Australia: Warranty misrepresentations – Part of the ACCC’s current focus

Competition and Trade Practices Update - Part 2
Last Updated: 10 March 2011
Article by Laura Hartley

The ACCC has given indications in its annual report for 2009-10 that its focus under the ACL will be the use of new penalty provisions, national leadership in product safety, the identification of unfair terms in standard form contracts, and a greater emphasis on statutory consumer guarantees.

Looking at recent ACCC action, it is clear that the ACCC's increased interest in the warranty and refund policies of consumer good suppliers has already started. In the past month, the ACCC has accepted court enforceable undertakings from both Dell Australia Pty Ltd (Dell) and Optus Mobile (Optus) regarding warranty representations.

In arriving at these outcomes, ACCC Chairman Graeme Samuel has noted, "The ACCC will actively pursue businesses that misrepresent consumers' rights under the new law."


The ACCC raised concerns that Dell's warranty and refund policies were misleading and did not comply with sections 52 and 53(g) of the TPA.

The ACCC was concerned that from January 2008 to May 2010, Dell made written and verbal representations to its consumers that:

  • the consumer was only entitled to a refund, replacement or credit of the purchase price for a product within 15 days of the invoice date of the product, when that was not the case;
  • where a product developed a fault outside Dell's express warranty period, the consumer was not entitled to any remedy for the product and would have to pay for any repair or replacement parts required to remedy the fault, when that was not always the case;
  • where a product developed a fault within Dell's express warranty period, the consumer was required to prepay, and assume the risk of all shipping and transportation charges to return the product to Dell for repair or replacement, when that was not always the case; and
  • where a third party product was faulty, the consumer was only entitled to seek remedies directly from the third party manufacturer, when that was not the case.

In December 2010, Dell provided the ACCC with a court enforceable undertaking to provide consumers with accurate information about their warranty rights. In particular, Dell has undertaken to:

  • email all customers who purchase products directly from Dell in the next three years, and publish on the Dell website for a period of three years, a notice outlining the warranty rights of consumers;
  • publish an advertisement in the Weekend Australian notifying the public of the ACCC's investigation of Dell and inviting consumers to contact Dell if they wish to have their claims reassessed; and
  • upgrade its existing Trade Practices Compliance Program.


On 7 January 2011, the ACCC announced that it had accepted court enforceable undertakings from Optus Mobile following an investigation into alleged misrepresentations about consumers' rights and remedies for faulty mobile phones.

The ACCC was concerned that the remedies made available by Optus to customers who complained of receiving a faulty mobile handset were limited to those under the mobile handset manufacturer's express warranty policy and did not include remedies arising from the implied statutory warranties under the TPA.

The express warranties of the handset providers were shorter than the life of the mobile phone contract with Optus meaning that if the express warranty had expired, and the consumer still had time remaining on their mobile phone contract, they were in a position where they were still paying a phone off under a contract which they were no longer in a position to use.

Following the ACCC's investigation, Optus introduced a 24 month express repair warranty for mobile phones supplied by Optus on 24 month post paid contracts, and has undertaken for a period of three years to provide this warranty for all brands of mobile phones supplied by Optus. Optus has also undertaken:

  • not to make any false or misleading representations to consumers about their statutory rights to the effect that the consumer is not entitled to a refund or replacement mobile handset, when this is not the case;
  • to continue providing a 24 month express repair warranty for mobile phones supplied on 24 month post paid contracts;
  • to provide a replacement mobile handset to those consumers who have purchased a mobile handset from Optus which is found to be a faulty mobile phone within the 'early life failure' period;
  • to continue providing an extended 'early life failure' period of 30 days after purchase for faulty mobile phones manufactured by Nokia, Sony, Ericsson, LG and Research in Motion (Blackberry); and
  • to take all reasonable steps to ensure repairs are completed in a timely manner.

In addition, Optus has undertaken to provide repairs, replacements or refunds to customers with active unresolved complaints which are no more than 6 months old, and to review its trade practices compliance program.

This undertaking by Optus follows an ACCC investigation in 2009 into Vodafone Hutchison Australia which gave similar undertakings to the ACCC, and recent negotiations with Telstra, both of which now provide 24 month warranties for mobile phones on 24 month contracts.

ACCC Chairman, Graeme Samuel stated, "Retailers take note – you cannot wipe your hands clean of a faulty product just because the manufacturer's warranty period has ended, particularly when your product is supplied in conjunction with a lock-in contract that is longer than the manufacturer's warranty period".

In light of the ACCC's increased focus on consumer guarantees, suppliers of consumer goods should review their warranty and refund policies and ensure they are familiar with the requirements of the new consumer guarantee provisions of the ACL.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Laura Hartley
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