The Australian Consumer Law ( “ACL”), which came into operation on 1 January 2011, introduced a comprehensive new framework of statutory consumer guarantees under the Competition and Consumer Act 2010 (Cth)[i]. The Australian Consumer Law 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.
Consumer guarantee issues reported to the ACCC in 2017, exceeded 29,000 complaints, half of which related to consumers having problems getting remedies for faulty automative products, whitegoods and electronic products[ii].
The Australian Competition and Consumer Commission (“ACCC”) is continuing to monitor manufacturers and suppliers of goods to ensure compliance with consumer guarantees under the Australian Consumer Law. ACCC recently accepted court enforceable undertaking from Volkswagen Group Australia to improve its compliance with its consumer guarantee obligations under the Australian Consumer Law when dealing with customers’ complaints about faults or defects in new cars purchased[iii].
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. [iv]
- Guarantee as to undisturbed possession (provided there are no limitations on the title disclosed to the consumer).[v]
- Guarantee as to undisclosed securities, charges or encumbrances;[vi]
- Guarantee that goods are of an acceptable quality;[vii]
- Guarantee that goods are reasonably fit for any disclosed purpose;[viii]
- Guarantee that goods match their description;[ix]
- Guarantee that goods match a sample or demonstration model;[x] and
- Guarantee that spare parts and repair facilities are reasonably available for a reasonable period after goods are supplied.[xi] 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.[xii]
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;[xiii]
- Guarantee that services are reasonably fit for a particular purpose;[xiv]
- Guarantee that services will achieve the desired result;[xv] and
- Guarantee as to reasonable time of supply.[xvi]
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[xvii]; or
- insurance contracts.[xviii]
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.[xix]
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.[xx] 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. [xxi]
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 consumer under the Australian Consumer Law where [xxii]:
- The amount paid or payable for the goods or services does not exceed $40,000 (or other amount prescribed by law in the future).
- 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[xxiii]:
- 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 fails 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 $10 million for corporations and $500,000 for individuals[xxiv].
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. For many businesses, this may involve a comprehensive consumer law review of all documentation, to ensure that all marketing and point of sales material, supply terms and conditions, sales contracts, warranty documentation, packaging and sales invoices and receipts are not misleading in relation to consumer guarantees rights and remedies. On-line businesses offering and supplying goods and services to consumers in Australia, should also ensure that their website material complies with the Australian Consumer Law. Staff training and education in relation to Australian Consumer Law is also important, to minimise the risk of non-compliance with the Australian Consumer Law.
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 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:
Stephens Lawyers & Consultants
Suite 205, 546 Collins Street, Melbourne VIC 3000
Phone: (03) 8636 9100 Fax: (03) 8636 9199
All Correspondence to:
PO Box 16010 Collins Street West Melbourne VIC 8007
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© Stephens Lawyers & Consultants, November 2018. Authored by Katarina Klaric.
[i] Competition and Consumer Act 2010. Schedule 2 – Australian Consumer Law
[ii] ACCC Media Release titled “39 percent increase in consumer guarantee reports in 2017” 8 January 2018 (edited 12 April 2018).
[iii] ACCC Media Release titled “Volkswagen undertakes to fix consumer guarantees approach” dated 7 September 2018. https://www.accc.gov.au/media-release/Volkswagen-undertakes-to-fix-consumer-guarantees-approach
[iv] Australian Consumer Law, Schedule 2, section 51
[v] Australian Consumer Law, Schedule 2, section 52
[vi] Australian Consumer Law, Schedule 2, section 53
[vii] Australian Consumer Law, Schedule 2, section 54
[viii] Australian Consumer Law, Schedule 2, section 55
[ix] Australian Consumer Law, Schedule 2, section 56
[x] Australian Consumer Law, Schedule 2, section 57
[xi] Australian Consumer Law, Schedule 2, section 58(1)
[xii] Australian Consumer Law, Schedule 2, section 58(2)
[xiii] Australian Consumer Law, Schedule 2, section 60
[xiv] Australian Consumer Law, Schedule 2, section 61(1)
[xv] Australian Consumer Law, Schedule 2, section 61(2)
[xvi] Australian Consumer Law, Schedule 2, section 62
[xvii] 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)
[xviii] Australian Consumer Law, Schedule 2, section 63 (b)
[xix] Australian Consumer Law, Schedule 2, section 59
[xx] Australian Consumer Law, Schedule 2, section 64
[xxi] Australian Consumer Law, Schedule 2, section 29(n)
[xxii] Australian Consumer Law, section 3(1) and 3(2)
[xxiii] Australian Consumer Law, section 3(2)
[xxiv] Australian Consumer Law, sections 259(4), 267(4), 271, 272