From 1 July 2021, the definition of a “consumer” for the consumer guarantees in the Australian Consumer Law (ACL) will change. A large number of commercial transactions will now be subject to additional regulation. In this article, we discuss:

  • what the ACL and the consumer guarantees are;
  • the impact changes to the ACL will have on Australian businesses; and 
  • some practical considerations for businesses to make sure that they are ready for the 1 July 2021 change.

What is the Australian Consumer Law and Consumer Guarantees?

The ACL is a national law that regulates how businesses can sell goods and services to consumers. The ACL contains many important features, including:

  • preventing unfair contract terms in certain types of contracts;
  • a national product safety law and enforcement system; and 
  • the consumer guarantees.

The consumer guarantees provide any consumer with a basic level of protection in relation to goods and services that they purchase in Australia. Some of the consumer guarantees in relation to goods include that the goods are:

  • of acceptable quality; and 
  • fit for any purpose specified by a particular consumer to the seller. 

In relation to services, some of the consumer guarantees include that the services are provided:

  • with due care and skill; and 
  • within a reasonable time (where you have not agreed to a specific time).

If a business fails to provide goods and services consistent with the consumer guarantees, the consumer has the right to a remedy. This is typically a:

  • repair;
  • replacement; or 
  • refund.

Excluding Guarantees or Warranties

Importantly, you cannot exclude the consumer guarantees by a contract. 

For example, even if your customer terms and conditions state that there are no refunds permitted in any circumstances, the customer will still be entitled to a refund. This is because the consumer’s rights under the ACL trump any contrary contractual clauses. 

Furthermore, businesses that misrepresent a consumer’s rights by making representations (including in terms and conditions, advertising and packaging) that are inconsistent with the consumer’s ACL rights could be fined by the ACCC. These fines could be for breaching ACL provisions on:

  • misleading and deceptive conduct or 
  • false and misleading claims.

The ACL also mandates that any warranties you provides must be in addition to the consumer’s rights under the ACL.

For example, a two-year manufacturers warranty, or a three-year replacement guarantee must contain specific mandatory wording. This wording must effectively inform the consumer that they also have rights under the ACL that cannot be excluded or replaced by the warranty.

The consumer guarantees do not apply to all types of transactions. Financial products and services, as well as insurance contracts, are governed by separate regimes. Some other types of transactions that the consumer guarantees exclude include those for:

  • the transportation or storage of business goods; or
  • goods costumers purchase to then transform into a product and on-sell it.

What Are the Upcoming Changes to the ACL and Consumer Guarantees?

The consumer guarantees currently apply to consumer transactions. These are: 

  1. purchases for goods and services (other than excluded transactions as discussed above) less than $40,000; or
  2. purchases for goods and services greater than $40,000 if the goods or services are of a kind ordinarily acquired for personal, domestic or household use or consumption. This is unless they are goods purchased for resale (such as wholesale goods purchased for retail sale).

The upcoming changes to the ACL now increase this monetary threshold from $40,000 to $100,000 from 1 July 2021. Considering that the $40,000 threshold was imposed in 1986, the increase to $100,000 is roughly in line with inflation.

Impact for Australian Business

The sector of Australian businesses that will be heavily impacted by the change are those businesses that engage in business to business transactions between $40,000 and $100,000. Whereas currently, business to business transactions between $40,000 and $100,000 are largely excluded from the consumer guarantees, come 1 July 2021 they will be largely included. 

The impact of these transactions being covered by the consumer guarantees is that purchasers will have additional rights. Sellers will therefore need to have a greater awareness of the regulatory framework and ensure that all communications and representations are compliant with the ACL.

Businesses’ should take steps now to ensure that they are ready for 1 July 2021. Some steps that businesses can take today include to:

  • review all commercial contracts to ensure that they are consistent with the ACL and do not misrepresent the consumer’s rights;
  • train staff who deal with customers on any new rights that the customers may have;
  • review the quality of your goods and services to make sure they comply with the consumer guarantees;
  • consider seeking additional protection in commercial contracts with manufacturers; and 
  • making sure all packaging and advertising are compliant with the ACL (especially where any additional warranty is provided).

Key Takeaways

The 1 July 2021 changes to the ACL that increase the monetary threshold for the definition of a consumer from $40,000 to $100,000 will see many additional transactions subject to the consumer guarantees. Purchasers of business to business transactions from $40,000 – $100,000 will have additional rights, and sellers in this bracket can face penalties for: 

  • misrepresenting consumer rights; or
  • advertising in a way that is not compliant with the ACL.

Businesses should start preparing now for the upcoming changes. If you have any questions, contact LegalVision’s competition lawyers on 1300 544 755 or fill out the form on this page.

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