Changes to ACL – suppliers of services to use compulsory wording

On 9 June 2019, amendments to Schedule 2 of the Competition and Consumer Amendment (Australian Consumer Law Review) Regulations 2018 (Cth) (Amendments) came into effect.  The Amendments require suppliers of goods and services to use a mandatory wording if they provide a “warranty against defects”.  Mandatory wording of such warranties were previously required only for the supply of goods.  However, these changes extend the prescribed warranties to situations where there is a supply of services or a supply of both goods and services.

Failure to incorporate this wording may result in a pecuniary penalty of up to $50,000 being imposed on a company.  Additionally, a failure to include the prescribed wording can amount to misleading or deceptive conduct in contravention of section 18 of the Australian Consumer Law (ACL) or constitute a false representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy in contravention of section 29(1)(m) of the ACL.

Parliament has now also introduced amendments that greatly increased the penalties available for a breach of the ACL (Penalty Amendments) which include a maximum penalty for a breach of section 29 of the ACL being the greater of the following amounts:

• $10,000,000.00;
• three times the value of the benefit obtained by the company (including any related body corporate) from the offence that led to the penalty; and
• if the benefit cannot be determined by the court the 10% of the annual turnover of the company in the past 12 months.

Existing prescribed wording of warranties for suppliers of goods

Before the Amendments came into force, suppliers of goods were required to use the following wording for their warranties.

‘Our goods come with guarantees that cannot be excluded under the Australian Consumer Law.  You are entitled to a replacement or refund for a major failure and compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure.’

New prescribed wording of warranties for suppliers of services to consumers

Suppliers of services are required to use the following wording for their warranties:

‘Our services come with guarantees that cannot be excluded under the Australian Consumer Law. For major failures with the service, you are entitled:

• to cancel your service contract with us; and
• to a refund for the unused portion, or to compensation for its reduced value.

You are also entitled to be compensated for any other reasonably foreseeable loss or damage. If the failure does not amount to a major failure you are entitled to have problems with the service rectified in a reasonable time and, if this is not done, to cancel your contract and obtain a refund for the unused portion of the contract.’

New prescribed wording of warranties for suppliers of goods and services to consumers

Suppliers of both goods are services are required to use the following wording in their warranties:

‘Our goods and services come with guarantees that cannot be excluded under the Australian Consumer Law. For major failures with the service, you are entitled:

• to cancel your service contract with us; and
• to a refund for the unused portion, or to compensation for its reduced value.

You are also entitled to choose a refund or replacement for major failures with goods. If a failure with the goods or a service does not amount to a major failure, you are entitled to have the failure rectified in a reasonable time. If this is not done you are entitled to a refund for the goods and to cancel the contract for the service and obtain a refund of any unused portion. You are also entitled to be compensated for any other reasonably foreseeable loss or damage from a failure in the goods or service.’

Penalties for attempted exclusion of Consumer Guarantees

In a previous article we discussed the case of Australian Competition and Consumer Commission v Jetstar Airways Pty Ltd [2019] FCA 797, where Jetstar contravened ss18 and 29(1)(m) of the ACL by making representations that their Jetstar Starter and Plus Fares were not refundable and that their Flight Services were not subject to any statutory guarantees or warranties, including Consumer Guarantees.

Jetstar was ordered to pay $1,000,000 in respect of their contraventions regarding representations of non-refundability, and a pecuniary penalty of $950,000 regarding representations in respect of their Flight Services.  The penalties received were arguably fairly steep; however, Jetstar was fortunate their case was heard prior to the Penalty Amendments taking effect as they could have been much steeper. Had the Penalty Amendments been in force at the time of Jetstar’s breach, they could have faced a pecuniary penalty of up to $46 million (10% of annual turnover in the 2018 financial year).

Takeaways

If your business provides warranties in the course of supplying goods or services to consumers then you need to consider:

• ensuring any documents such as terms of sale and other agreements do not purport to exclude the Australian Consumer Guarantees; and
• ensuring that any warranties provided to the consumer are compliant with the prescribed wording.

Links and further references

Legislation

Competition and Consumer Act 2010 (Cth) Schedule 2 (Australian Consumer Law)

Competition and Consumer Regulations 2010 (Cth)

Competition and Consumer Amendment (Australian Consumer Law Review) Regulations 2018 (Cth)

Cases

Australian Competition and Consumer Commission v Jetstar Airways Pty Ltd [2019] FCA 797 (30 May 2019)

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Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

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