By Stuart Walter, Partner and Phoebe Pitt, Special Counsel

Update to definition of “consumer”

From 1 July 2021, there will be amendments to the Australian Consumer Law (at Schedule 2 to the Competition and Consumer Act 2010 (Cth) (ACL)) which will result in its expansion to include more business to business transactions.

Currently, a person is taken to acquire goods or services as a consumer if – subject to exceptions such as re-supply – the amount paid for goods or services did not exceed $40,000 or the goods or services were of a kind ordinarily acquired for personal, domestic or household use or consumption.

From 1 July 2021, the financial threshold for those considered to be a “consumer” under section 3(1)(a) ACL will increase from $40,000 to $100,000, pursuant to the Treasury Laws Amendment (Acquisition as Consumer – Financial Thresholds) Regulations 2020 (Cth).

The amendment means that – regardless of whether the goods or services are of a kind ordinarily acquired for personal, domestic or household use or consumption, a “person” (including a business) who acquires goods or services with a value of up to $100,000 will be entitled to the statutory guarantees provided for by the ACL. A business which provides goods or services to that value will be obliged to provide those guarantees. We see scope for more business-to-business transactions to be captured by the regime as a result of the increased threshold.

The ACL requirements – which cannot be waived, limited or excluded – apply above and beyond (and irrespective of) any express guarantees or warranties against defects which may separately be offered or sold by a business.

Reminder – what are the consumer guarantees?

The ACL requires that products must:

1. Be of acceptable quality;
2. Match descriptions, packaging and labels;
3. Be fit for purpose;
4. Comply with express warranties or guarantees;
5. Come with full title and ownership; and
6. Have spare parts and repair facilities available for a reasonable time after purchase (unless told otherwise).

Services must be:

1. Provided with due care, skill or technical knowledge;
2. Fit for purpose; and
3. Delivered within a reasonable time when there is no agreed end date.

What this means for your business:

If your business provides goods or services under $40,000 value: the changes will not affect your supplies and the ACL will continue to apply in the same way as previously.

If your business provides goods or services between $40,001 and $100,000 value: regardless of whether those goods are of a kind ordinarily acquired for personal, domestic or household use or consumption or otherwise, from 1 July 2021 it must also comply with the ACL guarantees regime in respect of those supplies. These changes should be conveyed by management to all operational divisions (including, importantly, marketing and sales) so that any necessary amendments to processes and procedures are made.

We suggest that businesses, at a minimum:

1. Undertake a review of contractual terms to ensure that consumer rights are properly and accurately described;
2. Ensure that any warranty against defects (for goods or services) includes the mandatory text required by the ACL; and
3. Take the opportunity to train up staff on the range of goods and services which will be captured, and that this may extend to business customers (also a good chance for a refresher for staff in those businesses already subject to the ACL guarantees regime!).

Confirmation of multiple non-major failures constituting “major failure” for purpose of ACL

Separately, the Treasury Laws Amendment (2020 Measures No. 6) Act 2020 (Cth) has clarified that, as from 18 December 2020, multiple non-major failures to comply with consumer guarantees can amount to a major failure. The ACL now provides that a failure to comply with a guarantee is a “major failure” and actionable under section 259 ACL if:

1. It is one of two or more failures to comply with a section 259(1)(b) guarantee; and
2. The goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of those failures, taken as a whole.

The multiple cases need not relate to the same guarantee in order to enliven the provisions of section 261 ACL which address the manner in which suppliers may remedy a failure to comply with a guarantee under section 259(1)(b).

In those circumstances, it would be prudent for any business supplying goods to a “consumer” (in terms of the definition with regards to both the current and future financial threshold) to review its policies, practices and procedures to ensure that it is not liable to occasion any breaches of the consumer guarantees regime.