Consumer guarantees and product warranties: Can your business afford to get it wrong?

Businesses offering goods and services for sale to the public often have the best of intentions in dealing with product warranty claims, however, their efforts can at times be let down by poorly written warranties, a lack of coherent customer claim processes or poor staff training in relation the organisation’s obligations under the law. 

In the era of scathing google reviews and over-anxious keyboard warriors, the slightest missteps in dealing with warranty claims can result in swift and significant reputational damage for business not to mention stressed and disengaged customer service staff. In addition, enforcement action by the Australian Competition and Consumer Commission (ACCC) can also mean that a supplier’s failure to adhere to its guarantee and warranty obligations can carry significant penalties.

A recent decision in a case brought by the ACCC against LG Electronics Australia has highlighted the dangers associated with staff who either don’t understand how company warranties operate or fail to appreciate that, not withstanding those warranties, the law provides remedies to consumers regardless of what might be in written warranties. 

In the LG case, two customers who purchased defective televisions were made to understand in phone conversations with LG employees that the customer’s rights under LG’s manufacturer’s warranties were the only rights those customers had in circumstances where their televisions were defective. That of course was not correct. Under the Australian Consumer Law (ACL), “consumers” have rights under various statutory guarantee provisions. These are in addition to any rights or remedies a seller or manufacturer might offer a customer in an express, written warranty.

The LG employees’ comments in the phone calls were therefore deemed by the Court to be misleading, and the company was ordered to pay penalties for breaches of the ACL.

The case not only emphasises the importance of proper training for employees in relation to a company’s consumer guarantee obligations but also brings into sharp focus how indispensable a carefully worded warranty document can be. Apart from needing to contain mandatory text regarding consumer guarantees, such written warranties should also be clear about the distinction between what the supplier is offering as opposed to what is already implied at law.

In particular, businesses should be careful not to tell or imply to customers that a consumer guarantee under the ACL:

  • doesn’t exist; 
  • is substituted by the supplier’s written warranty;
  • can be excluded as part of a contract between the customer and the supplier; or 
  • that the guarantee may not have a particular effect.

Clear warranty documentation not only aids customers to understand their rights but can also be a useful tool for frontline customer service staff who are tasked with attending to customer warranty claims.

Businesses must also take care in advertising, signage or public statements to ensure that they do not mislead consumers about warranties being offered (or the capabilities of their products). The law around what constitutes a formal warranty document is to some extent unclear. Therefore, businesses should not be under the mistaken impression that if a representation is not contained within their written warranty document then the company will not be obliged to honour the commitments it makes, whether those commitments appear in overzealous marketing campaigns, instore promotions or elsewhere.

If you require guidance in relation to product warranties, staff engagement with customers on warranty claims or assistance in understanding how consumer guarantees may apply to your products or services, contact a member of our team for clear, on-point and practical advice. 

Joseph Carneli, Senior Associate

2019-11-28T03:45:11+00:00November 28th, 2019|Business Advice, Business Partnerships, Corporate Advisory, Dispute Resolution|Comments Off on Consumer guarantees and product warranties: Can your business afford to get it wrong?