Extended Warranties for Consumers – are they necessary?

February, 2015

The Australian Competition and Consumer Commission (ACCC) has had another win in the field of consumer protection.  The focus of the action this time was false and misleading representations made regarding warranties.

In proceedings before the Federal Court, both Fisher & Paykel Customer Services Pty Ltd (Fisher & Paykel) and Domestic & General Services Pty Ltd (Domestic & General), a company which provides warranty services, were hit with pecuniary penalties for providing false or misleading representations in the course of offering an extended warranty to its customers.

Over the course of two years, Fisher & Paykel and Domestic & General sent letters to consumers who purchased a Fisher & Paykel appliance, requiring them to purchase an extended warranty to cover potential repair costs.  The letters indicated that the appliances would lose protection in 12 months time if the consumer did not purchase the extended warranty.

These letters were found to be in breach of the Competition and Consumer Act 2010 (ACL), and specifically the provision that a person who supplies goods or services must not make false or misleading representations concerning any warranty. The letters forwarded by Fisher & Paykel and Domestic and General had the potential to mislead thousands of consumers into believing they required an extended warranty when in fact they were covered by the ACL statutory warranties.

Whilst becoming less frequent, particularly given recent ACCC action, it is still not uncommon for businesses to make misleading representations about the extent of consumers statutory warranties under the ACL.

Each company was liable to pay a pecuniary penalty of $200,000.  The Court also granted injunctions against each company and ordered that both companies update their compliance programs.

These proceedings were similar to those concerning Harvey Norman franchisees where the Court ordered 8 franchisees to pay pecuniary penalties for false and misleading representations regarding consumer guarantee rights.

Given the similar nature of these disputes, it is clear that the ACCC will not sympathise with companies who attempt to manipulate consumers and contravene the law.  Given a statutory warranty can exist to ensure a good lasts as long as a consumer would “reasonably” expect, it is important businesses don’t make false or misleading representations about a consumers rights under the ACL.  Businesses should review their current representations regarding warranties generally.

Contact Mills Oakley

If you’d like advice regarding your current practices in this area, please contact:

tim-cox

Tim Cox | Partner
T: +61 7 3228 0442
E: tcox@millsoakley.com.au

Privacy Policy | Terms of Use