Apple agrees to settlement of up to $500 million from lawsuit alleging it throttled older phones

Apple Inc. has agreed to pay a settlement of up to $500 million, following a lawsuit accusing the company of intentionally slowing down the performance of older phones to encourage customers to buy newer models or fresh batteries.

The preliminary proposed class action lawsuit was disclosed Friday night and would see Apple pay consumers $25 per phone, as reported by Reuters.

Any settlement needs to be approved by U.S. District Judge Edward Davila, who oversaw the case brought in San Jose, Calif.

For consumers, the $25 payout may seem a little low, as a new iPhone can cost anywhere from $649 to $849 (for a lower-end model). The cost may be varied depending on how many people sue, and the company is set to pay at least $310 million under the terms of the settlement.

For its part, Apple is denying wrongdoing in the case and said it was only agreeing to avoid the cost and burden associated with the lawsuit.

Any U.S. owner of the iPhone 6, 6 Plus, 6s, 6s Plus, 7 Plus or SE that ran on iOS 10.2.1 or any of the later operating systems are covered by the settlement. Users of the iPhone 7 and 7 Plus which ran iOS 11.2 or later before Dec. 21, 2017 are also covered by the settlement.

Apple customers said their phone performance slowed down after they installed Apple software updates. The customers contend that Apple’s software updates intentionally degraded the performance of older models to encourage customers to unnecessarily upgrade to newer models or install new batteries.

Lawyers for Apple said that the problems were mainly due to high usage, temperature changes and other issues and that its engineers tried to address the problems as quickly as possible.

In February, Apple was fined $27 million by the French government for the same issue.

As we reported at the time:

A couple of years ago, Apple  released an iOS update (10.2.1 and 11.2) that introduced a new feature for older devices. If your battery is getting old, iOS would cap peak performances as your battery might not be able to handle quick peaks of power draw. The result of those peaks is that your iPhone might shut down abruptly.

While that feature is technically fine, Apple failed to inform users that it was capping performances on some devices. The company apologized and introduced a new software feature called “Battery Health,” which lets you check the maximum capacity of your battery and if your iPhone can reach peak performance.

And that’s the issue here. Many users may have noticed that their phone would get slower when they play a game, for instance. But they didn’t know that replacing the battery would fix that. Some users may have bought new phones even though their existing phone was working fine.

Shares of Apple were up more than 9% today in a general market rally.