Businesses who provide warranties in relation to either products or services have until the end of the week to bring those warranties into line with changes to the Australian Consumer Law (ACL), or face substantial penalties and fines – potentially up to 10% of annual turnover. The changes take effect this Sunday, 9 June 2019.
Promises provided by suppliers (or manufacturers) to consumers about what they will do if goods have a fault are commonly known as ‘warranties against defects’. Those warranties are voluntary and, if given, will apply in addition to any consumer guarantees under the ACL.
Warranties against defects must also comply with prescribed requirements and include standard text from 9 June 2019. The warranties which are required to be given are divided into three categories and are different for each of:
Penalties of up to $50,000 can be imposed for failing to include the prescribed text. Additional penalties can also be imposed if the text used is misleading about consumers’ rights, entitlements under warranty or guarantee provisions up to $10,000,000, or 10% of the annual turnover of the supplier in the past 12 months.
Businesses should review any document which contains a warranty against defects (such as terms and conditions, packaging, website, etc.) to ensure that it includes the new prescribed text. Warranty documents provided by sellers and manufacturers should:
Any warranties should also be consistent with consumer guarantees, which automatically apply to goods and services purchased by consumers under the ACL. Manufacturers and importers must also comply with certain consumer guarantees and they cannot be excluded by agreement or under any terms of sale.
The guarantees include that those goods must:
Consumers are entitled to a remedy, which could be either a repair, replacement or refund and compensation for any consequential loss, depending on the circumstances. For minor problems, the seller can choose whether to take a replacement, repair or refund the goods. For major problems the consumer can choose to reject the goods and obtain a full refund or replacement, or keep the goods and seek compensation for the reduction in value.
Consumers are entitled to approach manufacturers directly for a remedy and may take action against manufacturers to recover costs, which include an amount for reduction in the product’s value and in some cases compensation for damages or loss.
If the problem is the manufacturer’s fault, the consumer is still entitled to ask the seller to provide a remedy, and the seller must oblige. The manufacturer must then reimburse the seller, including for any compensation paid to the consumer for reasonably foreseeable consequential losses.
Consumer guarantees won’t apply where a consumer simply changes their mind. However, as suppliers must comply with consumer guarantees, signs which provide blanket statements such as ‘No refunds’ are unlawful because there may be instances where the consumer is still entitled to a remedy.
Finally, it is important not to mislead consumers about their rights.
Within the last week, Jetstar was ordered to pay almost two million dollars in penalties for misleading passengers about their right to refunds on cheap fares, by indicating that only more expensive fares were refundable. That is misleading as, under the ACL, customers whose flights were cancelled or significantly delayed due to reasons within Jetstar’s control are entitled to refunds.
Sellers must not tell customers they should approach the manufacturer or importer of the goods for assistance. Customers are entitled to deal with the seller, and sellers must deal with the problem when approached.
Sellers also must not suggest that their consumer guarantees are limited to any warranty period. The consumer guarantees apply regardless of any warranties which have been given and may apply for a longer period than an express warranty, depending on the quality of the goods, sale price and consumer expectations.
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