In its Compliance and Enforcement Policy released in February 2019, the Australian Competition and Consumer Commission (ACCC) flagged a continued focus on the representations, or more importantly misrepresentations, companies make in relation to the consumer guarantees regime under the Australian Consumer Law (ACL).

Companies that are misrepresenting customer guarantees and consequently breaching consumer guarantee laws, are a continued concern for the ACCC. From the wave of investigations carried out by the ACCC in 2019, several lessons can be learned.

Recalling the authorities

This spotlight on customer warranties and guarantees touches on two key aspects of the ACL:

• First, is that section 54 of ACL requires businesses to provide automatic guarantees to customers that products and services purchased (for less than $40,000, or for more than $40,000 if for personal or household use) will work as expected.
• Second, section 29 of the ACL prohibits businesses from making false or misleading representations regarding their goods or services. This includes, as per section 29(m):

…a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy…

Separate to these guarantees, many businesses offer warranties against defects. These warranties usually consist of a time-limited representation to the customer that, if the goods are defective, the business will repair, replace or refund those goods as appropriate. It is important to note however, as called out by the ACCC, that these warranties operate in addition to the consumer guarantees under the ACL – they do not limit or replace them.

The golden thread – and how to snip it

Throughout 2019 the ACCC has undertaken a range of enforcement activity to uphold the ACL, emphasising that the consumer guarantees cannot be excluded or changed by a business’ warranty. Attempts to do so risk pecuniary penalties to the higher of:

• $10 million;
• 3 times the value of the benefit obtained by the misrepresentation; or
• 10% of the annual turnover of the company during the 12-month period preceding the misrepresentation.

Examples of conduct found to be attempting to exclude or change rights to consumer guarantees, and where penalties were subsequently issued, include:

• businesses’ refusal to provide refunds (eg on travel fares);
• businesses asserting that refunds were available solely from the manufacturer, not the retailer;
• businesses imposing time restrictions on consumer guarantees; and
• businesses asserting that a consumer’s rights were limited to the manufacturer warranty, which would override any other consumer guarantees.

In addition to the above, the Full Federal Court has indicated that businesses which refrain from highlighting the ACL consumer guarantees to their customers (and only acknowledging that ACL consumer guarantees exist when prompted by a particular customer) may be found to be misleading such customers under the ACL

Tracking out of the storm

Businesses need to be increasingly mindful that their policies and procedures are clear and accurate regarding the ACL consumer guarantees regime. We recommend businesses consider the following steps:

• ensuring their relevant documentation (e.g. policies, websites) inform customers of  their rights under the ACL;
• checking that any warranties provided do not contain language which could be seen as denying or overriding the consumer guarantees;
• updating any warranties to include the mandatory text introduced in June 2019 by the ACCC; and
• training staff to ensure they are adequately informed of the relevant consumer rights and remedies.

Authors: Lesley Sutton, Thomas Power and Rosalind Moffatt