Australia: Enforcement priorities in action - ACCC sues over ACL consumer guarantees representations

Last Updated: 10 December 2012
Article by Adrian Kuti and Matthew Battersby

Key Points:

The ACCC is taking action against what it sees as false and misleading representations about the ACL's consumer guarantees.

The ACCC has identified five high level objectives for 2012/2013 and is expected to devote more than half of its investigation and enforcement resources to them. These include a commitment to make full use of its powers under the Australian Consumer Law (ACL) and a medium-term priority to raise awareness of the ACL consumer guarantees regime.

The ACCC has started with a bang commencing proceedings against Hewlett-Packard in October and against 11 Harvey Norman franchisees last week.

The ACCC has said that it is conducting similar investigations into other large manufacturers and retailers, so these proceedings may well be just the beginning.

The National Project

The ACL commenced on 1 January 2011 and contains statutory consumer guarantees and remedies which apply to goods and services supplied to consumers. These consumer guarantees cannot be excluded and apply to both manufacturers and suppliers.

Earlier this year the ACCC implemented a national project designed to educate consumers about their ACL rights and investigate businesses which may be contravening the ACL. This started with a national education campaign around consumer guarantees: "If it's not right, use your rights. Repair, replace, refund", and has now seen investigations translate into enforcement proceedings against both manufacturers and retailers.

Proceedings commenced against Hewlett Packard and 11 Harvey Norman franchisees

In October 2012, the ACCC commenced proceedings against Hewlett-Packard Australia Pty Ltd for allegedly making false or misleading representations in two different areas:

  • to consumers about their statutory warranty and consumer guarantee rights; and
  • to retailers and resellers, that Hewlett-Packard was not liable to indemnify them if the reseller provided consumers with a refund or replacement without Hewlett-Packard's prior authorisation.

In this new case against the Harvey Norman franchisees, the ACCC alleges that between May 2011 and June 2012 sales representatives made misleading representations to specific consumers about the existence or effect of their consumer guarantee rights in the course of discussions about problems with electrical goods including computers, televisions, mobile phones, cameras and white goods, such as:

  • the franchisee had no obligation to provide refunds or replacements;
  • there was nothing the franchisee could do; repairs or replacements were a matter for the manufacturer;
  • the franchisee had no obligation to provide remedies for damaged goods unless notified within a specific period of time (eg. 14 days);
  • consumers would need to pay a fee to have faulty products repaired and returned;
  • the franchisee had no obligation to provide remedies for goods still covered by the manufacturer's warranty;
  • the franchisee had no obligation to provide refunds or replacements for particular items such as large appliances or items priced below a certain amount (eg. $300); and
  • refunds or replacements were not within company policy.

The ACCC is seeking a range of remedies including pecuniary penalties, injunctions and costs.

The maximum pecuniary penalty is $1.1 million per contravention.

Lessons for business

The allegations in the proceedings against Hewlett Packard and the Harvey Norman franchisees highlight practical issues about the relationship between warranty claims and ACL claims and how they are communicated to customers by retail and call centre staff.

The ACCC's focus in this area means it is important to ensure customer-facing staff are properly trained and do not, for example, confuse the requirements which apply to the return of defective products with those that apply for "change of mind" returns. The nature of manufacturers' warranties and in-store returns policies as being additional to, rather than in place of, consumers' rights under the ACL consumer guarantees regime is another key distinction that businesses must ensure their staff understand.

What should we expect from the ACCC in 2013?

The ACCC's proceedings against Hewlett Packard and the Harvey Norman franchisees are by no means the end of the story. Further enforcement proceedings appear inevitable, particularly given the ACCC's stated intention to take on more cases even where the outcomes may be less certain.

It is interesting that the ACCC chose to commence pecuniary penalty proceeds against the Harvey Norman franchisees where in the past it may have instead issued infringement notices for this type of conduct. This is a sign that the ACCC is stepping up its focus on ACL compliance and is becoming more proactive in commencing proceedings against manufacturers and retailers for alleged ACL contraventions.

These proceedings represent only one aspect of the ACCC's current investigations into ACL compliance. For example, we are yet to see what actions the ACCC may take in relation to manufacturers and retailers who continue to offer warranties against defects that do not comply with the ACL requirements, now that the transitional relaxation of enforcement of those laws has come to an end.

The importance of a strong ACL compliance training program for retail and call centre staff and careful review of product warranty literature cannot be overstated.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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