The Federal Court recently imposed AU$200,000 in penalties (by consent) in relation to false or misleading representations about extended warranty products on appliances manufacturer Fisher & Paykel (F&P). The proceeding was initiated by the ACCC under theAustralian Securities and Investments Commission Act 2001 (ASIC Act).
F&P and its agent had offered an Extended Warranty to purchasers of F&P appliances. The Court found (by consent) that they had represented to purchasers that after the two-year Manufacturer's Warranty expired, their appliances wouldn't be 'protected againstrepair costs' unless they purchased an Extended Warranty.
This was misleading because in some circumstances buyers have statutory rights under the consumer guarantees regime under the Australian Consumer Law (ACL) which could continue beyond the expiry of the Manufacturer's Warranty. If your business offers any extended warranties, please note:
- Simply including the prescribed text won't save you. In this case F&P and its agent had included the text prescribed by ACL regulations on the back of their letter to purchasers. This text was designed to clarify that any Extended Warranty would not affect the consumer's statutory rights. However, the overall communication was still found (by consent) to be misleading.
- There are significant dangers in using 'absolute' language in the marketing of extended warranty products (eg 'your products won't otherwise be protected'). If the products are or may be subject to the consumer guarantees regime in the ACL, statements like this are misleading.
- Such warranties must offer a benefit to the purchaser above and beyond what they are already entitled to under the ACL. The ACCC may not consider administrative benefits (such as 'no forms to fill out') to be sufficient justification for charging for an extended warranty.
- Extended warranty products may be subject to other licensing and regulatory requirements. In the F&P case, the Court accepted that the extended warranty was a 'financial product' - which may attract other licensing and regulatory obligations under financial services laws.