Stephens Lawyers & Consultants – Legal Update – December 2022
The Australian Consumer Law[i] provides consumers with rights and remedies against suppliers (including on-line retailers) and manufacturers of goods or services acquired by them that do not comply with consumer guarantees. The consumer guarantees provided under the Australian Consumer Law cannot be excluded, modified or restricted and are in addition to any manufacturer’s or supplier’s warranty.
Individuals and businesses are considered to be “consumers” who have the benefit of “consumer guarantees” under the Australian Consumer Law, where the amount paid or payable in respect of good or services is up to the value of $100,000.[ii] The threshold amount does not apply where goods or services are acquired for personal, domestic or household use or consumption.
The Australian Competition and Consumer Commission (“ACCC”) is continually monitoring manufacturers and suppliers of goods to ensure compliance with consumer guarantees under the Australian Consumer Law.
Penalties for making false or misleading representations concerning the existence, exclusion or effect of any guarantee or warranty including a statutory guarantee in contravention of section 29 of the Australian Consumer Law have increased to:-
- In the case of a company – to the greater of AU$50 million; or three times the value derived from the relevant breach; or, if the value derived from the breach cannot be determined, 30 per cent of the company’s turnover during the period it engaged in the conduct; and
- In the case of an individual – a maximum of to AU$2.5 million.[iii]
Following multiple complaints by consumers, the ACCC recently instituted Federal Court proceedings against US based Fitbit LLC for allegedly making misleading statements to consumers about their consumer guarantee rights in respect of faulty devices in contravention of the Australian Consumer Law[iv]. The alleged false or misleading representations by Fitbit LLC include that consumers would not be entitled to a refund unless they returned a faulty product within 45 days of purchase or shipment; and that consumers who had been supplied with a faulty device as a replacement for an original faulty device, were not entitled to a second replacement device if Fitbit’s two-year ‘limited warranty period’ for the original device had expired.[v] The ACCC has sought court orders for penalties, injunctions and a compliance program.
In the recent proceeding brought by the ACCC, the Federal Court of Australia ordered caravan manufacturer Jayco Corporation Pty Ltd [“Jayco”] pay $75,000.00 for making the false or misleading representation about consumers rights under the consumer guarantees. Jayco misled a consumer by representing that they were only entitled to have their caravan repaired.[vi] Under the Australian Consumer Law, in addition to having a good repaired, a consumer is also able to obtain a refund or replacement or compensation where there is a major failure with the good.[vii]
The ACCC released a New Caravan Retailing Report (July 2022) which provides manufacturers and suppliers of caravans with guidance to ensure businesses in this market comply with the Australian Consumer Law [viii].
What are consumer guarantees under the Australian Consumer Law?
The consumer guarantees in relation to goods under the Australian Consumer Law include the following:
- Guarantee as to title.[ix]
- Guarantee as to undisturbed possession (provided there are no limitations on the title disclosed to the consumer).[x]
- Guarantee as to undisclosed securities, charges or encumbrances;[xi]
- Guarantee that goods are of an acceptable quality;[xii]
- Guarantee that goods are reasonably fit for any disclosed purpose;[xiii]
- Guarantee that goods match their description; [xiv]
- Guarantee that goods match a sample or demonstration model;[xv] and
- Guarantee that spare parts and repair facilities are reasonably available for a reasonable period after goods are supplied.[xvi] An exemption applies where manufacturers give reasonable notice, in writing, to a consumer that repair facilities or parts would not be available for a specified period. [xvii]
The consumer guarantees in relation to the supply of services imposed by the Australian Consumer Law are as follows:
- Guarantee as to due care and skill;[xviii]
- Guarantee that services, and any product resulting from the services, are reasonably fit for a particular purpose, where a consumer makes the purpose known expressly or by implication;[xix]
- Guarantee that services, and any resulting product from the services, will be of such a nature and quality, state or condition, that might reasonably be expected to achieve the desired result, where a consumer makes the desired result it wishes the services to achieve known expressly or by implication; [xx] and
- Guarantee as to reasonable time of supply. [xxi] .
The guarantees for the supply of services do not apply to:-
- contracts for the transportation or storage of goods where the consignee of the goods is not carrying on or engaged in a business, trade, profession or occupation in relation to the goods[xxii] ; or
- insurance contracts [xxiii].
Further, if a manufacturer or supplier provides an express warranty or “manufacturer’s warranty” to consumers when supplying goods or services, the Australian Consumer Law imposes on the business, a consumer guarantee that they will comply with the express warranty provided in respect of their goods or services.[xxiv]
The Australian Consumer Law also provides that the consumer guarantees cannot be excluded, restricted or modified by contract. A contractual term excluding, restricting or modifying a consumer guarantee will be void.[xxv] However, manufacturers or suppliers can limit their liability for failure to comply with consumer guarantees (other than guarantees as to title, undisturbed possession and undisclosed securities, charges and encumbrances), in limited circumstances.
Where a business offers an “extended warranty”, care should be taken to ensure that the extended warranty offers consumers benefits, over and additional to their rights already provided by consumer guarantees under Australian Consumer Law. Businesses risk contravening the Australian Consumer Law if they mislead consumers into paying for “benefits” they are already entitled to by law.[xxvi]
What goods and services have the benefit of consumer guarantees?
In summary, goods and services that have been supplied by manufacturer or supplier (including a non-profit organisation) in trade or commerce and acquired by a consumer in Australia will have the benefit of consumer guarantees. Subject to a number of exceptions, a person is taken to have acquired goods or services as a consumer under the Australian Consumer Law where [xxvii]:
- The amount paid or payable for the goods or services does not exceed AU$100,000 (or other amount prescribed by law in the future).
- For goods and services supplied before 1 July 2021, the threshold amount was AU$40,000.00.[xxviii]
- Goods or services are of the kind ordinarily acquired for personal, domestic or household use irrespective of their cost.
- A vehicle or trailer is acquired for use principally in the transport of goods on public roads.
A person or business does not acquire goods as a consumer under the Australian Consumer Law where the goods are acquired[xxix] :
- for the purpose of re-supply;
- for the purpose of using them up or transforming them, in trade or commerce in the course of a process of production or manufacture or repairing or treating other goods or fixtures on land.
Failure to comply with consumer guarantees and Australian Consumer Law
Failing to comply with the Australian Consumer Law may not only be “bad for business”, but may also involve significant legal consequences, reputational damage and financial risks. Consumers have a range of redress options, where goods or services do not comply with a consumer guarantee, including repair or replacement of the goods, resupply of the services, cancellation of the services, refund of the cost of the goods or services and compensation for loss or damage suffered.
The ACCC and State consumer protection agencies can also take enforcement action (including seeking court enforceable undertakings and taking court proceedings) on behalf of consumers where the manufacturers or suppliers fail to meet their obligations in relation to consumer guarantees under the Australian Consumer Law. Further, the ACCC will not hesitate to seek pecuniary penalties against parties who make false or misleading representations relating to consumer guarantees and rights and remedies available to consumers in contravention of section 29 of the Australian Consumer Law: maximum penalties are AU$50 million for corporations and AU$2.5 million for individuals[xxx]
What can a business do to minimise the risk of contravention of the Australian Consumer Law relating to consumer guarantees?
Many of the complaints by consumers relating to non-compliance with consumer guarantees could be avoided by businesses.
It is critical that business engaged in manufacturing, selling or supplying consumer goods or services ensure that they comply with consumer guarantees and the requirements of the Australian Consumer Law. Steps that can be taken by businesses (including online businesses offering and supplying goods and services to consumers in Australia) to minimise the risk of contravention of the Australian Consumer Law concerning statutory “consumer guarantees” include:-
(a) undertaking a comprehensive consumer law review of all business documentation to ensure they are not misleading in relation to consumer guarantees rights and remedies – including the following:-
- marketing and point of sales material;
- supply terms and conditions;
- sales contracts;
- warranty documentation;
- packaging and sales invoices and receipts;
(b) for all online businesses offering and supplying goods and services to consumers in Australia, a review of their website material to ensure it complies with the Australian Consumer Law; and
(c) regular staff training and education in relation to Australian Consumer Law compliance requirements and risk management generally.
How Stephens Lawyers & Consultants can assist
Stephens Lawyers & Consultants can advise and assist businesses on all aspects of Australian Consumer Law compliance – including:
- Review of online terms and conditions to ensure compliance with Australian Consumer Law;
- Review of existing marketing and point of sales material, supply terms and conditions/sales contracts, warranty documentation, packaging, cards, leaflets, invoices and receipts and websites to ensure compliance with the Australian Consumer Law.
- Preparation of supply terms and conditions, sales contracts, manufacturer and supplier warranty terms and conditions in compliance with the Australian Consumer Law.
- In-house training for management and staff on Australian Consumer Law compliance and related risk management.
- Preparation of Australian Consumer Law compliance and training manuals tailored to your business needs.
- Advice and representation in dealing with ACCC investigations, consumer complaints and court proceedings commenced either by the ACCC or a consumer.
Disclaimer: This information sheet is not intended to be a substitute for obtaining legal advice.
For further information contact:
Katarina Klaric
Principal
Stephens Lawyers & Consultants
Melbourne Head Office
Suite 205, 546 Collins Street, Melbourne VIC 3000
Phone: (03) 8636 9100 Fax: (03) 8636 9199
Sydney Office
Level 29, Chifley Tower, 2 Chifley Square, Sydney, N.S.W. 2000
Phone: (02) 9238 8028
Email: [email protected]
Website: www.stephens.com.au
All Correspondence to:
PO Box 16010 Collins Street West Melbourne VIC 8007
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© Stephens Lawyers & Consultants, November 2018 – updated 12 December 2022 Authored by Katarina Klaric, Principal. The contribution of Rochina Iannella, Lawyer, in updating this article (in December 2022) is acknowledged.
[i] Competition and Consumer Act 2010. Schedule 2 – Australian Consumer Law. Commenced on 1 January 2011.
[ii]Treasury Laws Amendment (Acquisition as Consumer—Financial Thresholds) Regulations 2020 came into effect on 1 July 2021– increasing the contract/value threshold amount paid or payable in respect of goods or services from $40,000 to $100,000.; Consumer Affairs Australia and New Zealand, Australian Consumer Law Review Final Report, 2017
[iii] Ibid; The Treasury Laws Amendment (More Competition, Better Prices) Act 2022 increased maximum penalties that apply to a range of offences and civil penalty provisions under the Australian Consumer Law including false and misleading representations.
[iv] ACCC, “Fitbit in court over statements to consumers on faulty devices”, 24 October 2022; [https://www.accc.gov.au/media-release/fitbit-in-court-over-statements-to-consumers-on-faulty-devices ]
[v] Ibid.
[vi] ACCC, “Jayco to pay $75,000 for misleading a consumer about consumer guarantee rights”, 3 May 2021, https://www.accc.gov.au/media-release/jayco-to-pay-75000-for-misleading-a-consumer-about-consumer-guarantee-rights
[vii] Australian Consumer Law, sections 260 and 261
[viii] ACCC, “New caravan retailing: Ensuring industry compliance with the Australian Consumer Law”, 21 July 2022; [https://www.accc.gov.au/publications/new-caravan-retailing-ensuring-industry-compliance-with-the-australian-consumer-law]
[ix] Australian Consumer Law, Schedule 2, section 51
[x] Australian Consumer Law, Schedule 2, section 52
[xi] Australian Consumer Law, Schedule 2, section 53
[xii] Australian Consumer Law, Schedule 2, section 54
[xiii] Australian Consumer Law, Schedule 2, section 55
[xiv] Australian Consumer Law, Schedule 2, section 56
[xv] Australian Consumer Law, Schedule 2, section 57
[xvi] Australian Consumer Law, Schedule 2, section 58(1)
[xvii] Australian Consumer Law, Schedule 2, section 58(2)
[xviii] Australian Consumer Law, Schedule 2, section 60
[xix] Australian Consumer Law, Schedule 2, section 61(1)
[xx] Australian Consumer Law, Schedule 2, section 61(2)
[xxi] Australian Consumer Law, Schedule 2, section 62
[xxii] Australian Consumer Law, Schedule 2, section 63 (a); Treasury Laws Amendment (Australian Consumer Law Review) Act 2018 (No. 132, 2018) – Schedule 9, section 2 (2)
[xxiii] Australian Consumer Law, Schedule 2, section 63 (b)
[xxiv] Australian Consumer Law, Schedule 2, section 59
[xxv] Australian Consumer Law, Schedule 2, section 64
[xxvi] Australian Consumer Law, Schedule 2, section 29(n)
[xxvii] Australian Consumer Law, section 3(1) and 3(2)
[xxviii] Treasury Laws Amendment (Acquisition as Consumer—Financial Thresholds) Regulations 2020
[xxix] Australian Consumer Law, section 3(2)
[xxx] Australian Consumer Law, sections 259(4), 267(4), 271, 272