Summary

  • As a further reminder of the strength of the new enforcement powers in the Australian Consumer Law (ACL), and the ACCC’s determination to use those powers, the Federal Court has imposed a $3 million penalty on Hewlett-Packard. The action brought by the ACCC related to false and misleading statements concerning the statutory consumer guarantees in the ACL.
  • Simply drafting and administering a legally compliant manufacturer’s warranty card or contractual warranty is often not sufficient to avoid potential liability under the ACL.
  • The case highlights that companies must be vigilant and ensure that staff are equipped with precise language to accurately respond to consumer and retailer requests or inquiries in respect of faulty (or allegedly faulty) products.
  • The case is a clear example of the complexities involved in managing a company’s contractual warranty and the statutory consumer guarantees in the ACL. Accurately representing a consumer’s rights under a company’s warranty may involve inaccurately representing the consumer’s rights under the ACL consumer guarantees, and expose substantial compliance risks.

Overview

The ACCC has identified statutory consumer guarantees under the ACL as a priority enforcement area.

The Federal Court ordered Hewlett-Packard (HP) to pay a $3 million pecuniary penalty for false and misleading statements made by HP call-centre staff regarding consumers’ rights in respect of faulty desktop computers, notebook computers, laptops and printers. This is one of the highest pecuniary penalties ordered for a breach of the ACL, and shows that the ACCC is continuing its rigorous approach to consumer law enforcement.

In addition to these proceedings against HP, the ACCC has also recently re-instituted proceedings against Harvey Norman franchisees for allegedly misrepresenting consumers’ rights in respect of faulty products. This reinforces that manufacturers and other suppliers must be vigilant to ensure that they accurately communicate consumers’ rights under the ACL.

The relevant contraventions

The Federal Court found that, based on the parties’ agreed facts, the following representations made to consumers by HP call-centre staff, were false, misleading or deceptive in contravention of the ACL:

  • the range of remedies available to consumers were limited to those made available by HP at its own discretion
  • consumers must have faulty products repaired multiple times by HP before they were entitled to a replacement
  • the warranty period for HP products was limited to a specified express warranty period, notwithstanding the fact that the consumers were also entitled to remedies under the ACL
  • HP would only repair products on condition that consumers pay for such repairs, and
  • consumers could not return or exchange products purchased on its website (subject to HP’s discretion).

Further, the Federal Court found that HP contravened the ACL by representing to retailers that HP was not liable to indemnify the retailer where the retailer provided a refund or replacement to a consumer without first obtaining its authorisation.

In addition to the $3 million penalty, HP has been restrained from engaging in similar conduct for three years, ordered to write to all retailers, and publish corrective notices on its website and in major newspapers to indicate that consumers may seek a refund or replacement for faulty HP products.

HP must also set up an independently reviewed consumer redress program, as well as a three year compliance program, plus pay a contribution to the ACCC’s costs of bringing the proceedings.

Key takeaways

A key feature of this case involves the interaction between a warranty provided by the company and the statutory consumer guarantees conferred by the ACL. The consumer guarantees cannot be excluded and coexist with any contractual warranty given by the company.

Companies often face a challenge to ensure that accurate explanations concerning the terms of a warranty they may give do not mislead consumers about the coexisting rights they have under the ACL consumer guarantees. To comply with the ACL companies must ensure that staff dealing with consumers accurately represent all warranty rights that may apply to the consumer transaction.   

These proceedings reinforce the fact that simply drafting and administering a legally compliant manufacturer’s warranty card or contractual warranty is not sufficient to avoid potential liability under the ACL.

The case also highlights the risks for global companies with dedicated customer care teams servicing multiple jurisdictions, and for manufacturers who supply ‘add-on’ warranty care services for an additional fee at the point of sale.

Complexities undoubtedly arise for electronics products, where the cause of the problem may not be obvious once additional software, applications or other functionality has been applied. Legal exposure may arise if manufacturers and other suppliers fail to provide their customer care staff with clear guidelines for dealing with customers and retailers to ensure that they do not misrepresent the consumers’ and retailers’ rights under the ACL.

Consumer guarantees

The ACL imposes statutory consumer guarantees on manufacturers and other suppliers in relation to goods and services sold to consumers. These include guarantees that the goods are of acceptable quality and are fit for the purpose for which they are intended. Depending on the circumstances, the consumer may be entitled to have the faulty goods repaired, replaced or receive a refund for the goods.

These consumer guarantees apply irrespective of any specific manufacturer’s warranties or other contractual warranties that a manufacturer or supplier might offer. Manufacturers and suppliers cannot limit, restrict or exclude the consumer guarantees, and are prohibited from making false representations in respect of consumers’ rights under these guarantees.

Under the ACL, consumers have a right to take action against manufacturers and suppliers if the goods do not meet the standard required by the consumer guarantees. The ACL also allows a supplier to seek indemnity from a manufacturer where the goods do not meet the standard required by a statutory guarantee.