The Australian Competition and Consumer Commission has taken Fisher & Paykel Customer Services Pty Ltd (Fisher & Paykel) and Domestic & General Services Pty Ltd (Domestic & General) to Court for allegedly making false or misleading representations about consumers' rights under the statutory guarantee regime in the course of offering an extended warranty.

The ACCC alleges that the companies breached sections 18 (misleading or deceptive conduct) and 29 (false or misleading representations) of the Australian Consumer Law (ACL). As well as penalties and injunctions, the ACCC is also asking the Court to order the companies to implement appropriate compliance programs in relation to the ACL.

The letters were sent to consumers who had purchased a Fisher & Paykel appliance, inviting them to purchase an extended warranty. Those letters allegedly contained a number of false or misleading representations about consumers' statutory rights, including that the consumer would not be protected against repair costs for the appliance after the expiry of the manufacturer's warranty, unless the consumer purchased an extended warranty.

This action follows the ACCC's national consumer awareness-raising campaign called 'If it's not right, use your rights. Repair, replace, refund'. It highlights the ACCC's continuing focus on the protection of consumer rights. What is the problem with offering extended warranties?

Under the ACL, consumers may have a right to a repair, replacement or refund which extends beyond the time period covered by the manufacturer's warranty. This is a fact that some businesses seemingly either don't understand, or don't want to admit to consumers.

If you are offering consumers an extended warranty (either in your own right or as an agent for someone else), it is crucial that you are offering protection over and above that provided by the ACL, rather than simply attempting to replace the underlying consumer guarantees in the ACL. Under the ACL it is an offence, with penalties of up to $1.1 million per offence, to make a false or misleading representation concerning:

  1. the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (including those under the ACL) or
  2. a requirement to pay for a contractual right (such as an extended warranty) that is wholly or partly equivalent to any condition, warranty, guarantee or right or remedy the person has under any Australian legislation (including the ACL).

In other words, if you are going to offer an extended warranty, you need a very good understanding of exactly what rights the consumer has under any Commonwealth, State or Territory legislation and how your extended warranty differs from that. If you don't understand these matters, you are at serious risk of breaching the ACL.

Statutory Guarantees under the ACL

The Australian Consumer Law gives consumers a set of rights called statutory guarantees for all goods purchased after 1 January 2011 including that:

  • goods will be of acceptable quality (i.e. fit for all purposes for which goods of that kind are commonly supplied, acceptable in appearance and finish, free from defects, safe and durable);
  • goods will be fit for any disclosed purpose;
  • goods will match any description under which they are sold;
  • goods will match any demonstration model or sample shown
  • goods will have spare parts available for a reasonable period of time; services will be provided with due care and skill, will be fit for any particular purpose specified and will be provided within a reasonable time and
  • all express warranties offered will be honoured.

Where these guarantees are not met, the consumer has various rights against the seller as well as the manufacturer or importer of the goods. Depending on the issue and its seriousness, these rights include repair, replacement or refund of the goods. What does this mean for you?

This serves as a timely reminder that businesses should be cautious when offering extended warranties. It is essential that you avoid misrepresenting or understating consumers' statutory rights under the ACL, or overstating the value of additional rights (if any) provided by the extended warranties.

This is an area where it does not matter that you did not intend to mislead – all the ACCC and the Court will look at is the effect of your conduct. When in doubt, businesses should seek assistance from advisors who are well experienced in dealing with statutory guarantee issues under 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.