Background

Retailers and phone stores worldwide have begun pulling the newly released Samsung Galaxy Note 7 off shelves amidst a global recall by the South Korean electronics giant. The issue? Incredulously, batteries themselves catching fire and exploding.

While it seems unlikely that any phone would burn or explode, especially from a company that prides itself on quality and technology: the Samsung Galaxy Note 7 recall is an unprecedented example of a mistake that will impact the global smartphone market of 2016. A move which marks a huge loss for Samsung who had hoped to compete with Apple’s Iphone 7 release later this year.

Reports first began surfacing on the internet shortly after the Galaxy Note’s release, with users uploading to social media photos of their smartphones burnt, charred and even “exploding”. Following media speculation that the Galaxy Note 7 may contain faulty fire-prone batteries Samsung Electronics halted sales of the smartphones in over 10 different countries and issued a global recall.

The damage done

The damage caused by the issue has had an impact upon the electronics giant with almost $7 billion USD lost as a result. With increasing consumer and media speculation surrounding the faulty battery, the anticipation and hype over Samsung’s latest baby has seen a huge de-evaluation.

Yet in Australia, this is not the first time Samsung Electronics have had their hands full with a fire-prone product. In August 2016, a Samsung washing machine that caught fire in Western Sydney caused two people to be hospitalised due to smoke inhalation. Furthermore Fire and Rescue NSW have reportedly responded to 49 fires involving Samsung washing machines over the past 4 years.

With stocks plummeting to an all-time low this week, Samsung has stated it has began preparing replacement devices for affected customers which will take approximately two weeks.

The legal perspective

In Australia, telecommunication companies Telstra, Optus and Vodafone have already removed the Galaxy Note 7 from shelves. The rights of the consumers who have bought the phone outright or who are contracted to a monthly plan have been the subject of much speculation.
Under Australian Consumer Law, a major failure on behalf of the manufacturer or retailer occurs when the goods are unsafe or the goods would not have been acquired by a reasonable consumer if they were aware of the issue. In this scenario, consumers are entitled to a remedy from Samsung or the retailer they purchased the product from. These remedies include:

  • having the product repaired, replaced, refunded; or
  • to receive compensation if there was a loss or damage suffered due to the product.

However for consumers who have received the phone as part of an on-going phone plan, additional plans may need to be taken by contacting the telecommunication providers to cancel or halt the monthly fees.

What’s next?

Despite the widespread criticism of the Note 7, it is possible for Samsung to bounce back from the massive blow through implementing effective damage control. The importance of stringent product testing will be a key determinant of Samsung’s continued popularity in the Australian market. In order to continue to operate and trade within the Australian electronics market, Samsung needs to ensure that it promptly responds to any claims lodged by consumers under the ACL to avoid potential legal action.

If you are selling products ensure that you have the legals in place by contacting an experienced business lawyer.

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Jennifer Wang

Jennifer is a Paralegal, working in our content team, which aims to provide free legal guides to facilitate public access to legal resources. With a keen interest in media and IP law, her research focuses on the evolving role of the law to navigate new and emerging information platforms.