How the EU got me a free iPhone

Knowing EU law is more useful than it seems, as Jon Worth found out.

My 16 month old iPhone 4S had a hardware fault: the power button on the top of the phone would not press properly, it was partially stuck. You had to push the button with all your might to get the thing to turn off, or just to turn off the screen. It turns out this is a very common iPhone 4 and 4S problem – see here, as well as numerous similar posts on Apple’s forums.

I’d bought the phone from the Apple Store online, so had to go to an Apple Store to get someone to have a look at it. There is no store in Copenhagen or Brussels, so I went to the Geneva store when I was working in Switzerland last week. I booked my appointment at Genius Bar, and – in French – started to explain my problem. Barely had I got to the end of the sentence and the guy knew exactly what I was about to report… but he couldn’t help me. My phone was out of warranty, and I had not bought it in Switzerland.

The latter is important, because my case for getting a new phone, for free, from Apple, was by citing Directive 1999/44/EC about guarantees for electronic goods in the EU. This basically says that if a fault was in the product when it was purchased, the manufacturer will have to take it back and replace it within the first 2 years – i.e. double the 1 year warranty that Apple gives. More details about the Directive here, and a legal case about it in Belgium here. I’d purchased my phone direct from Apple, that’s why I needed to go to them for the replacement. If I had the phone on a contract from O2 or Vodafone or whoever, I would have had to do all of this via the mobile phone company instead.

Anyway, the guy in the Geneva store said that I better phone Apple’s main European call centre in Ireland and see what they say, as Geneva could not make a judgment on the applicability of EU law. So back at my hotel I called the call centre in Ireland. It took 30 minutes on the phone, and my call was referred to three different staff. My line was clear and persistent:

  • The fault with the power button is well known
  • The phone was purchased in the EU (shipped from Ireland to a UK address)
  • That hence EU law should apply, and I should be entitled to a new phone even though I was beyond Apple’s own 12 month warranty

The most senior person I spoke to was most amenable. Rather than ask about the phone directly, he asked about my history as a purchaser of Apple products. I’ve only had Apple computers since 1994, and said so. He even asked for the serial number of my MacBook Pro to check I was telling the truth – giving this reassured him that I was. He then said that, in this case, they would be willing to make an exception… So he put a note on my record with Apple, and said I could go to any Apple Store to get a replacement.

So off I went back to the Geneva store to collect my replacement phone. “Comment est-ce que vous avez réussi à obtenir cela?” [How did you get that?] the guy there asked me. “Enfin, la raison que je suis à Genève aujourd’hui est pour donner des cours en politique de l’UE… donc je connais mes droits comme consommateur en droit européen!” [The reason I'm in Geneva today is to give courses in the politics of the EU… so I know my rights as a consumer under European law!] So I handed in the old phone, received the new one from the store, and off I went. Mission accomplished.

This was originally posted on Jon's blog, and has been reposted here with permission.

Photograph: bredgur/flickr, CC-BY-SA

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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation