Consumer rights - How do they impact on your business?
An owner of a franchised business, like any other business owner, must comply with the Australian Consumer Law (ACL). This means you are required by law to honor consumer guarantees and not engage in unfair business conduct.
The Australian Competition and Consumer Commission (ACCC) was contacted by over 16,000 members of the public regarding alleged breaches of consumer guarantees in 2012. As a result the ACCC is actively and loudly investigating large manufacturers and retailers. A prime example is the recently instituted proceedings by the ACCC in the Federal Court against 11 franchisees of one of Australia’s largest retailers. The ACCC are alleging that these franchisees made misleading representations to consumers about their consumer rights including that:
• They had no legal obligation to provide:
- remedies for damaged goods unless notified within a specific period of time such as 24 hours or 14 days
- remedies for goods still covered by the manufacturer’s warranty
- refunds or replacements for particular items such as large appliances or items priced below a certain amount
• Consumers must pay a fee for the repair and return of faulty products.
The court orders that the ACCC is seeking include penalties, declarations, injunctions and costs.
What is the ACL?
Whilst being part of a franchise system that complies with best practice can put you in a great position to set up policies and procedures for the ACL compliance, ultimately complying with the ACL is your responsibility. Therefore, this responsibility cannot simply be passed on to a franchisor or disregarded because other franchisees are not complying. In fact, it is very likely that your franchise agreement stipulates you must comply with all relevant laws. Consequently, a franchisor’s hand may be forced to act if you are a franchisee in breach in order to protect the rest of the franchise network against any adverse publicity. It is therefore paramount you know and uphold your consumers’ rights.
The ACL came into full effect on 1 January 2011. Its purpose was to harmonise and modernize Australian consumer protection laws. One of the most notable changes introduced by the ACL was the new system of statutory consumer guarantees which replaced the conditions and warranties previously implied into consumer contracts by the Trade Practices Act 1974 (Cth) and various State laws. Unlike the implied conditions and warranties, the ACL system provides for express remedies for consumers. Since its launch, the ACCC has backed up this new system of consumer guarantees with a public awareness campaign including guidelines and website tools. In other words, the ACCC is educating consumers so they can stand up for their consumer rights.
Consumer guarantees explained
Consumer guarantees are mandatory. They cannot be excluded, restricted or modified. They will apply where a person (which can include a corporation) is taken to acquire goods or services as a consumer if:
• the amount payable does not exceed $40,000 (subject to exclusions)
• goods or services costing more than $40,000 if are of a kind ordinarily acquired for domestic or household use or consumption (subject to exclusions)
• in the case of goods, those goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads, • and, in the case of goods, the goods are not acquired for re-supply or to be used up or transformed in the manufacturing process.
By way of summary there are:
NINE GOODS GUARANTEES for businesses that sell goods:
• Those goods are of acceptable quality.
• Those goods are fit for any purpose that the consumer made known to the business before buying (either expressly or by implication), or the purpose for which the business said it would be fit for.
• Those goods have been accurately described i.e. in catalogues.
• Those goods match any sample or demonstration model.
• Those goods satisfy any express warranty.
• The business has clear title (unless specified it was limited before sale).
• The business has undisturbed possession.
• Those goods are free of any hidden securities or charges.
• Manufacturers or importers guarantee they will take reasonable steps to provide spare parts and repair facilities for a reasonable time after purchase.
THREE SERVICE GUARANTEES - for businesses that supply services that those services will be:
• Provided with due care and skill.
• Fit for any specified purpose (express or implied).
• Provided within a reasonable time (when no time is set).
If you sell a consumer a good/service that fails to meet one or more of the consumer guarantees, he/she is entitled to a remedy – for example, a refund, a further service to rectify the problem and in some circumstances compensation for consequential loss. The business must then provide the appropriate remedy.
If the problem is minor and can be fixed, you can choose how to fix the problem i.e. offer the consumer a repair, replacement or refund. If the problem is major and cannot be fixed, the consumer can choose to:
• in the case of goods, request a refund, replacement or keep the goods and get compensation for the drop in value caused by the problem
• in the case of services either end the contract for the services and obtain a full refund / replacement or otherwise seek compensation for the difference between the value of the services provided compared to the price paid.
Misleading claims and advertising If a business makes a false or misleading claim that is reasonably relied upon by consumers to purchase goods/services they could be in breach of the misleading and deceptive provisions of the ACL. Whether you meant to mislead consumers is irrelevant… if the overall impression is misleading!
Misrepresenting a consumer’s right to remedies in notices, advertising, communications or contracts may amount to misleading and deceptive conduct.
So how can franchised businesses make sure they’re in the right?
Knowing and respecting consumer rights should not only be understood by those in managerial positions, but all staff in order to avoid conflicts with consumers.
Review your refund policies and signs to ensure they take into account consumer rights under the ACL. In particular, a refund policy must not:
• make blanket ‘no returns’ or ‘no refunds’ statements, even on sale items
• require a consumer to take an exchange or a credit note rather than a cash refund
• require consumers to keep their receipt (although satisfactory proof of purchase can be required) or return products in their original packaging
This does not mean you are compelled to accept ‘change of mind’ returns and if you do, you are permitted to set conditions on those returns i.e. length of time or tags still on the goods.
Businesses may wish to consider displaying the national point of sale sign that informs consumers of their rights to repair, refund or exchange faulty goods. For more information you can visit the Australian consumer law website at http://www.accc.gov.au or http://www.consumerlaw.gov.au.
These are some simple steps every franchised business owner could be following to keep consumers satisfied and to help avoid any ACCC penalisation. This article provides a general guideline for franchised business owners. I recommend that if the ACL is relevant to your business you seek legal advice to make sure your business is compliant.
Kristie Piniuta, principal at KUBED LEGAL, specialises in franchising, retail leases and business law. Liability limited by a scheme approved under Professional Standards Legislation.
Kristie established KUBED LEGAL so that her clients can directly benefit from the knowledge, skills and insights she gained from her unique experience as a private practice lawyer and General Counsel of Boost Juice Bars. KUBED LEGAL offers specialised yet practical legal services taking a flexible approach to meet each client’s needs.
Contact Kristie at:
Phone: 03 8514 5179