The Australian Consumer Law (ACL) applies to all businesses in Australia. It includes a range of laws that are designed to protect consumers and create a fair marketplace.

One of the key areas that the ACL regulates is product liability. Under product liability laws, manufacturers are held strictly liable directly to consumers for damage suffered as a result of a defective product. This means that if a consumer purchases products which have a safety defect, and that safety defect results in personal injury or property damage, then the consumer will be able to make a:

  • legal claim against the manufacturer for the loss that they suffered; or
  • complaint to a state consumer protection agency.

Broad Definition of Manufacturer

‘Manufacturer’ is defined very broadly under the ACL, and includes a business that:

  • grows, extracts, makes or assembles goods;
  • imports goods (if the maker of the goods does not have an office in Australia);
  • uses its own brand name in relation to the goods;
  • promotes itself to the public as the manufacturer of the goods; and
  • permits another person to promote the goods as having been manufactured by the company.

These laws expose Australian manufacturers, and potentially anyone in a product supply chain, to consumer claims.

Safety Defects

Goods have a safety defect if their safety is not something a person would be entitled to expect. The product must be unsafe, rather than just be of poor quality or inoperative.

If you are sued for damage caused by your defective product, then the court will consider factors such as:

  • the product’s quality;
  • how you represented the product (i.e. through its packaging, warnings or instruction booklet); and
  • loss or damage arising from the product (i.e. physical injury or damage to private property).

Manufacturers Defences

If a consumer sues you for product liability, you may be able to avoid liability. However, you will need to prove that:

  • the safety defect did not exist at the time of supply;
  • the product that you produced was merely a component of the finished product, and the safety defect arose due to the overall design of the finished goods or the packaging, instructions or warnings in those finished goods;
  • you could not have discovered the safety defect when you supplied the goods because there was insufficient scientific or technical knowledge at the time; or
  • safety defect only existed because you complied with a mandatory standard (in which case the government may have to pay any compensation).

Practical Steps for Manufacturers to Protect Themselves

Rather than waiting for a defect to occur and defending yourself in court, all manufacturers and suppliers should proactively take steps to reduce the risk of an accident occurring. Ways that you can do this include:

  • negotiating indemnity clauses into your contracts. These clauses pass risk on by requiring another party to absorb legal risks. However, it is important to note that you cannot contract out of negligence (i.e. your duty of care);
  • having in place policies for product reviews and quality assurance to minimise the risk of problems emerging with products in the first place. These policies should comply with safety standards under the ACL;
  • ensuring that your marketing and packaging includes clear and detailed descriptions, assembly instructions and warnings; and
  • looking into insurance companies that offer products and public liability insurance or business pack insurance that includes product liability insurance.

Additionally, under the ACL, consumers can take action within 10 years of the time you supplied the goods with safety defects. Therefore, it is important to keep good records and to manage your contracts. This will make it easier to find the information necessary to defend the claim. Finally, if you become aware of an issue, you should have a procedure in place to warn consumers and recall products to reduce the risk of further injuries.

Frequently Asked Questions

Who is a manufacturer?

A manufacturer is any person that manufactures the goods, holds itself out to the public as a manufacturer, permits someone else to promote the goods as being manufactured by it or imports products.

What is the role of the Australian Consumer and Competition Commission in product liability?

The ACCC can bring representative actions on behalf of one or more people who suffer loss or damage as a result of defective goods.

What is the difference between the Australian Consumer Law and the Trade Practices Act?

The Australian Consumer Law (ACL) replaced Commonwealth, State and Territory consumer protection legislation in fair trading acts and the Trade Practices Act 1974 on 1 January 2011. The ACL is contained in a schedule to the Competition and Consumer Act 2010.

What defines a consumer?

If the goods or services are purchased for less than $40,000, the person will be considered a consumer for the purposes of the consumer guarantees regime. From 1 July 2021, this threshold will increase to $100,000. This adjustment means that more commercial goods and services will be captured within the amended definition.

How can LegalVision help me?

LegalVision provides businesses and individuals with tailored online legal advice, including consumer protection and product liability. LegalVision can also assist you to minimise the risk of product liability and protect your business against such claims. Call LegalVision today on 1300 544 755.

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