Australia Consumer Law: How Does it Affect Your Business?

by Nov 11, 2021

australian consumer law: how does it affect your business?

From 1 July 2021 the monetary limit that applies to consumer goods or services under the Australian Consumer Law increased from $40,000 to $100,000. So, what does that mean for you?

Let’s start by looking at who is a consumer.

Who is a consumer under the Australian Consumer Law (ACL)?

Since 1 July 2021, a consumer can be any person or entity that purchases goods or services from you, where those goods or services –

  • are purchased for $100,000 or less;
  • or are ordinarily acquired for personal, domestic or household use,
  • or are a vehicle or trailer used for transporting goods on public roads (more than personal use).

For anything purchased up to 30 June 2021, the value was $40,000. This is the first uplift in that value since 1986 and aims to protect a broader group of consumers. Whether your customer is a person, or a company or any other type of entity is irrelevant is the goods or services purchased were under $100,000. So, if you deal B2B, your business still has to meet consumer law obligations.

Similar rules apply to the provision of financial services under the Australian Securities Investment Commission (ASIC) legislation, and the monetary limit of financial services has also been lifted.

What protections apply to consumers?

As soon as a purchaser is classified a consumer, the ACL consumer guarantees apply. Consumer guarantees are automatic and apply in addition to any warranties you might offer.

A warranty and a guarantee are similar things. They are both promises that you make about your business goods or services. It might be helpful to consider them from an ‘active’ and ‘passive’ perspective. Consumer guarantees are automatic. A business doesn’t have to actively do anything, they just exist. A warranty is a voluntary promise, something you offer in addition to consumer guarantees. So, a ’30 day money back guarantee’ is actually an express warranty. Go figure.

There are nine consumer guarantees for goods, and three for services.

 

ProductsServices
  • Will receive clear title
  • Will have undisturbed possession
  • No undisclosed security over the goods
  • Acceptable quality
  • Fit for purpose
  • Match description
  • Match sample or demo
  • Repairs and spare parts are available
  • Express warranties will be met
  • Acceptable care and skill
  • Fit for purpose
  • Delivered within a reasonable time

Clear title and undisturbed possession just mean that when you purchase it, the buyer knows that there is not another owner or some other costs in the background. An example might be a business or relationship break up where one person sells something second hand and it actually belonged to the other partner. The person who really owned it can argue that the person who sold it did not have the right to do so and claim it back. Equally, a customer might want to pick something up from customs only to discover there are fees owed before they can take away the goods.

Undisclosed security is where money is owed. For example, if you want to buy a piece of machinery and there is finance owed on it and a PPSR registration against it, so the lender has priority over your claim and can sell the machinery to recover the debt, even though you bought it in good faith.

Many of the consumer guarantees are straight forward, but acceptable quality will depend on the value and quality of the goods. If you pay $100 for something that is advertised as an outdoor marquee, you might expect it to last at least a day, but you wouldn’t expect it to last for years and you wouldn’t expect it to last through high winds. On the other hand, you would expect a $1200 marquee to be more robust.    

For something to be fit for purpose, the consumer has to let you know what purpose is important to them. So, if a customer says it is important to them that the office chair they are buying can recline, but not fall over with someone who weighs 110kg in the seat, then the office chair needs to be able to meet that specification to be fit for purpose.

The availability of spare parts is important because it can affect what people are prepared to pay for an item. A consumer might be prepared to buy something that will last for a limited period without repair if it is cheap (consider home printers), but not pay for a large office copier without the ability to rely on regular service and repairs.     

What happens if you do not meet a Consumer Guarantee?

If you don’t meet a consumer guarantee, the purchaser has rights to remedies which can include repair, replacement, refund and may also include damages and consequential losses.

Depending on how the failure to meet consumer guarantees came about, you may also be liable for penalties for breaching a prohibition on making false or misleading representations, another provision of the Australian Consumer Law.

The type of remedy will depend on the problem with the product or service. If it is capable of being fixed, it is probably a minor problem and will need to be repaired or replaced. Depending on the value of the product, you also have the option of providing a refund, or the customer may have the option of requesting a refund.  

Consider large retail chains which will refund or replace most items without question simply because it is more efficient than arguing with customers or sending items off for assessment or repair. It also ensures a loyal customer base. Not every business has the same scale to do that.

If it is a major problem and cannot be fixed, then it is the customers choice about replacement or refund and the supplier must provide that replacement or refund and may also have to pay damages for any foreseeable loss resulting from the failure. In considering whether or not something is a major failure, you need to consider whether a reasonable consumer fully acquainted with the nature and extent of the failure would still have purchased the item for the amount that it was sold.

Consider how you might feel in the same position. 

For example

ACCC v Jayco Corporation Pty Ltd [2020]

As most people would know, Jayco is a brand of caravans and recreational vehicles (RVs). Jayco is a manufacturer that sells through dealerships.

The ACCC took action against Jayco to determine whether 4 RVs were of acceptable quality (a consumer guarantee), fit for purpose (a consumer guarantee) and whether the manufacturer was compliant with its express warranties. There was also a claim of misleading and deceptive conduct.

The first RV was a camper trailer. The issues it had were mainly a collection of relatively small poor finishes, but there was also a problem with the alignment of the chassis and a strut that failed in lifting the tent, causing further damage. The Court said –

At that price point ($27,000+), a reasonable consumer was entitled to expect a commensurate level of quality, including fit and finish. That expectation is consistent with the brochure that Jayco Corp published, and which Consumer read, which was calculated to convey the impression that a Jayco camper trailer was a durable, quality product. The combination of defects with the RV had the cumulative effect that the RV as a whole was not acceptable in appearance and finish, and its presentation was not consistent with the impression conveyed by the Jayco brochure…. In consequence, Consumer was entitled in April 2014 to reject the RV on the ground that the failure to comply with the guarantee of acceptable quality was a major failure…. As a result of the failure of the strut for the tent section on the second occasion, the RV was substantially unfit for purpose.”

The second RV was pop-top caravan that leaked, which was something the Consumer specifically asked about before purchase. Over a 15-month period it was in for repair on approximately 10 occasions. The Court considered the inability to provide shelter from the weather (the leaking soaked mattresses) “went to the heart of one of its purposes” and that “a reasonable consumer, fully acquainted with the defects and what was involved in attempting to repair them, would not have acquired the RV, and therefore there was a major failure” which entitled the Consumer to a replacement or refund.

There was also discussion around the fact that Jayco promoted their products as suitable for a relaxing family holiday, and a leaking roof and chassis would make it unfit for that purpose.

In all cases, Jayco had not provided a replacement or refund of the purchase price of the RVs and in one case was found to have led the consumer to believe that the only remedy available was repair. The court found those representations to be misleading or deceptive (s.18 of the ACL) and false and misleading (s.29 of the ACL). As a result, Jayco was required to pay a penalty of $75,000. It then had to deal with the owners of the RVs.

How to manage your risk of a consumer plan

We can help you to review your terms and conditions of supply of goods or services, whether you make them available online through your website or otherwise.

There are provisions that can be written into terms and conditions to provide you with a level of certainty around what you must do to meet consumer guarantees. For example, with consulting services it might be easiest for you to simply provide the services again rather than offering a refund. This will depend on how amicable the relationship remains with your customer, but may be more attractive that having to refund the consulting fee.

The ACL does require specific wording in terms and conditions depending on the goods, services or warranties you offer.

Once we have your terms worked out, then we can look at your processes with you and how information is shared within your business so that you and your employees understand how best to respond to and deal with requests for replacement or refund.

How can Onyx Legal help you?

Your terms and conditions of supply are important documents for managing your risk. Understanding your risks and having a clear understanding of how to respond to and deal with consumer complaints also makes a big difference. Book at time to discuss your situation with one of our team.