Business Franchise Australia


Nine Harvey Norman franchisees ordered to pay total penalties of $234,000 for misleading consumers

In proceedings brought by the Australian Competition and Consumer Commission against certain Harvey Norman franchisees, the Federal Court of Australia has recently ordered a further three Harvey Norman franchisees to pay a total of $60,000 in civil pecuniary penalties for making false or misleading representations regarding consumer guarantee rights. The Federal Circuit Court has also ordered another Harvey Norman franchisee to pay a pecuniary penalty of $26,000. 

The nine judgments to date in proceedings brought by the ACCC against Harvey Norman franchisees have led to penalties of $234,000.

The four franchisees are:

  • Oxteha Pty Ltd, located in Oxley, Queensland ($26,000);
  • Gordon Superstore Pty Ltd located in Gordon, New South Wales ($25,000);
  • Mandurvit Pty Ltd located in Mandurah, Western Australia ($25,000); and
  • Avitalb Pty Ltd located in Albany, Western Australia ($10,000).

In each case, the Court found that each franchisee had made false or misleading representations to consumers about their consumer guarantee rights. While the allegations made by the ACCC against each of the franchisees differ, examples of the misrepresentations include:

  • the franchisee had no obligation to provide a remedy while the relevant product was still covered by the manufacturer’s warranty;
  • the franchisee had no obligation to provide consumers with a choice of remedy if the relevant product was supplied more than three months ago; and
  • the consumer would have to pay a postage and handling fee before the relevant product could be returned from the manufacturer.

The misrepresentations were made orally by sales representatives or store managers in each store.

“These judgments imposing penalties are a clear message to all suppliers, no matter how big or small, that they must not mislead consumers about their rights under the Australian Consumer Law,” ACCC Deputy Chair Dr Michael Schaper said.

In addition to penalties, the Federal Court and the Federal Circuit Court (as applicable) also made orders including declarations and injunctions in relation to the four franchisees.  Oxteha Pty Ltd and Gordon Superstores Pty Ltd were also ordered to display in-store corrective notices and implement a consumer law compliance program. Mandurvit Pty Ltd and Avitalb Pty Ltd had both ceased trading in May 2013.

The Australian Consumer Law gives consumers 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; and
  • 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 get a refund or have the problem fixed and recover reasonable costs of doing so from the supplier.

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Proceedings were commenced against Gordon Superstore on 20 November 2012 and nine other Harvey Norman franchisees (including those listed above) on 13 June 2013. Subsequently, the ACCC and each of the ten franchisees agreed on joint submissions and proposed orders to be put to the Court for consideration.

On 6 December 2013, the Federal Court made orders against four Harvey Norman franchisees, requiring them to pay civil pecuniary penalties totalling $116,000 for each making false or misleading representations to customers about their consumer guarantee rights

On 13 December 2013, the Federal Court also made orders against Camavit Pty Ltd for similar conduct. Camavit Pty Ltd, which is located in Campbelltown, New South Wales, was required to pay a civil pecuniary penalty of $32,000

A decision in relation to penalty and other orders against Bunavit Pty Ltd is expected to be handed down by the Federal Court later this year.