Apple's iPhone slowdown may have violated securities laws

Apple's admission that it slowed down iPhones has become a major issue for company CEO Tim Cook. Photo/File.

Apple late Tuesday said government officials have questioned the tech giant about a software update that slowed down older iPhones, escalating a problem that has already damaged Apple's reputation with consumers.

"We have received questions from some government agencies and we are responding to them," Apple spokesperson Trudy Muller said in a statement. Apple's statement does not reference any specific agency.

Apple also reiterated that it did not release the update - designed to preserve battery life - to make older phones obsolete to sell new ones. Apple intentionally throttled the speed of most iPhones older than the iPhone 8 and iPhone X, both released late last year, when the battery power was low or the software sensed the battery was old.

"As we told our customers in December, we have never - and would never - do anything to intentionally shorten the life of any Apple product, or degrade the user experience to drive customer upgrades," the statement said.

Apple's statement comes amid reports that the Department of Justice and the Securities and Exchange Commission have asked Apple for more information about the software update from last January. The agencies are looking into whether Apple may have violated securities laws, but have not yet determined that there was wrongdoing, according to a Tuesday report from Bloomberg.

The SEC's involvement suggests that the government is looking at how Apple's actions affected investors.

The SEC declined to comment. The Justice Department did not respond to a request for comment.

In the statement, Apple said a new spring software update will allow iPhone users to see if the power throttling function is on and control it.

Many consumers have criticised the firm for not being more forthcoming. Apple apologised in December for slowing down iPhones without openly informing customers of the change. The company faces several lawsuits over the software, and government officials in Italy, France and South Korea have opened investigations into the issue.

Many of the people suing Apple say that they would not have bought newer iPhones if they knew that they could fix the issues with their older models by simply replacing the battery.

Apple has denied it had any motivation in releasing the update other than improving iPhone performance. It has since temporarily dropped the price of battery replacements from $79 to $29. It will also give people the option to turn off the phone-slowing software in a future update.

Sen. John Thune, R-S.D., chairman of the Senate Commerce Committee, has also asked Apple for more information about the update, including on how they disclosed the performance issues to iPhone owners.

"The large volume of consumer criticism levelled against the company in light of its admission suggests that there should have been better transparency with respect to these practices," Thune said in a letter sent Jan. 9. Apple's response to that letter is expected this week, said the Commerce Committee's spokesperson, Frederick Hill.

Apple chief executive Tim Cook said in an interview with ABC News earlier this month that Apple did alert customers about the change but could have been more open.

"We did say what it was, but I don't think a lot of people were paying attention and maybe we should have been clearer, as well," Cook said. "We deeply apologize for anyone who thinks we had some other kind of motivation."

Last February, Apple published a note on a support page that said the update "improves power management during peak workloads to avoid unexpected shutdowns on iPhone." It did not specifically mention that Apple would slow down the phone to do this.

The company's shares were down slightly in Tuesday trading - less than 1 percent - closing at $166.97 per share.