Exporting to Australia just got a little trickier for consumer product and service providers. The Australian Consumer Law (the “Act”) was recently amended to expand the warranty protections afforded to consumers. These changes not only have an effect on the obligations you owe to a consumer, they will also require changes to your packaging.

Warranties Against Defects

Beginning January 1, 2012, if you provide a warranty against defects, you must provide certain details to the consumer with respect to that warranty.

The following requirements are prescribed for any warranty against defects:

  1. It must be in reasonably plain language, legible, and presented clearly. 
  2. It must include the warranty time period, the procedures for making a warranty claim, who bears the costs of claiming the warranty, and the name, address, telephone number, and e-mail (if applicable) of the person who gives the warranty. 
  3. It must state that the benefits to the consumer given by the warranty are in addition to any other rights and remedies of the consumer under law in relation to the goods or services to which the warranty relates.

Mandatory Guarantees and “Magic” Words

It is important to note that any warranties against defects are provided in addition to the consumer guarantees contained in the Act.

In some instances, a warranty against defects will provide the consumer with remedies that exceed those provided by the consumer guarantees. However, in other cases, consumers may be entitled to a remedy under the consumer guarantees after a warranty against defects period has expired.

The consumer guarantees contained in the Act are memorialized by the following statement which must be included verbatim in your packaging, owner’s manual, or warranty instructions:

Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and for compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure.

As the mandatory guarantee component of the Act is new, it is uncertain how the courts and regulators in Australia will reconcile the mandatory guarantees with the express warranties given by a consumer product or service provider. For instance, what happens if a manufacturer gives a sixty (60) day warranty for a certain part; that part fails after eighty (80) days; the manufacturer declines to replace or repair the part as it is outside of the warranty period; and yet it is determined by Australian regulators that the part failed to be of acceptable quality?

The simple answer is that the part needs to be repaired or replaced. The more difficult issue is whether the express warranty misled the consumer into thinking that their rights are limited to the remedies or timeframe set forth in a written warranty against defects. While a failure to comply with the warranty against defect requirements can lead to a maximum AUD $50,000 penalty for corporations and a AUD $10,000 penalty for individuals, misleading representations can incur a maximum penalty of AUD $1.1 million for corporations and AUD $220,000 for individuals.

Only time, case law, and practical experience will tell as to how the above scenario plays out.

Transitional Arrangements

Following the enactment date of January 1, 2012, Australian regulators have realized some of the practical difficulties to complying with the Act - most notably that certain consumer products have lengthy production lead times. In recognition of this, until September 1, 2012, in considering enforcement actions, regulators will look to see if the stock was manufactured and packaged before November 1, 2011, whether there are serious practical difficulties to updating the warranty documents, and whether the manufacturer or supplier has taken all reasonable steps to otherwise convey the mandatory text and information required by the Act to consumers (e.g., by placing a sticker with the mandatory guarantee on the outside of the packaging). In these circumstances, it is unlikely that regulators of the Act will take enforcement action.