The Australian Consumer Law contains a number of consumer guarantees designed to protect consumers when they deal with businesses. In particular, they entitle a consumer to a repair, replacement or refund in certain circumstances if there is a fault with the product or service they purchased. The guarantees enshrined in the Australian Consumer Law represent the minimum level of guarantee. However, a business can offer additional guarantees if it wishes.

A business may wish to comment on certain guarantees in its terms and conditions, contracts and other documentation, but what can they say without contravening the Australian Consumer Law? A recent action by the Australian Competition and Consumer Commission (ACCC) demonstrates their position about the misrepresentation of consumer guarantees and their willingness to take action.

ACCC Action Against MSY Technology

The ACCC instituted proceedings against MSY Technology (MSY) alleging that they misrepresented consumers’ rights to remedies for faulty products. MSY sells electronic goods including computers and parts through a number of retail stores and its website. The ACCC allege that MSY misrepresented consumers’ rights in six ways:

 

Misrepresentation found by the ACCC Why it was considered illegal
MSY had discretion over whether a customer was entitled to a remedy for a faulty product Consumer guarantees assure a remedy for a faulty product.
It was up to MSY to choose which remedy they would provide to customers. For major faults, the consumer has a right to request a replacement or refund.
MSY would only provide a remedy for products returned to them within seven days. Consumer guarantees don’t have a specific time limit — timescales just need to be reasonable in the circumstances.
MSY may require the customer to pay an administration fee to receive a remedy for a faulty product that is out of warranty. Warranties cannot remove guaranteed rights under the Australian Consumer Law — if a product is deemed faulty the business cannot charge the consumer for a remedy.
They would provide no remedies in relation to faulty software products. A company cannot pick and choose which of their products and services the Australian Consumer Law covers — all goods and services are covered, unless specifically excluded by that law.

 

Common Misrepresentations Identified by the ACCC

The ACCC issued a warning to businesses not to misrepresent consumer rights and a reminder to consumers to be aware of their rights. The ACCC identified three common misrepresentations made by businesses.

 

Common misrepresentation Why it was considered illegal
Saying that the warranty on the product has expired. The length of time a product or service is covered by consumer guarantees is independent of any warranty or extended warranty offered by a business or manufacturer. How long a product should be expected to remain free of faults will depend on the product.
Telling the consumer that they need to return the product to the manufacturer. The consumer is entitled to enforce their rights against the retailer. They may have additional claims against the manufacturer for damages suffered. However, these are in addition to, not instead of, their rights under the ACL.
Attempting to upsell extended warranties to consumers on the grounds that the manufacturer warranty has a limited lifetime. A consumer’s rights under the ACL are independent of any retailer or manufacturer warranty and may extend beyond the period covered by any warranty, or extended warranty.

 

Sale Items and Discounts for Damaged Goods

Another obvious example of misrepresenting consumer guarantees is a sign on shop counters that states some variant of ‘no refunds on sale items’. The condition is not something the retailer can enforce since it is a misrepresentation of the consumer guarantees. A consumer’s rights are not affected by whether an item is on sale or not.

However, a retailer can offer an item at a discounted price while specifying that there is a particular fault with the item. For example, if buttons are missing on a shirt and you sell that shirt. By informing the customer at the time that the buttons are missing, the customer cannot then request a replacement or refund on the grounds the buttons are missing. They would, however, retain that right under the consumer guarantees for any other faults that were not pointed out.

If you are selling damaged stock you should:

  • specify what the damage is; and
  • let the customer know that they may not have the right to return it on the basis of that fault.

Do not simply put up a sign saying ‘no returns/refunds’ on damaged stock or sale items. Doing that misrepresents the consumer’s rights.

What Should Businesses Do?

First, you should understand what the consumer guarantees are and how they impact on your business. The ACCC website contains useful summaries, but your lawyer can provide additional information, particularly if your goods or services are unusual. In that case it might be harder to interpret what a major or minor fault is or what might be considered reasonable.

Second, once you understand the consumer guarantees, you need to make sure they are represented in your terms and conditions. You also need to make sure that you do not make any misrepresentations such as the examples discussed above. You should be particularly careful about the wording of any return or refund policy to make sure they don’t accidentally say anything that misrepresents consumers’ rights.

Third, avoid misrepresenting consumer guarantees to your customers through non-contractual communications such as:

  • messages on your website;
  • physical signs in a store;
  • emails;
  • telephone exchanges; or
  • when speaking to customers in a store.

It doesn’t matter whether any such misrepresentations are in a physical shop or online. Nor does it matter whether they are written or verbal. Any employees, contractors or other representatives of the company also need to be clear about what they can and cannot say to customers.

Key Takeaways

Consumers are entitled to refunds or replacements for faulty goods and services in certain circumstances. You can always give more generous warranties, but the consumer guarantees are the bare minimum that you must give.

Misrepresenting consumer guarantees in contracts, notices or discussions is a breach of the Australian Consumer Law. This can result in the ACCC taking action against you. Fortunately, simple steps can help avoid these very common mistakes. The most important step is to understand exactly what the consumer guarantees are and what it means to misrepresent them.

LegalVision’s consumer lawyers can advise you about the consumer guarantees and help draft appropriate terms and conditions for your business. Get in touch by completing the form on this page or call us on 1300 544 755.

Daniel Ah-Sun
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