How Do I Deal with a Dissatisfied Customer?

In Short

• Understand your legal obligations under consumer guarantees and provide remedies like repair, replacement, or refund.

• Address dissatisfied customers by offering fair and timely resolutions in accordance with the Australian Consumer Law (ACL).

• Handle bad online reviews carefully; report fake ones to the ACCC and know your defamation rights.

Tips for Businesses

To manage dissatisfied customers, always ensure your products meet consumer guarantees. Be clear on your store policies, especially around refunds. If a customer posts a bad review, check if it’s genuine. If not, take action through the ACCC or defamation laws. Keeping communication open can help resolve issues swiftly.

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Table of Contents

• Consumer Guarantees
• Warranty
• Store Policy
• Bad Online Review
• Key Takeaways
• Frequently Asked Questions

Businesses will inevitably deal with disgruntled or unhappy customers. Importantly, if customer dissatisfaction results from a breach of the consumer guarantees, an enterprise is legally obliged to provide certain remedies. If, however, a consumer expresses their displeasure through a bad online review, a business can only take action in certain situations. This article outlines how businesses should handle dissatisfied customers to fulfil all their legal obligations.

Consumer Guarantees

If your goods or services breach a consumer guarantee, your business must, at a minimum, provide the remedies contained in the Australian Consumer Law (Cth) (ACL). Businesses should know that consumer guarantees have no set expiry date.

If the problem is minor and relates to a good or service, a customer has the right to a repair at the outset. If the business cannot repair the item or do so in a reasonable time, the consumer can:

• request a refund;
• request a replacement;
• have the item or service fixed elsewhere and invoice the supplier with the reasonable costs of repair; or
• recover compensation for the reduced value of the service or good as compared to when the consumer originally purchased it.

There is no legal definition of ‘reasonable’ time for repair. It will depend on the particular situation. For example, a reasonable time to repair an essential household item is shorter than for a non-essential one.

If the product requiring repair is capable of retaining user-generated data (for example, a mobile phone), a business must issue a written repair notice to the customer before taking the product for repair. Similarly, it must also issue a repair notice if the repairer’s practice is to supply refurbished goods rather than repair defective goods.

If a dissatisfied customer has a major problem with a product, they can request a replacement or refund initially. A refund must equal what the customer paid for the product. It must take the same form as payment.

If a dissatisfied customer has a major problem with a service, they can cancel it at the outset and receive a refund or compensation for the drop in service value compared to what they paid for it. A business cannot refer an unhappy customer to the manufacturer or supplier, nor can it display a sign refusing to provide refunds.

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Warranty

If a consumer is unhappy because a good or service has failed to meet a warranty, the supplier is obliged to honour the warranty and provide the appropriate remedy. A warranty is a voluntary promise that a supplier makes to a customer, typically guaranteeing the quality of a product or service. Warranties exist in addition to the consumer guarantees and do not limit or negate them.

A warranty can be either a:

• common warranty: an extra representation concerning the quality or standard of a good; or
• warranty against defects: an additional representation that if the good or service (or a part) is defective, the supplier will fix the problem or offer a replacement or compensate the consumer.

If a customer is unhappy because a product does not meet a common warranty, a business must honour the representation made. If it does not, a consumer has rights against the supplier under the ACL. If the customer’s dissatisfaction stems from a breach of warranty against defects, the business must comply with its promise. If it does not, a consumer has legal remedies under the ACL and for breach of contract.

Store Policy

If a customer is unhappy with their purchase, a business is not obligated to offer a repair, refund or replacement. For example, when a customer changes their mind or finds it on sale for less somewhere else. In these cases, the consumer guarantees do not apply. It then becomes a question of store policy.

Bad Online Review

Consumers can review businesses to help other consumers make informed purchasing decisions. A review is genuine if it is independent and based on a consumer’s personal experience with a business’ goods or services.

If you suspect the review is fake, you can make a complaint to the Australian Competition and Consumer Commission (ACCC). The ACCC takes fake online reviews seriously because they mislead consumers. A review is fake if it reads impartially and was authored by a:

• Business (typically positive reviews);
• Competitor;
• Person paid to write the review with no experience of a business’ product or service; or
• A person with personal knowledge of the product or service who received a financial or non-financial benefit to write it.

If the online review is defamatory, a business may have a remedy under its relevant state or territory legislation for defamation. For example, in New South Wales, this is the Defamation Act 2005 (NSW). A business can only take action for defamation if it qualifies under the relevant Act. If it does, it would need to prove that the review was defamatory.

Key Takeaways

Managing dissatisfied customers effectively requires understanding and adhering to your legal obligations under consumer guarantees, warranties, and store policies. By offering clear remedies, such as repairs, refunds, or replacements, businesses can mitigate the impact of customer complaints and maintain a strong reputation. Additionally, businesses must take appropriate action when dealing with fake or defamatory online reviews. By fulfilling these obligations and proactively addressing customer dissatisfaction, you can strengthen your customer relationships and avoid potential legal issues.

If you have any questions about how to best manage online reviews or your business’s obligations under the ACL, our experienced consumer lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page. 

Frequently Asked Questions

What should I do if a customer requests a refund or replacement under a consumer guarantee?
If the product has a major problem, the customer is entitled to a refund or replacement. For minor issues, the customer is entitled to a repair within a reasonable time.

How long does a business have to repair a product under consumer guarantees?
There is no set time for repairs under the ACL. However, the time allowed should be reasonable, with more urgent repairs (e.g., for essential items) needing faster resolution.