Are Australian Consumer Laws Fit For Purpose As Lawyers Go After JB Hi Fi For Monetary Gain?

Serious questions are being raised today about whether the Australian Consumer laws (ACL) are fit for purpose and are actually fair, when it comes to both consumers, retailers and manufacturers in today’s marketplace.

This follows the decision by Melbourne based legal form Maurice Blackburn to initiate legal action against JB Hi Fi claiming they sold extended warranties that allegedly had little or no value because customers already had those rights under Australian Consumer Law.

The action against JB Hi Fi is timely, due in part to the whole question of warranties Vs the interpretation of the ACL laws with industry executives claiming that in today’s marketplace they are “not fit for purpose” and need to be amended so that they deliver “Better balance for all parties” involved in warranty claims.

The Competition and Consumer Act 2010 (which replaced the Trade Practices Act 1974 on 1 January 2011) was designed to give businesses a fair and competitive operating environment.

It covers anti-competitive conduct, price fixing, unconscionable conduct and other issues, such as advertising.

Maurice Blackburn is using this act to take action against JB Hi Fi whose policy in the past much to the angst of brands is to refund customers and then get the manufacturer to take responsibility.

Brands believe that there needs to be more accountability and that the act needs to be amended to better protect retailers and themselves from questionable warranty claims by consumers.

Shortly after the act was changed the ACCC in 2012, instituted proceedings in the Federal Court in Sydney against 11 Harvey Norman franchisees for allegedly misrepresenting consumer rights.

The ACCC alleged at the time the franchisees made “false or misleading representations to consumers about their rights under the consumer guarantee provisions of the Australian Consumer Law (ACL)”.

The ACCC alleged that each franchisee misled consumers by representing that the franchisee had no obligation to provide remedies:

for damaged goods unless notified within a specific time period such as 24 hours or 14 days
for goods still covered by the manufacturer’s warranty (because the consumer must return the goods to the manufacturer)

for particular items such as large appliances or items priced below a certain amount.

The ACCC also alleged that the franchisees misled consumers by making representations that consumers must pay for the repair and the return of faulty goods.

The ACCC sought penalties, declarations, injunctions and costs, which include pecuniary penalties of up to A$1.1 million, for a corporation or A$220,000 for individuals.

Harvey Norman was found guilty by the Federal Court and ordered to pay penalties.

The action against Australia’s largest consumer electronics retailer, comes as manufacturers move to increase the cost of goods “significantly”, just to cover off the cost of current warranty claims which have risen as consumers come under pressure due to financial stress and inflation issues, with some industry executives claiming that the retail industry and their suppliers are also having to fund fraudulent claims because of the wording of the ACL.

Brands have told ChannelNews that in some categories 70% of the goods consumers are returning after claiming a “warranty fault” are found to have not been faulty.

Recently LG Electronics had a serious conversation with a major retailer, whose policy appears to be based on rebating the consumer, and then arranging for the goods to be returned to the manufacturer.

LG in the past as well as the likes of Samsung forced to wear the cost of picking up the goods and then doing a service call on the goods only to find that there is no problem with the goods.

In most cases such as with returned washing machines and refrigerators that weight several kilos the likes of LG and Samsung are not only forced to wear the cost of the returned goods but the loss of profits on the sale of these goods.

Major retailers claim that the key question is “What is Fair and Reasonable” under the ACL which is what the Maurice Blackburn case is set to focus on in an effort to extract money out of JB Hi Fi.

Some observers claim that the Australian Competition and Consumer Commissions interpretation of the laws need to be reviewed in the interest of all parties involved in warranty claims, or consumers in Australia are going to have to pay more simply to facilitate the questionable warranty claims that suppliers are now having to handle for what is being determined as problems with the Australian ACL.

Then there is the issue as to where all of the millions of dollars’ worth of returned appliance products including refrigerators, washing machines and dryers, as well as the products that are damaged are ending up with the bulk going to land fill which is now seen as an environmental problem which the industry and the ACCC are in a position to resolve.