The Australian Consumer Law (ACL) affects all business owners in Australia. It sets out consumer guarantees, an unfair contract regime and a national product safety and enforcement system. The ACL also outlines business owners’ obligations regarding sales practices, lay-by agreements and the Australian Competition and Consumer Commission’s (ACCC) powers when investigating potential breaches of the laws.
It’s vital that as a business owner you’re aware of your rights, obligations and have an understanding of how consumer law affects your business specifically. Harsh penalties apply to business owners who are found to breach these laws.
The laws are uniform across the country, so if your business operates across state or territory boundaries there is only one set of legislation you have to abide. The laws came into effect on 1 January 2011 and replaced 17 separate state and territory laws.
The ACCC and state and territory consumer protection agencies enforce the ACL. Where the ACL applies to financial services it’s enforced by the Australian Securities and Investments Commission (ASIC).
Consumer guarantees
Under ACL, the products or services you sell come with an automatic guarantee that they’ll work in the manner you say they will. If they don’t, the consumer has certain rights and legal recourse.
The automatic guarantee applies to all products and services you sell, hire or lease that are under $40,000 and those that are over $40,000 that are normally bought for personal or household use. Additionally, business vehicles and trailers, provided they are used primarily for the transport of goods, are also covered.
Products
Under the terms proscribed by Australian Consumer Law, products must be safe, look acceptable and do all the things someone would normally expect them to do.
Products must also: match the descriptions provided; match any demonstration models; be fit for the advertised purpose; come with full title and ownership; not carry any hidden debts or extra charges; meet any extra promises made about performance, condition and quality, like lifetime guarantees; and have spare parts and repair facilities available for a reasonable time after purchase unless otherwise stated.
Services
The automatic guarantee on services dictates that they must be: provided with acceptable care and skill or technical knowledge and taking all necessary steps to avoid loss and damage; be fit for the purpose or give the results that you and the business had agreed to; and be delivered within a reasonable time when there is no agreed end date.
The ACCC has produced a short, educational video to further explain your rights and obligations, as well as providing several examples of how the ACL may be applied to service-based businesses.
Exceptions
There are some exceptions that, depending on your business, may be relevant. For example, consumer guarantees do not apply if the customer simply changes their mind, misuses the product or were aware of the faults but bought it anyway.
Who is responsible?
If you are a retailer, you’re obliged to provide a remedy if the product doesn’t meet any one or more of the consumer guarantees. It’s important to understand these obligations because failure to adhere to them may lead to legal action. The only exceptions are if spare parts are unavailable or you don’t have the facilities to repair the fault.
The remedies you can offer customers are repair, replacement or refund and, in some instances, compensation for damages and loss. Importantly, you cannot refuse to help a customer by sending them to the manufacturer.
Alternatively, customers can also claim a remedy directly from the manufacturer or importer if the goods are of an unacceptable quality, don’t match the advertised description or don’t meet any other of the consumer guarantees.
Repair, replace, refund
If a product or service is faulty, you’re required to provide a remedy: to repair, replace or refund the item. The remedy will depend on the specific nature of the issue and, in most instance, you have the discretion to determine the best course of action. For example, if a customer returns with an item that has a minor fault and asks for their money back, you are within your rights to offer to repair the item free of charge instead.
Repair
Customers are obliged to accept your offer of repair if the fault is minor. Alternatively, you could come to an arrangement with the customers where they arrange for the repairs and you reimburse them for the cost. If the repair isn’t carried out in a reasonable amount of time, then the customer may be entitled to a refund or replacement.
Replacement, refund
If a fault is major and the customer asks for a replacement or refund you’re obliged under Australian Consumer Law to provide it.
What constitutes a major problem can often be a contentious issue, so the ACL sets out a few guidelines:
- It has a problem that would have stopped someone from buying it if they’d known about it;
- It is significantly different from the sample or description;
- It is substantially unfit for its common purpose and can’t easily be fixed within a reasonable time;
- It doesn’t do what you asked for and can’t easily be fixed within a reasonable time; or
- It is unsafe.
A service has a major problem when:
- It has a problem that would have stopped someone from buying it if they’d known about it;
- It is substantially unfit for its common purpose and can’t easily be fixed within a reasonable time;
- It does not meet the specific purpose you asked for and cannot easily be fixed within a reasonable time; or
- It creates an unsafe situation.
Compensation
Customers are able to seek compensation for damages and losses they suffer as a result of a faulty product or service if it’s deemed that the issue was reasonably foreseeable. Compensation is not an alternative to a customers’ repair, replace and refund rights, but an addition to them.
In most cases, compensation pertains to financial loss, but can also relate to time and productivity. Compensation can be notoriously difficult to work out, but the general rule of thumb is that it should restore the customers’ position if the product or service had done what it was meant to.
Warranties
You may want to offer customers a warranty, in addition to the automatic customer guarantees outlined under the Australian Consumer Law, as a way of promoting your product or service.
For example, if you own a home appliances store, you might provide a ten-year warranty on a washing machine. If it then breaks down after nine years you’d be required to repair, replace or refund it, even though you wouldn’t ordinarily be required to because it would be considered a problem caused by normal wear and tear. The warranty, in other words, becomes a promise that can be enforced under ACL.
Nothing in this article constitutes legal advice – if you have questions about compliance and rights, please seek professional legal advice.
Related articles
A Guide to the Australian Minimum Wage for Employers
How to Choose the Best EFTPOS Machine
What is a SWOT Analysis
