The Australian Consumer Law (ACL) contains a number of consumer guarantees designed to protect consumers when they deal with businesses. In particular, a consumer is entitled to a repair, replacement or refund in certain circumstances if there is a fault with the product or service they have purchased. A business cannot exclude, restrict, or modify a consumer’s rights. This article focuses on the misrepresentations businesses make regarding consumer rights and provides practical tips on how business owners can stay compliant with the ACL.

ACCC Action Against MSY Technology

The ACCC recently commenced proceedings against MSY Technology Pty Ltd and related entities (MSY Technology) alleging that they misrepresented consumers’ rights to remedies for faulty products.

MSY Technology sells electronic goods including computers and parts through a number of retail stores and its website. The ACCC allege that MSY Technology misrepresented consumers’ rights.

What MSY Technology Claimed Consumer Rights Under the ACL
MSY Technology had discretion over whether a consumer was entitled to a remedy for a faulty product. A consumer has the right to ask for a repair, replacement or refund under the ACL consumer guarantees.
MSY Technology could choose which remedy they would provide to customers. A business can only choose to give a free repair instead of a replacement or refund if a consumer has a minor problem with a product or service.
MSY Technology would only provide a remedy if the consumer returned the product within seven days. Statutory rights have no time frame other than what is ‘reasonable’ considering the cost and quality of the item.
MSY Technology may require the customer to pay an administration fee to receive a remedy for a faulty product that is out of warranty. The consumer guarantees apply regardless of any other warranties a business provides. This means that the consumer guarantees may continue to apply after the warranty expires. If a product is deemed faulty, the business cannot charge the consumer for any remedy.
MSY Technology would not provide a remedy in relation to faulty software products. Businesses must guarantee that the products they sell are of an acceptable quality, including that there are no faults. If a business fails to deliver on this guarantee, a consumer has a right to a repair, replacement or refund.

 

Importantly, a company cannot pick and choose which of their products and services the ACL covers.

Common Misrepresentations Identified by the ACCC

The ACCC identified three common misrepresentations businesses made regarding consumer rights. 

Misrepresentation Consumer Rights Under the ACL
The warranty on the product has expired. The length of time consumer guarantees will cover a product or service is independent of any warranty or extended warranty a business or manufacturer offers. How long a product should be expected to remain free of faults will depend on the product.
Consumers must return the product to the manufacturer. The consumer is entitled to enforce his or her consumer rights against the retailer. They may have additional claims against the manufacturer for damages suffered, but these are in addition to, not instead of, their rights under the ACL.
Upselling extended warranties to consumers because the manufacturer’s 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

A business cannot display a sign that states some variation of ‘no refunds on sale items’. Whether or not an item is on sale will not affect a customer’s rights if the product is faulty.

Rather, retailers can offer an item at a discounted price and specify that there is a particular fault with the good. For example, you sell a shirt with missing buttons, and you inform the customer at the time of the purchase that the buttons are missing. The customer cannot then request a replacement or refund because the buttons are missing. They would, however, retain that right under the consumer guarantees for any other faults that you did not point 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, since it misrepresents the consumer’s rights.

There is no legal requirement for businesses to provide a refund for change of mind.

What Should Businesses Do?

Businesses should understand the consumer guarantees set out in the ACL and the consequences for misrepresenting a consumer’s rights. It’s worth speaking with a consumer lawyer about how the ACL may apply to your business. In particular, if your goods or services are unusual, in which case it might be harder to interpret what a major or minor fault is or what might be considered reasonable.

If you decide to provide a warranty to customers in your terms, ensure that it not worded in a way that suggests it limits the consumer guarantees. Also, take care to avoid misrepresenting a consumer’s rights through non-contractual communications, for example:

  • messages on your website,
  • physical signs in a store,
  • email,
  • telephone exchanges, or
  • speaking to customers in-store.

You as a business owner and any employees, contractors or other representatives of the company, 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 will breach the ACL if you misrepresent the consumer guarantees in contracts, notices or discussions and may result in the ACCC taking action against your business. There are simple steps you can take to reduce the chances of falling into these very common mistakes – the most important of which is to understand what the consumer guarantees are and what it means to misrepresent them.

If you have any questions or need assistance drafting your business’ terms and conditions, get in touch with our consumer lawyers on 1300 544 755.

Daniel Ah-Sun
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