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New consumer laws: Seller Beware!

January 1, 2011: ushered in a new, more robust consumer protection regime for Australia and New Zealand which appears to have significant implications for both retailers and manufacturers of photographic equipment and services.

The new Australian Consumer Law (ACL) replaces 20 state and territory laws and also includes New Zealand. The New Zealand Ministry of Consumer Affairs and the New Zealand Commerce Commission have entered into a memorandum of understanding to guide joint enforcement and administration of the ACL.

New Zealand has signed the ACL Memorandum of Understanding, ‘to emphasise the cooperative relationship between Australian and New Zealand consumer agencies’.

The NZCC chair, Dr Mark Berry has been appointed as an associate member of the ACCC, and ACCC member Dr Jill Walker has been appointed as an associate member of the NZCC.

The enforcement regime now includes the ACCC and ASIC in addition to the various state consumer affairs departments, with a more active role outlined for these government bodies in pursuing consumer rights, and tougher penalties for those who breach the ACL.

The ACL includes:
– a new national unfair contract terms law covering standard form contracts;
– a new national law guaranteeing consumer rights when buying goods and services, which replaces existing laws on conditions and warranties;
– a new national product safety law and enforcement system;
– a new national law for unsolicited consumer agreements, which replaces existing State and Territory laws on ‘door-to-door’ sales and other direct marketing; and
– simple national rules for lay-by agreements.

A close reading of Consumer Guarantees, just one of the several lengthy guidebooks produced by the Australian Government to explain the new legislation, throws up a range of issues and questions for retailers.

For example, obligations to a consumer don’t necessarily end at the expiry of a one-year warranty in the new environment:

Here’s an example from the guidebook:

‘A consumer buys a plasma television for $6000. It stops working two years later . The supplier tells the consumer they have no rights to repairs or another remedy as the television was only under the manufacturer’s warranty for 12 months. The supplier says the consumer should have bought an extended warranty, which would have given five years’ cover.

A reasonable consumer would expect more than two years’ use from a $6000 television. Under the consumer guarantees, the consumer therefore has a statutory right to a remedy on the basis that the television is not of acceptable quality. The supplier must provide a remedy free of charge.

This may also amount to misleading a consumer about their rights.

– If the same logic is applied to anything other than entry level digital cameras, the photo retailing sector has a few challenges in front of it!

Extended warranties under question

The example above also touches on extended warranties, and leading law firm Minter Ellison actually questions whether the new laws spell the deathy-knell for this high-margin accessory:

‘Little consideration has been given to an associated amendment to the consumer protection provisions that has the potential to significantly affect the structure and promotion of extended warranty products.

‘…Extended warranty products are often criticised by consumer groups as offering little benefit or value beyond the rights automatically implied by the statutory warranties. This is compounded by the fact that Australian consumers have very low levels of understanding of their statutory rights. Only 29 percent of Australian consumers are aware of the statutory rights under the implied warranties, compared with 67 percent in New Zealand, and around half of all consumers, retailers and manufacturers/importers believe the manufacturer’s express warranty is the full extent of consumers’ rights.

‘The upshot of this lack of awareness is that consumers may be motivated to purchase an extended warranty that may or may not add real substantive protection over the rights automatically implied by law.’

Penalties for false or misleading representations of the kind which a sales person could fairly innocently make when selling an extended warranty are up to $1.1 million for companies and up to $220,000 for individuals.

Minter Ellison goes on to say that these kinds of consumer safeguards had been in place prior to January 1, but ‘have not systematically been enforced by the ACCC against manufacturers or retailers who sell or promote extended warranty products that replicate rights that are automatically implied by statute.

‘However, from 1 January 2011, manufacturers and retailers will be in clear breach of the Australian Consumer Law if they represent that consumer rights of the kind automatically implied under the statutory guarantees regime can only be obtained by payment for an extended warranty product.

‘These guarantees include that goods and services are fit for any disclosed purpose, and are of “acceptable quality” having regard to factors including the nature and price of the goods…

‘What is less clear is whether suppliers will breach the new prohibition if they merely sell or promote extended warranty products that duplicate, or to some extent overlap with, rights that are automatically implied by the statutory guarantees.’

So if a retailer says something along the lines of – ‘The LCD panels in these DSLRs can fail after 18 months or so, but If you buy an extended warranty, you don’t have to worry about it’ – they may be in breach of the law, given that it would be reasonable to expect an LCD screen on a $1000+ camera to function for longer than the 12-month manufacturers’ warranty period.

Retailers selling extended warranties urgently need to get up to speed on what can and can’t be said when offering them, and brief their sales staff.

There are a number of guarantees covered by the ACL: goods must be of acceptable quality; fit for any disclosed purpose and match any description given to them, services must be carried out with due care and skill, be fit for any disclosed purpose and achieve any specified result.

‘Businesses can extend, but not reduce these guarantees with their own company policies,’ explained acting chairman of the ACCC, Dr Michael Schaper.

‘If a good or service does not meet the consumer guarantees, then a consumer has rights to a remedy – for example a refund, replacement or repair, or having unsatisfactory service performed again—depending on the circumstances.’

Reading the Consumer Guarantees document, it seems that assurances made across the counter can stand as extensions of a guarantee. So for instance if a camera is sold to a consumer as specifically being suitable for, say, macro-photography, and it isn’t, then the consumer can seek redress – once again, retailing counter staff need to be very careful of what they tell potential buyers about a product’s performance.

This also begs the question – what happens when there is a dispute between a customer and the retailer about what was said at the time of purchase, or in a case when the relevant staff member is no longer employed?

‘Not my problem’ – Not!

In most cases consumers are entitled to seek a remedy from the seller or service provider and businesses must honour these obligations: ‘You’ll have to take that up with the manufacturer’ won’t work under the new regime.

The consumer guarantees also clarify who is entitled to choose the most appropriate remedy – the supplier or the consumer – depending on the severity of the problem.

‘A “major failure” is generally one that is so severe that a reasonable consumer would not have bought the good or service if they had fully understood the problem with it,’ Dr Schaper said.

‘If the problem is major, or cannot be fixed within a reasonable time, the consumer can choose what he or she prefers – a refund, a replacement good or compensation for any drop in value.

‘Generally, if the failure to comply with the guarantee is not major and can be remedied within a reasonable time, the supplier can choose whether to repair or replace the good, resupply the services or provide a refund.

‘These consumer rights don’t cover problems caused through misuse or carelessness or circumstances where consumers later change their mind. Of course, stores that offer refunds or exchanges under their own voluntary or extended warranty must honour these.

‘It is important for all businesses to ensure that their policies, procedures and advertising comply with the ACL,’ Dr Scaper warned.

The ACCC says it will take ‘closely monitor businesses implementation of these new laws and will take strong enforcement action where necessary to protect consumers.’

In some 1500 words (surely the upper limit for a feature story on screen!) Photo Counter has really only scratched the surface of what the ACL implies for retailers.

Other issues include:
Consequential loss: Camera recharger malfunctions and burns down a house – potentially the responsibility of the supplier or manufacturer,
Signage required alerting consumers to their rights (from January, 2012).
Spare parts and repair facilities must be available ‘for a reasonable time’ after purchase. (But ‘reasonable time ‘ is not defined).
Sale and demonstator goods are covered as fully as non-sale goods.
– Guarantees extend to second hand goods.
– Credit notes, exchange cards or replacement goods are not acceptable substitutes for a refund.
Lack or original packaging not acceptable reason for refusing a refund.
– In certain circumstances consumers can have goods repaired by a third party and bill the supplier.

Further reading:

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