest in the ecosystem. This affluent section of the society may not want to discontinue their purchase of the same regardless of whether they are charged extra for a power adaptor, enabling Apple to exploit its dominant power in this segment of the economy. If Apple persists with the current practice of selling the smartphone without a charger, it will be discriminatory against consumers who do not have an iPhone power adapter lying around at home. Thus, what is needed for smartphone companies to avoid penalties such as those imposed by the Brazilian Court, is a reform in strategy such that neither an economic cost is imposed on the consumers through bundling at a higher price nor are they forced to purchase an essential second product to make the first product work.

NUDGING: PROTECTING CONSUMER INTEREST

Several smartphone companies have adopted Apple’s pioneering approach of selling a power adapter separately in the name of sustainability. Samsung jumped on the bandwagon for environmental concerns by ceasing the supply of chargers with phones when it introduced Galaxy 21. Just like Apple, it coerced the consumers to purchase a charger separately.  The same is true for Huawei, which silently released new models of its current flagship model without the power adapter inside. Users were however given an option of choosing the version with or without the charger, the price of the bundle with the charger was higher. This practice of coercing consumers to purchase a second product integral to the functioning of the second is discriminatory. Xiaomi on the contrary, though it discontinued supplying chargers when it introduced Mi 11, allowed consumers to opt for a charging brick and cable free of cost in case, they didn’t have these accessories lying around separately. Thus, consumers were offered two bundles of Mi 11 phones, one without a charger and another with a 55W charger in the box. Both bundles cost exactly the same. It is crucial to note that the manufacturing costs of Mi 11 and iPhone 12 were identical.  Xiaomi’s approach takes into account consumer interests and from a consumer-centric view, should have been opted for by Apple and its other competitors as well.  This approach also prevents charger piling instead of doing mere lip service to environmental cause and hence promotes sustainability. Such an approach would enable Apple to solve its dilemma of whether or not it should include outlet chargers with iPhones.                                          

To implement the said strategy in an even more effective way, smartphone companies like Apple and Samsung could consider utilizing Nudge Theory to steer repeat consumers toward bundles without chargers so that charger piling is prevented. A nudge predictably alters people’s behaviour without changing their economic incentives significantly.^[1] Nudging works on consumer heuristics and biases. Consumers usually end up choosing the default option owing to their status quo bias.^[2] For instance, when you purchase a new smartphone, the manufacturer has made a number of default choices like the wallpaper, the background to the ring sound and the number of times the phone rings before the caller is sent to voice mail. There are greater chances that you have stuck to the same default settings. Coming back to the discussion on power adaptors, smartphone companies can make the bundle without the charger the default option, nudging consumers to choose that bundle. However, consumers should be allowed the freedom to choose the bundle with the charger without any additional charges if need be. This way consumers are nudged towards the bundle without a charger and at the same time their economic incentive is not impacted. The freedom to choose is also maintained. Consumer interest is, thus, taken care of. Simultaneously, environmental concerns are also given due attention by preventing charger piling.

TOWARDS SUSTAINABILITY: USING COMMON CHARGERS     

In order to prevent anti-consumerist practices such as bundling at higher prices alternative approaches need to be evaluated. European legislators, for instance, have voted to introduce a single charging port for mobile phones, tablets, cameras, etc from 2024 onward. This move inevitably challenges Apple, given that iPhones use a different power connector. It will make USB-C connectors with fast charging time and speedy data transfer speeds, used by Android-based devices, the EU standard, compelling Apple to change its charging port for its devices. The move calls a halt to Apple’s selling devices with its proprietary ports since it is impracticable for Apple to produce different ports for varied geographic regions. The decision will not only help reduce e-waste but also increase convenience given that every device in one’s home will use the same charging standard. It will also save consumers close to $247 million a year as they will no longer need to buy a separate charger for each device.

Notably, several countries are making the shift towards uniform charging ports for smartphones including India. Like the European Union, India has also decided to make USB-C cables standardised. USB-C cables are not only cost-effective, they are also faster than any other charger. The European Commission has declared that it would require manufacturers to provide consumers with both a bundled and an unbundled option of the same product. Another sustainable way of charging phones that can be explored is energy-efficient wireless charging. Piling chargers can be prevented if standardized rules for portless charging are devised. Wireless charging utilizes electromagnetic induction to transfer electric energy from the charger to the smartphone. European Union lawmakers are contemplating implementing standardized rules for portless charging by the end of 2024.

The European Union’s exemplary decision is a crackdown against smartphone makers’ restrictive trade practices and at the same time promotes sustainability. This piece concludes that an approach similar to that of the European Union and India should be taken instead of banning the sale of mobile phones that come without power adaptors. In addition, the plausibility of using efficient wireless chargers should also be explored. The current decision of imposing a penalty is coercive and disregards environmental concerns. It may also lead to the bundling of goods and price rise which is against consumer interest and welfare. Thus, in order to tackle the issue of multiple chargers and discriminatory practices by smartphone companies like Apple and Samsung, alternatives like standardised USB cables and wireless chargers should be evaluated.

[1] Robert Pindyck and Daniel Rubinfeld, ‘Behavioral Economics and Public Policy’, in Robert Pindyck and Daniel Rubinfeld, Microeconomics (Pearson Educated Limited, 9^th edition 2018) 157.

[2] Richard H. Thaler and Cass R. Sunstein, Nudge: Improving Decisions About Health, Wealth and Happiness (Yale University Press 2008) 6.

[3] ibid 83.

The author is an undergraduate student at the National Law School of India University, Bengaluru and an observer at LSPR