The Australian Competition and Consumer Commission (ACCC) commenced legal proceedings against both franchisees of Harvey Norman and against Hewlett Packard for allegedly engaging in misleading and deceptive conduct about the rights of consumers when purchasing goods from their respective stores.  

Proceedings were filed by the ACCC in the context of its national consumer awareness campaign to educate consumers and the industry about consumers’ rights under the Australian Consumer Law (ACL). This article considers how these alleged breaches occurred and what the law says are consumer rights.  

Harvey Norman franchisees representations  

In the Sydney Federal Court the ACCC commenced proceedings against 11 Harvey Norman franchisees for allegedly engaging in misleading or deceptive conduct.  

The ACCC claims that:

  • the franchisees made false or misleading representations to consumers about their rights under the consumer guarantee provisions of the ACL.
  • The action was prompted by consumer complaints to the regulator.  

The ACCC is seeking penalties, declarations, injunctions and costs, with penalties being up to $1.1 million for corporations and $220,000 for individuals  

The ACCC alleges that the employees of the franchisees mislead the consumers between the period April 2011 to mid 2012 by making false representations about warranties and refunds including:

  • the franchisee was under no obligation to provide remedies for damaged goods unless notified within 24 hours or 14 days;
  • the franchisee was under no obligation to provide remedies for goods covered by the manufacturer’s warranty;
  • the franchisee was under no obligation to provide refunds or replacements for particular items including large appliances or items priced below a certain price; and
  • the consumers must pay a fee for the repair and return of faulty products.  

Hewlett-Packard Australia Pty Ltd

The ACCC instituted proceedings in the Sydney Federal Court on 16 October 2012 against Hewlett- Packard Australia Pty Ltd (HP) for breaches of the ACL.  

The ACCC alleged that HP had misled consumers with deceptive conduct relating to warranties, specifically:

  • making false or misleading representations to consumers in relation to consumers’ statutory warranty and consumer guarantee rights; and
  • making false or misleading representations to retailers that HP was not liable to indemnify them if they provided consumers with a refund or replacement without HP’s prior authorisation.  

The ACCC says that it is investigating other large companies for similar breaches.

ACL Provisions

In 2010, the ACL replaced the existing national, State and territory laws on implied conditions and warranties with a single national system of statutory consumer guarantees.  

Under the ACL, consumers have rights known as ‘consumer guarantees’ for goods purchased after 1 January 2011. The ACCC chairman Mr Rod Sims stated that, “these rights cannot be excluded, restricted or modified.”1

Section 29 of the ACL states that a person is prohibited from making false or misleading representations in connection with the supply, possible supply or promotion of goods or services.  

The ACL has banned false or misleading representations about:

  • the standard, quality, value or grade of goods or services;
  • the composition style, model or previous history or use of goods;
  • whether the goods are new;
  • A particular person agreeing to acquire goods or services;
  • testimonials by any person relating to goods or services;
  • the sponsorship, performance characteristics, accessories, benefits and uses of goods and services;
  • the price of goods or services;
  • any condition, warranty or guarantee on the goods or services; and
  • any actual or implied requirement for a person to pay for a contractual right equivalent to a statutory consumer guarantee.  

Section 33 of the ACL also prohibits conduct liable to mislead the public as to the nature, manufacturing  process, characteristics, suitability for their purpose or the quantity of goods.  

Furthermore, section 34 of the ACL prohibits conduct liable to mislead the public as to the nature, characteristics, suitability for their purpose or the quantity of services.  

If the seller does not meet any of the guarantees, the consumer is entitled to a remedy. In addition where a good develops a major fault, consumers will also have a right to a replacement or a refund from the suppliers of the good.  

A major fault is one where the failure was so severe that a reasonable consumer would not have purchased the goods had they known of the full extent of the problem. If a good has a minor fault, consumers will have a right to have the good remedied within a reasonable time.  

Recommendations to avoid breaches

To avoid being the subject of proceedings by the ACCC, franchises should ensure the following:

  • Receipt dockets, warranty documents, refund policies, websites, marketing and promotional material and product packaging are fully compliant with the ACL.
  • Employees are adequately ACL trained to understand the laws regarding consumer guarantees including remedying minor and major faults in products. The ACCC has produced a video training module for businesses to use to train employees.
  • Be aware that the consumer guarantees have no set time limit. Depending on the type and quality of the good, businesses may be obligated to provide a remedy after any voluntary or manufacturer’s warranty has expired.
  • Be aware of conduct that constitutes misleading and false representations as set out in ss 29, 33, 34 of the ACL and act to prevent this occurring within your business.