Did Apple’s Controversial Warranty Policies Inadvertently Help Scammers?

iphone 4sOn the same day that Apple’s (NASDAQ:AAPL) Chief Executive Officer Tim Cook issued an apology to the company’s Chinese iPhone customers for its allegedly discriminatory customer service policy, a couple was arrested in China for scamming unsuspecting customers shopping for the company’s iconic devices. In fact, the very aspect of Apple’s warranty that the country’s state-run media outlets took issue with — its iPhone return policy — enabled five employees at an electronics store in Wenzhou, China to sell fake iPhones.

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A report in The Register on Monday outlined their scheme; to take advantage of the company’s return policy, the scammers submitted 121 iPhone 4S “BAND parts” — it was unclear whether the items were modem assemblies or motherboards — using their credentials as official iPhone distributors and claimed they were defective and needed replacing. One BAND unit, which makes up the iPhone’s core components, excluding its battery and back cover, costs more than 3000 yuan, or about $480. The scammers would buy a back cover, battery, and other components, and then reassemble those parts together with the BAND piece and sell the refurbished device as a new iPhone. They even went so far as to print the real iPhone serial numbers on the fake BAND components…

“It took Apple over a month to spot the scam,” The Register’s Phil Muncaster reported, “after which the owner of the store in question was informed and an investigation begun. On April 1 police finally cuffed a shop engineer and her boyfriend as the ringleaders.”

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The iPhone distributors had initially denied any wrongdoing to police, but local law enforcement became suspicious when it was discovered that 118 of the 121 iPhones that were reported as faulty were activated on December 20 and contained the identifier “C8PC” in their serial number. In a statement, police from Wenzhou’s Lucheng district said that it was unusual for so many of the same phones to be in needed of repair. Police found that the suspects had also filed for the replacement order on December 28 and 30, just within Apple’s 15-day threshold for free returns on products, which was another indication that the phones were part of a scam.

Police said that the BAND parts helped scammers make a profit of 100 yuan, or $162, on each refurbished phone sold.

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