Industry Committee on March 1st, 2018

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you, and I'll try to sneak in two questions.

First, for Ms. Gendron-O'Donnell, when you're collaborating with other countries, could a problem in one country trigger an investigation in Canada?

[Alexa Gendron-O'Donnell]

We start our investigations in a number of ways, but speaking with our international counterparts is certainly among the ways we use to determine whether we should begin investigating certain issues.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you, because with Canadian consumers and American producers, sometimes borders disappear.

[Alexa Gendron-O'Donnell]

I think we know that products and services are getting more global all the time and to us it underscores the need to work together.

[Lloyd Longfield, Liberal, Guelph, ON]

Great. Thank you.

I have a quick technical question for Mr. Poole.

I'm a hydraulics specialist, so I'm translating this into pressure and flow. When you put power in, when you're trying to get too much pressure out, you can reduce your flow. It sounds like what they're doing in this case is a technical solution. Does your agency look at technical solutions, or do you just look at complaints? Let's say a battery is a replacement. You could put in a larger horsepower electric motor and a hydraulics system, or you could dial back your flow on motors to be able to get more things done with the same amount of power.

Do you look at technical solutions?

[John Poole]

We will occasionally look at certain issues. In regard to batteries, we tend to treat the battery as a black box that we don't fully understand.

Our expertise really lies in the processor itself, and generally speaking, we won't speak to the design of a phone, saying that a phone should have a larger battery or a smaller battery, something like that. Our focus really is on the processor itself.

[Lloyd Longfield, Liberal, Guelph, ON]

Okay, thank you. Thanks, Mr. Chair.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

For the final question of this session, we go to Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Ms. Gendron-O'Donnell, I know that in Australia there's a mediation process going on with Apple on some of their marketing practices, but also in your notes you mentioned that the Federal Court recently upheld a bureau investigation with Hachette, Macmillan, Simon & Schuster, and as well, Apple.

Can you highlight that a little? I've been reading your comments here, and it appears that an agreement was reached and then later on was appealed in the courts, and then was upheld again. Can you please expand on what happened there? It seems that something was reached, and then it was challenged later on. That seems a bit different or unusual.

[Alexa Gendron-O'Donnell]

That's right. The bureau reached a consent agreement with a number of parties. Under the court system and under the law, a third party who has potentially been affected by a consent agreement can challenge, which is what happened in this case. That has now all been resolved, so the most recent consent agreements that the bureau entered into now stand. There are consent agreements in place with all the list of parties that you saw, that currently stand today.

[Brian Masse, NDP, Windsor West, ON]

Can you confirm that Apple was part of that?

[Alexa Gendron-O'Donnell]

There's a public consent agreement available on the Competition Tribunal website with Apple and the Competition Bureau that outlines all of those details.

[Brian Masse, NDP, Windsor West, ON]

Okay.

Last, Mr. Poole, with regard to your process now, will you be continuing to use your analyses for not only just Apple, but other phones and devices, in terms of speeds and updates? Is it something that you do on a regular basis and as part of your analyses?

[John Poole]

We'll be extending the statistical analysis, which we do on a regular basis, to include this sort of analysis for iOS and Android devices. We'll also investigate whether or not we'll need to extend this to both PC and Apple laptops.

[Brian Masse, NDP, Windsor West, ON]

Thank you very much.

[The Chair, Liberal, Dan Ruimy]

Thank you very much to our two witnesses for coming in today and sharing such wonderful information.

We are going to suspend while we set everything up for our next panellists and then we'll go from there.

[The Chair, Liberal, Dan Ruimy]

Welcome back, everybody.

We are on round two. With us today, from Apple Canada, we have Jacqueline Famulak, the regional counsel for Canada and Latin America, and Simon Potter, who is counsel with McCarthy Tétrault LLP.

You have 10 minutes to present to us. We'll then go into questions.

[Jacqueline Famulak, Regional Counsel, Canada and Latin America, Apple Canada Inc.]

Good afternoon. My name is Jacqueline Famulak. I manage legal and government affairs at Apple Canada Inc. I have been employed by Apple Canada for over 30 years.

Apple Canada Inc. is a sales and distribution entity. We also have 29 retail stores across Canada. The design, manufacture, and testing of devices has always been done by Apple's parent company, Apple Inc., which is based in California.

I’m here to help the standing committee understand the facts of Apple’s efforts to make sure that users of Apple devices get all the benefits from the devices they use, and that these benefits last as long as possible, even in a world of rapid innovation.

Apple Inc. has recently answered a series of questions posed by the chairs of the United States Senate Committee on Commerce, Science and Transportation and the United States House of Representatives Committee on Energy and Commerce. Apple’s comprehensive answers to those questions are attached to my written statement. I believe you have received it.

I am here today to answer your questions, but before doing so, I would like to share a few important points at the outset about Apple’s actions regarding iPhone batteries and performance, and what the Canadian consumer may have experienced as a result of those actions.

First, Apple would never intentionally do anything to shorten the life of any Apple product or degrade the user experience in order to drive customer upgrades. Apple’s entire philosophy and ethic is built around the goal of delivering cutting-edge devices that our customers love. Our motivation is always the user.

Second, Apple’s actions related to the performance of iPhones with older batteries were designed specifically to prevent some older models from unexpectedly shutting down under certain circumstances, and we communicated this publicly. Let me explain.

In order for a phone to function properly, the electronics must be able to draw power from the battery instantaneously, but as lithium-ion batteries age, their ability to hold a charge diminishes, and their ability to provide power to the device decreases. Very cold temperatures can also negatively affect a battery’s performance. A battery with a low state of charge may also cause the device to behave differently. These things are characteristics of battery chemistry that are common to all lithium-ion batteries used in all smart phones, not just Apple’s.

If power demands cannot be met, the iPhone is designed to shut down automatically in order to protect the device’s electronics from low voltage. We do not want our customers to experience interruptions in the use of their iPhones, whether that is making an emergency phone call, taking a picture, sharing a post, or watching the end of a movie.

To address the issue of unexpected shutdowns, we developed software that dynamically manages power usage when, and only when, the iPhone is facing the risk of an unexpected shutdown. This power management software helps keep iPhones on when they otherwise might turn off. It does this by balancing the demand for power with the available supply. The sole purpose of the software update in this case was to help customers to continue to use older iPhones with aging batteries without shutdowns, not to drive them to buy newer devices.

Third, Apple regularly provides software updates for iPhones and our other devices. These software updates can include everything from new features and bug fixes to security updates. Whenever we issue a software update, we include a ReadMe note that has a description of the contents of the update for the customer to review prior to the software installation. In the case of iOS 10.2.1, we stated in the ReadMe note “improves power management during peak workloads to avoid unexpected shutdowns on iPhone”.

Those things said, our intention has been to give our customers the best products and the best experiences possible. We take our customer concerns seriously, and we have taken a number of steps to address them.

First, Apple is offering to provide out-of-warranty replacement batteries for $35 instead of the original price of $99 to anyone with an iPhone 6 or later, whether they have experienced any performance issues or not. This offer began on December 28, 2017, and is available through to the end of December 2018, so customers have plenty of time to take advantage of it.

Further, Apple is also providing customers with additional information on its website about iPhone batteries and performance, including tips to maximize battery performance.

In addition, iOS 11.3, which is now in public beta, will add new features to give customers easy access to information about the health of their iPhone's battery. It will be available this spring, and the new software will offer power management that will recommend if a battery needs to be serviced. It will also allow customers to see whether the power management is on, and they can choose to turn it off if they wish.

With that, I am ready to answer your questions.

Thank you.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Just to be aware, we do need five minutes at the end for some committee business, so if we can keep our time tight, that would be great.

We're going to start off with Mr. Baylis.

You have five minutes.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

Thank you, Chair.

Ms. Famulak, thank you for being here. If I understand the issue with the lithium-ion batteries—and we understand it thanks not to Apple, but thanks to Mr. Poole from Primate Labs who explained it to us—when the battery hits about 30%, there is this danger of instant shut-off. Is that correct?

[Jacqueline Famulak]

Yes. There are a number of circumstances that might give rise to an unexpected shutdown. The chemical age of the battery itself—

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

Yes, it will shut down, and Apple did not want that to happen, so that's what they made this update for. Is that right?

[Jacqueline Famulak]

Correct. Originally, we found a limited range of iPhone 6s phones that were manufactured incorrectly. We offered a repair program for them. During that analysis, we discovered that other iPhone 6s phones were having shutdown issues.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

So you had this thing that would shut down. You said you only wanted to do this.... Apple would never do anything to degrade the customer experience, right? You said that. It would only happen when and if it was needed, right? You mentioned also that you would not do anything to degrade the customer experience. Then you also stated this would only happen when and if needed.

[Jacqueline Famulak]

Yes. The software looks at the variables. It looks at chemical age. It looks at the room temperature. It looks at the state of charge of the battery. It looks at those and adjusts its levels accordingly in order to maximize the performance.