Apple decides to comply with Italy’s free two-year warranty policy

After being threatened with a shut down of its local business and hefty fines by the Italian government for ignoring local warranty laws, Apple has backed down. Last week Apple(s AAPL) stopped selling AppleCare warranty plans in its retail stores in Italy, Reuters reported Tuesday.

AppleCare is a paid warranty policy that the company sells to customers to cover their gadgets after the free warranty period expires. Apple had come under fire from the Italian government’s consumer watchdog agency in late 2011 for not making it clear to Italian customers that they are entitled under European law to a two-year free warranty policy, and for continuing to sell AppleCare as an extended warranty that kicked in after just one year.

The company is still selling AppleCare on its website in Italy, but now phrases it as a way to “add to the two years of vendor warranty required by Italian law to protect consumers.”

Apple seemed to get away with ignoring the threats for almost a year, even as Italy got more aggressive in its enforcement policy. The company has been fined almost a million euros.

This probably isn’t the end of the warranty saga, however. The European Union’s Justice Commission has also been asking member countries if Apple is violating the two-year free warranty law in their countries as well.