A recent ACCC enforcement action shows that both local and international businesses need to strictly comply with Australian consumer law, and ensure they clearly let consumers know their rights.

From at least 1 January 2017, Fitbit made various representations on its website and product packaging that had the effect of limiting its liability and consumer warranties for defective products. The ACCC took action against Fitbit for its misconduct under the Australian Consumer Law, and obtained an enforceable undertaking (EU) from Fitbit in May this year.

How the Australian Consumer Law applies

Schedule 2 of the Competition and Consumer Act 2010 (Cth) contains the Australian Consumer Law (ACL). The ACL provides a number of protections to consumers when purchasing goods and services, which are known as consumer guarantees. These guarantees are automatically incorporated into any consumer purchase and are not able to be excluded, modified or limited.

The ACL entitles consumers to remedies against the supplier of a good or service for a failure to comply with a consumer guarantee. Major failures entitle the consumer to a refund or replacement from the supplier, while minor failures require the supplier to provide a refund, repair or replacement.

Attempts to limit or exclude remedies available to consumers under the ACL may contravene the ACL.

Fitbit’s misconduct

The specific elements of Fitbit’s misconduct related to various representations to consumers made via Fitbit’s Australian website and product packaging, which included the following representations:

  • the warranty for repair or replacement of defective products was limited to within one year of the date of purchase
  • any replacement product is only warranted for the remainder of the warranty period or thirty days, whichever is longer
  • consumers need to pay the return costs for defective products
  • Fitbit is not liable for any consequential loss or damage for a breach of any warranty
  • membership fees will automatically renew, which may mislead consumers if there is inadequate disclosure of ongoing fees.

Despite the warranties including phrases such as “to the extent permitted by law” and “except where prohibited by applicable law”, the ACCC found that engaging in the above conduct meant that Fitbit has:

  • contravened section 18 of the ACL by engaging in conduct that was misleading or deceptive, or likely to mislead or deceive, and
  • contravened section 29(1)(m) of the ACL by, in the supply or possible supply of services or promotion of goods and services, making false or misleading representations concerning the existence, exclusion or effect of a condition, warranty, guarantee, right or remedy under the ACL.

Enforceable undertakings: Actions required

The enforceable undertakings from Fitbit have the effect of ensuring warranty provisions comply with the ACL and that consumers are aware that their rights are governed by such legislation.

They will ensure that consumer guarantees are in no way limited by the supplier and consumers are afforded full protection under the ACL.

The specific actions Fitbit will need to take include:

  • extending the product warranty claims period from one year to two years
  • including specific references to the ACL in various policies and on the Fitbit website, such as “… in addition to any other rights and remedies that you may have under the Australian Consumer Law” and “… warranties that cannot be excluded under the Australian Consumer Law”
  • requiring Fitbit to give notice to consumers of any recurring membership fees before they are incurred
  • posting a notice on Fitbit’s website (for 90 consecutive days) that allows consumers to submit a concern if they feel their consumer rights have been infringed by Fitbit
  • implementing an ACL compliance program, sharing that with the ACCC and having an independent review annually for each of the 3 years of the EU
  • in accordance with Regulation 90 of the Competition and Consumer Regulations 2010 (Cth), including the following text where necessary: “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 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.”

Implications and key messages for other suppliers subject to the ACL

  • a supplier of goods or services cannot in any way exclude, modify or limit consumer rights and remedies prescribed by the ACL
  • warranties must expressly state they apply in addition to the rights and remedies under the ACL
  • in any warranties against defects, include the text mentioned from Regulation 90 of the Competition and Consumer Regulations 2010 (Cth)
  • before they are incurred, ensure that notice is provided to consumers of any fees in relation recurring memberships associated with the supplier
  • the use of broad and general representations in warranties to unnamed laws, such as “to the extent permitted by law”, are inadequate for compliance with the ACL. Overseas companies must take a more “localised” approach when drafting warranties to ensure that policies expressly refer to the ACL and consumers are clearly aware of their legislative protections. This means that warranty provisions must be ‘Australian-specific’.