Retailer fined $200K for warranty breaches

April 21, 2011: In one of the first implementations of the tough new consumer protection laws, the Federal Court in Sydney has imposed penalties totalling $203,500 against computer retailer MSY Technology Pty Ltd and four related companies for making false and misleading consumer warranty representations.

The MSY Technology companies sell computers, computer parts, electronic goods – and a limited range of digital cameras – to consumers from retail stores in Victoria, New South Wales, Queensland, South Australia and Western Australia, and online.

Acting ACCC chairman Michael Schaper said this outcome serves as a timely reminder that the ACCC will take action against businesses which mislead consumers about their rights.

Under Australian Consumer Law (ACL) amendments which commenced on April 15, 2010, the ACCC can seek in civil proceedings penalties of up to $1.1 million against corporations and $220 000 against individuals for a contravention of various consumer protection provisions of the Trade Practices Act (now the Competition and Consumer Act 2010). Since 1 January 2011, consumer transactions have been subject to the consumer guarantees set out in the new ACL.

Consumer guarantees under the national ACL are a new set of rights consumers now have every time they purchase goods or services in Australia. These replace the statutory warranties and conditions in the Trade Practices Act 1974.

The consumer guarantees require, amongst other things, that goods must be of acceptable quality, fit for any disclosed purpose, and must match any description given or sample shown. Sellers and manufacturers must also honour any express — or extra — warranty they give about the goods they sell. Manufacturers must also ensure they make repair facilities and spare parts reasonably available for a reasonable time.

The ACL also includes misleading or deceptive conduct provisions, and these will continue to apply to retailers and manufacturers who misrepresent consumer guarantee rights.

The MSY Technology companies made a range of false or misleading representations to consumers in relation to their statutory warranty rights, One of those misleading representations was to ‘require consumers to pay a fee to obtain a warranty beyond that provided by the manufacturer.’

The other two were:
– not providing any statutory warranties to consumers in relation to their products;
– only providing statutory warranties to consumers in a restricted range of circumstances.

In his judgment in this proceeding, Justice Perram said: ‘It is appropriate that it should be made plain to retailers in the position of companies such as the respondents that misrepresenting to consumers what their warranty rights are is an unacceptable form of commercial conduct and illegal. It is appropriate, therefore, to encourage retailers not to give consumers the impression either that their statutory rights are curtailed or non-existent or that warranties can only be obtained through payment.’

The court also ordered that MSY Technology:

– be restrained for a period of five years from making false or misleading representations about a consumer’s statutory warranty rights, including in relation to the new consumer guarantees introduced in the ACL on 1 January 2011;
– implement a Trade Practices compliance program;
– display corrective advertising in each of their stores;
– publish a corrective notice on the MSY Technology website at http://www.msy.com.au, and;
– pay the ACCC’s costs.

‘The ACCC will actively pursue businesses that misrepresent consumers’ rights under the new law.’ Dr Schaper said.

He added that retailers and manufacturers must be aware that consumer rights under the consumer guarantee provisions in the ACL cannot be excluded, restricted or modified by way of agreement between the parties.

Further information on the consumer guarantees regime, including an online education module for store owners, managers and sales staff, can be found at: http://www.accc.gov.au/consumerguarantees.


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