Are your warranties compliant with Competition and Consumer Regulation 90?

Are your warranties compliant?

From 1 January 2012 giving to a consumer a document containing a warranty against defects in connection with the supply of goods or services will be prohibited if the warranty does not comply with regulation 90 of the Competition and Consumer Regulations 2010 (Cth). It will also be prohibited to represent to a consumer that a warranty against defects applies to goods or services unless that warranty complies with regulation 90.

This means that all businesses issuing any documents that include warranties against defects must act now to ensure that they don't sell goods containing any non-complying warranties from 1 January 2012.

What is a Warranty Against Defects?

A warranty against defects is defined as:

"A 'warranty against defects' is a representation communicated to a consumer in connection with the supply of goods or services, at or about the time of supply, to the effect that a person will:

1. repair or replace the goods or part of them; or
2. provide again or rectify the services or part of them; or
3. wholly or partly recompense the consumer;

if the goods or services or part of them are defective, and includes any document by which such a representation is evidenced."

Essentially, when a supplier or manufacturer gives a warranty as to the quality or fitness of their goods such as 'Lifetime warranty' or '1 year warranty', the supplier or manufacturer usually undertake to repair or replace the goods, supply defective services again or otherwise recompense the end purchaser. These warranty statements will need to comply with the new requirements from 1 January 2012.

Consumer

These requirements only apply where a warranty against defects is provided to a consumer. A person or a company will be considered a 'consumer' if they purchase:

1. goods or services that cost less than $40,000 (no matter for what purpose); or
2. goods or services that cost more than $40,000 but are of a kind ordinarily acquired for domestic, household or personal use or consumption; or
3. a vehicle or trailer primarily used to transport goods on public roads.

So what should suppliers and manufacturers providing the warranties do?

1. Identify all documents that provide any warranty statements. This includes all warranty cards, brochures, manuals, point of sale materials such as terms and conditions and warranties displayed on any products.
2. Review and update all warranty statements so that they comply with the new requirements and ensure that consumers are only issued with the complying warranty statements from 1 January 2012.

Penalties

Any supplier or manufacturer found to be supplying goods that have non-complying warranty statements after 1 January 2012 will have no defence for breaching these requirements.

Failure to comply with the requirements from 1 January 2012 may result in penalties up to $50,000 per offence for corporations and $10,000 per offence for individuals.

Transitional Arrangements

The ACL regulators have indicated they are unlikely to take enforcement action until September 2012 against retailers, manufacturer's, suppliers for any stock in the supply chain manufactured and packaged prior to 1 November 2011.

In considering whether or not to take any action, the ACL regulators will have regard to:

1. whether or not there are serious practical difficulties in updating warranty documents, eg. Warranty is in a tamper-proof package; and
2. whether or not the supplier has taken all reasonable steps to otherwise convey the mandatory text and information required by the ACL to consumers eg. Placing a compliant sticker on the outside packaging. This transitional relief will be considered on a case by case basis.

If you have questions about the new rules or how them may affect you, the team at Coleman Greig can assist you.

We can also provide you with detailed advice on how these regulations affect your business and deliver training sessions for your relevant staff.

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.