Caveat vendor: Sellers beware (of the Australian Consumer Law)

How well do your business and your customer services representatives understand consumers' rights under the Australian Consumer Law (ACL)?  Do you trust them to ensure that nothing they say to customers will run contrary to those rights?  If the answer is "not well", or "not at all", then do beware - the Federal Court has just ordered one company whose communications misrepresented consumers' rights under the ACL to pay a penalty of $3 million, place remedial advertising across the Australian national press and pay $200,000 in legal costs.  Penalties might have been even higher had the matter not been settled with the ACCC on an "agreed facts" basis.

In this case¹, Hewlett-Packard Australia Pty Ltd (HP) found itself in trouble with the Australian Competition and Consumer Commission (ACCC) because, over a period of approximately 2 years, its call centre and other staff incorrectly:

• represented that customers' rights and remedies were limited to those available at HP's discretion;
• advised its customers that if they had problems with their HP computer products, then that equipment had to have been repaired by HP several times before the customers would be entitled to a replacement;
• represented on its online store that customers were not able to return or exchange HP products of unacceptable quality which were purchased via that online store unless otherwise agreed by HP;
• represented that the warranty period for HP products was limited to a specified expressed warranty period;
• required customers to pay for remedies outside that expressed warranty period; and
• refused to accept claims from retail suppliers for refund or replacement of faulty goods unless such a refund/exchange had been previously authorised by HPA.

The Court and all parties accepted that there was an additional layer of consumers' statutory rights under the ACL (and/or its predecessor, the Trade Practices Act) to which HP had failed to have proper regard when communicating to customers about their rights.  Customers had a statutory entitlement under the ACL to reject HP products which did not meet the quality standard, and could be entitled to a full exchange or refund (and potentially other avenues of redress) unfettered by any limitations which HP might be entitled to impose on its voluntary manufacturer's guarantee.

Lesson to be learned

The statutory consumer guarantees set out in the ACL give consumers a wide range of rights that cannot be excluded or (except for pure 'business' products) limited by a manufacturer or retailer.  Intentionally or inadvertently misleading consumers about these rights can incur the wrath of the ACCC, resulting in significant pecuniary penalties and reputational damage for the companies involved.
 
The lesson from HP's expensive experience is to ensure that all staff who deal with consumers are properly trained to understand consumers' rights under the ACL and know not to make statements that misrepresent those rights.  In larger organisations, this means documents such as return policies and call centre scripting should be reviewed or developed in conjunction with consumer law specialists.  As HP has learned, under no circumstances should policies or scripting developed for other, less regulated markets be applied to Australian consumers without careful review.
  
HWL Ebsworth has advised many companies to train staff and develop appropriate processes and scripts to ensure that service costs can be managed to the maximum extent possible without falling foul of consumer laws or the ACCC.


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¹Australian Competition and Consumer Commission v Hewlett-Packard Australia Pty Ltd [2013] FCA 653, handed down 5 July 2013

For information on our Competition and Consumer Group click here.

Important disclaimer: The material contained in this publication is of a general nature only and is based on the law as at 12 July 2013. It is not, nor is intended to be, legal advice. If you wish to take any action based on the content of this publication we recommend that you seek professional advice.