A US court cleared the way for a class action lawsuit against Apple based on comments made by CEO Tim Cook two years ago on the state of its business in China, which prosecutors claim later turned out to be misleading.

In her conclusion, the judge presiding over the hearing denied Apple’s attempts to get the case dismissed, adding the prosecution “adequately pleads that the China-related statements were materially false or misleading when made”.

The case, held at the United States District Court for the Northern District of California, surrounds comments made by Cook during the Q&A section of an analyst call in November 2018.

During the call he was asked about the company’s “trajectory” in its emerging markets, with a specific request for an overview on the outlook in China.

Cook responded by noting although there were various issues in countries such as Turkey, India, Brazil and Russia, China was “not in that category,” pointing to strong results in the previously reported quarter.

In early January 2019, the company informed investors it would fall up to $9 billion short of its earnings guidance blaming, in part, economic issues in China in the second half of 2018.

“While we anticipated some challenges in key emerging markers, we did not foresee the magnitude of the economic declaration, particularly in Greater China,” Apple noted at the time. Following the news its share price dropped more than 9 per cent.

Defence
During the hearing, Apple claimed the statements about China were not false or misleading as the executive was referring to the previous quarter rather than the present.

Apple also faced a second complaint which its lawyers successfully got thrown out.

The case is being led by UK local authority Norfolk County Council, which holds Apple stock through its pension fund. Apple is accused of various violations of the US Securities Exchange Act.

Lawyers for the prosecution Robbins Geller claim “defendants misrepresented the condition of its business in its largest growth market, Greater China, and specifically overall demand for the company’s iPhone in China.”

Apple has 14 days to respond to the decision.