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. We set out below how businesses should handle a dissatisfied customer so as to fulfil all their legal obligations.

Consumer Guarantees

If your goods or services breach a consumer guarantee, your business must minimally 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 customer with a written repair notice before taking them for repair. Similarly, it must also issue a repair notice if it is the practice of the repairer 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 at first instance. 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 get a refund or receive compensation for the drop in the value of the service as compared to what they paid for it. A business cannot refer an unhappy customer to the manufacturer or supplier or have a sign refusing to provide refunds.

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. 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 rests on breach of a warranty against defects, a business must comply with their 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 assist other consumers in making 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 Consumer and Competition 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 their relevant state or territory legislation for defamation. For example, in NSW 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.

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If you have any questions about how best to deal with online reviews or your business’ obligations under the ACL, get in touch with our consumer lawyers on 1300 544 755.

Carole Hemingway

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