The ACCC has issued a warning on the consequences of misleading statements relating to extended warranties. This relates to its big win late last year in the first case on misleading representations relating to extended warranties and the consumer guarantee regime. Fisher & Paykel and Domestic & General agreed to pay a penalty of $200,000 each for misleading consumers about the need for extended warranty products.
The penalty relates to the consumer guarantee regime in the Australian Consumer Law (ACL) and in particular the prohibition on misleading representations concerning the need for services and the existence or effect of any warranty which exists in both the ACL and the ASIC Act. Although there is an express prohibition in the ACL (s29(1)(m)) on misleading representations concerning the existence or effect of consumer guarantees under the ACL, this action was brought by the ACCC under the ASIC Act (under a delegation from ASIC) because the extended warranty was a financial product.
The Federal Court made consent orders on 27 January 2015 which meant that the parties conceded they had made false or misleading representations in the course of offering extended warranty products to consumers.
The proceedings related to representations contained in letters sent by the companies to consumers who had purchased a Fisher & Paykel appliance inviting them to purchase extended warranty. The letters contained a number of statements about the consumers' need for extended warranty including: Your Fisher & Paykel [appliance] is now a year old, which means that you have 12 months remaining – after that your appliance won’t be protected against repair costs.
The court held that this amounted to making false or misleading representations to consumers about their rights after the manufacturer's warranty had expired – namely, that they would not be protected against repair costs for their appliance after a period of two years from the date of purchase, unless they purchased the extended warranty. References to the effect of the consumer guarantee regime in the ACL in the terms and conditions in a "relatively fine print on the reverse side of the letter" were agreed not to have been sufficient given the prominence of the misleading statements in the main text of the letter.
The ACCC views this as a strong warning to all businesses offering extended warranty products to ensure that they do not make any representation which may mislead consumers about the existence and effect of the statutory consumer guarantee regime in the ACL, and, in turn, the need for extended warranty products.
Although this was the ACCC's first case in the area, it suggests that we are likely to see more of this kind of action in the future with the ACL consumer regime remaining a current enforcement priority area for the ACCC (particularly in the context of the sale of extended warranties).