December 2011

Keeping up with Australian Consumer Law changes: have you updated your warranties against defects?

This is a reminder that from 1 January 2012 all warranties against defects that are voluntarily provided by a wholesaler or a manufacturer to consumers must comply with the requirements of Regulation 90 of the Competition and Consumer Regulations 2010 (CCR).

Together, the CCR and the Competition and Consumer Act 2011 (Cth) replace what was previously called the Trade Practices Act 1974 (Cth). The new laws continue to be administered by the Australian Competition and Consumer Commission.

What is a warranty against defects?

A warranty against defects (commonly referred to as a manufacturer's warranty) is a representation communicated by a supplier (who could be a manufacturer, wholesaler or retailer) to a consumer at or about the time of supply of goods or services.

The warranty against defects sets out what the supplier will do in relation to the repair or rectification of the goods or services or compensation of the consumer if the goods or services are defective. The warranty is provided in addition to the consumer guarantees provided for in the Competition and Consumer Act that (if applicable) cannot be waived or excluded.

A warranty against defects is invariably provided in a written document. This document is provided with the product or service. It may also be incorporated into packaging, warranty cards, or promotional materials such as brochures.

What are the new requirements?

From 1 January 2012, a document giving a warranty against defects must contain certain compulsory information which includes:

  • the term of the warranty;

  • the contact information of the person giving the warranty against defects;

  • the procedure to be followed for a consumer to make a claim;

  • confirmation that it does not exclude the consumer guarantees; and

  • certain compulsory wording relating to certain rights of consumers that cannot be excluded or modified.

What are the penalties for non-compliance?

A wholesaler or manufacturer who is found to have non complying warranties against defects after 1 January 2012 may be subject to penalties of up to $50,000 (for a corporation) and $10,000 (for an individual).

Importantly, the offence is one of strict liability. This means that it is only necessary for the ACCC to prove that the offending person has a non complying warranty against defects. It is not necessary for the ACCC to prove that the offending person acted with intent or recklessness.

Enforcement policy

To take into account the long lead times associated with many consumer products and the nature of the packaging of those products, the ACCC has published the following statement:

'Until September 2012, when considering the appropriate enforcement response to any contravention of the warranty against defects requirements that apply to stock in the supply chain manufactured and packaged prior to 1 November 2011, the ACCC will have regard to:

  • whether there are serious practical difficulties in updating warranty documents?e.g. the warranty is in a tamper-proof package; and

  • whether the wholesaler has taken all reasonable steps to otherwise convey the mandatory text and information required.'

The ACCC has indicated that in the latter circumstances it is unlikely to take enforcement action.

Reseller conduct

The changes to the requirements for compliant warranties against defects also impact the relationship between manufacturers and wholesalers of products and retailers of those products who are responsible for making the sale to the consumer.

In many cases, retailers do not offer their own warranty but simply pass on the warranty against defects offered by the manufacturer or the wholesaler. In this instance a retailer can also be caught by the new rules because it is "giving" the warranty (albeit not in a contractual sense).

Many retailers are taking steps to ensure that their continued stocking of products is made conditional on the manufacturer or wholesaler to warrant that its warranties against defects in respect of those produces are compliant to ensure that they can be relied on by their customers.

What should you do next?

With 1 January 2012 nearly upon us, now is the time to double check that the warranties against defects that you provide to consumers comply with all of the requirements of Regulation 90 of the CCR.

If you are part of an arrangement between a retailer and a manufacturer or wholesaler, you should also ensure that you have made any consequential changes to the agreement that governs your relationship with the wholesaler or the manufacturer.

We can help!

If you would like a legal review of your warranties against defects or arrangements that you may have with wholesalers or manufacturers, please contact your Bartier Perry advisor.