There are legal guarantees you must give your customers when they purchase your goods. If you try to restrict these you could find yourself in a lot of trouble, as Hewlett Packard found out in July 2013.
Hewlett Packard v ACCC
In July this year the Federal Court ordered Hewlett Packard Australia (HP) to pay a huge fine arising from false and misleading representations made to consumers about consumer guarantee rights. HP had told its customers they had to have multiple repairs before replacement, that only a limited, express warranty was available, beyond which payment for repairs were required. To their online customers they said it was up to HP whether they would accept any returns to repair or replace. The case is significant for two reasons: it was the first high profile consumer guarantees case brought by the ACCC and it involved a fine of $3millon dollars, the second highest pecuniary penalty imposed by the Federal Court for a breach of the ACL.
The Court found that HP made a number of false or misleading representations to consumers about their consumer guarantee rights, including:
- the remedies available to consumers were limited to the remedies available at HP’s discretion.
- consumers were required to have their product repaired multiple times before they were entitled to a replacement.
- the warranty period for HP products was limited to a specified express warranty period.
- consumers were required to pay for remedies outside the express warranty period.
- products purchased online could only be returned to HP at HP’s sole discretion.
Additionally, the Court found that HP represented to retailers that it was not liable to indemnify the retailer if the retailer failed to obtain authorisation from HP before giving a consumer a refund or replacement.
The above representations were made by HP staff working at call centres located around the world, who were following HP’s internal guidelines and scripts.
In his judgment, Justice Buchannan stated that the penalty was appropriate and “reflects an acknowledgment of the seriousness of the respondent’s conduct”. Justice Buchannan noted the Court’s disapproval of HP’s conduct and the need for general and specific deterrence for such behaviour. In addition to the $3 million penalty, the Court also made ordered HP to pay $200,000 towards the ACCC’s legal fees as well as make a number of apologies, re-train their staff and advertise a correction.
What was wrong with HP’s warranty?
Under the Australian Consumer Law Act, consumers are given a set of rights called consumer guarantees for all goods purchased after 1 January 2011. These guarantees include a guarantee that:
- goods will be of acceptable quality.
- goods will be fit for any disclosed purpose.
- goods will match any description under which it is sold.
- goods will have spare parts available for a reasonable time.
- all express warranties offered will be honoured.
For goods purchased on or after 1 January 2011, where a good develops a major fault, consumers have a right to a replacement or refund from the supplier of the good. For goods that develop a minor fault, a consumer has a right to have the good remedied (at the suppliers discretion) within a reasonable time. If the supplier doesn’t do so, the consumer can either reject the goods and receive a refund or have the problem fixed and recover reasonable costs of doing so from the supplier.
If you offer guarantees, implied or expressed, you need to ensure that any guarantee provided complies with the Australian Consumer Law (ACL).
Call Coutts to assist you review your terms and practices of trade. If they do not comply with the ACL you could be prosecuted and fined.