Apple Fined in Italy - Analyst Blog

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Italian anti-trust authorities recently slapped a fine of $1.2 million (€ 900,000) on Apple Inc. (AAPL) for misleading consumers regarding assistance services and guarantees for its products. According to a recent report from news agency Reuters, authorities found Apple guilty of violating Italian customer laws.

Under the Italian customer code, products generally carry a two-year guarantee. However, Italian authorities said that notwithstanding this code Apple emphasized on selling its standalone one-year guarantee for its products, known as AppleCare Protection Plan to the customers, implying that the protection bought overlapped with the extra year provided by law.

Authorities levied a fine of €400,000 on Apple Italy, Apple Italy Retail and Apple International Sales for failing to adequately inform consumers about the two-year guarantee. The remaining amount was charged for inducing customers to sign up for overlapping protection plans.

Apart from paying the fine, Apple is also required to include the details of the two-year guarantee to its AppleCare plan within 90 days. However, the anti-trust authorities provided Apple with the option of challenging the verdict within 60 days.

Apple has been facing a tough time in Europe over the past 12 months. Apple faces a separate investigation by the European regulators relating to the alleged price-fixing deals with e-book publishers, thereby blocking rivals and hurting consumers.

European Union ( EU ) antitrust authorities are also probing Apple over its patent disputes with Samsung Electronics due to concerns that intellectual property rights may be unfairly used by some firms against their rivals.

Apple is also losing market share in Europe. According to a recent report published by research firm Kantar Group, Apple's smartphone market share declined in France, Germany, Italy and Spain over the last 12 months ending November 2011.

Apple's smartphone market share declined from 27% to 22% in Germany, which is one of the major markets of Europe. Google Inc.'s (GOOG) Android platform, on the other hand, continued to flourish and enjoyed a dominant 61% market share in Germany with the Samsung Galaxy II as its flagship product.

We believe that the lingering macroeconomic concerns in Europe will continue to hurt Apple's growth in the region going forward. However, Apple is expected to launch its new iPhone 4S in China in early 2012, which will boost its market share going forward, in our view.

We maintain our Neutral recommendation over the long term (6-12 months). Currently, Apple has a Zacks #2 Rank, which implies a Buy rating in the near term.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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