Statutory Consumer Guarantees: Lessons from Holden

Following the ACCC’s announcement on 26 July 2017 of proceedings against Ford, the ACCC issued a media release on 3 August 2017 announcing that it has accepted a court enforceable undertaking offered by Holden to address the ACCC’s concerns about Holden’s compliance with the Australian Consumer Law (ACL) and, in particular, the ACL’s consumer guarantees (Statutory Consumer Guarantees). Below are links to:

• The ACCC’s media release
• The ACCC’s summary of Holden’s undertaking and the undertaking itself.

Holden undertaking goes beyond current legal obligations

Significantly, by its undertaking, Holden has committed not only to act in compliance with the ACL as it currently stands, but also to take measures consistent with proposed changes to the ACL which have been recommended (by Consumer Affairs Australia and New Zealand) but which have not yet been adopted by the Government, much less legislated. These measures include:

• offering consumers a choice of refund, replacement or repair of a vehicle where a defect prevents a vehicle from being driveable within 60 days of purchase, irrespective of whether the defect results in a ‘major failure’ within the meaning of the ACL (the so-called ‘60 Day Policy’); and
• clarifying in compliance training for both employees and dealers that “multiple minor failures of a vehicle may constitute a major failure entitling the customer to a refund or replacement rather than a vehicle repair”.

Rights under the Statutory Consumer Guarantees are not limited by any other guarantee or warranty

It is clear from the undertaking that a significant issue with Holden was that in its dealings with consumers, its resolution of consumer complaints, and its dealings with Holden dealers concerning the resolution of consumer complaints, Holden tended to focus on rights and obligations under Holden’s new car warranty to the exclusion of rights and obligations under the Statutory Consumer Guarantees. The undertaking requires Holden to:

• upgrade its existing Consumer Law Compliance Program to “ensure that a consideration of customers’ rights under and arising from the Statutory Consumer Guarantees is embedded in all relevant systems, procedures and practices with the objective of ensuring that consumers are not denied remedies they are entitled to arising from the Statutory Consumer Guarantees”;
• similarly upgrade is complaints handling system (again, to “ensure that a consideration of customers’ rights under and arising from the Statutory Consumer Guarantees is embedded in all relevant systems, procedures and practices with the objective of ensuring that consumers are not denied remedies they are entitled to arising from the Statutory Consumer Guarantees”);
• take steps to ensure that Holden customers are aware of their rights under the Statutory Consumer Guarantees, by establishing a Customer Service Charter (to be published on Holden’s website within 120 days of the undertaking) and by providing all new customers with a letter from Holden “which advises them of their rights in relation to the Statutory Consumer Guarantees” within 30 days of the date of purchase;
• amend the Holden Dealer Agreement to clarify dealers’ obligations under the Statutory Consumer Guarantees, customers’ rights under the Statutory Consumer Guarantees and the dealers’ rights to be indemnified by Holden in accordance with the ACL for some dealer liabilities under the Statutory Consumer Guarantees; and
• upgrade its compliance training for both employees and dealers to clarify rights and obligations under the Statutory Consumer Guarantees.

Implications for suppliers of consumer goods or services

• Minimum standards

  : The ACCC regards the Statutory Consumer Guarantees as minimum standards for the protection of consumers acquiring goods or services as consumers. The undertaking describes the Statutory Consumer Guarantees as providing consumers with “…a basic, guaranteed level of protection for goods and services which they acquire…”.

• Consumers are increasingly asserting their rights

  : The ACL, including the Statutory Consumer Guarantees, commenced on 1 January 2011. Suppliers’ ignorance of the rights and obligations created by the Statutory Consumer Guarantees is no excuse for non-compliance. Consumers’ awareness of their rights under the Statutory Consumer Guarantees appears to be steadily growing and, as a result, they are increasingly asserting their rights in relation to defective goods and services. This growing consumer awareness of their rights under the Statutory Consumer Guarantees is partly attributable to ACCC initiatives directed towards raising awareness of the Statutory Consumer Guarantees. Similarly, the increase in consumers asserting their rights under the Statutory Consumer Guarantees has been facilitated by the ACCC; most recently by providing a Letter of Demand tool.

• Best practice

  : It appears that the ACCC regards ‘best practice’ as going beyond providing consumers with remedies to which they are entitled under the Statutory Consumer Guarantees, and possibly requires suppliers to provide remedies which are not required as a matter of law.

• Compliance training

  : Those responsible for the dealing with consumers’ complaints, such as service staff and call centre staff, need adequate training to ensure that they understand consumers’ rights under the Statutory Consumer Guarantees. Otherwise there is a risk that they may not resolve consumer complaints in accordance with the Statutory Consumer Guarantees, or may mislead consumers about their rights under the Statutory Consumer Guarantees, in contravention of other provisions of the ACL.

• Need to distinguish between Statutory Consumer Guarantees and express guarantees or warranties

  : There are particularly poignant reminders in this for those who supply consumer goods or services with an express guarantee or warranty. Consumers’ rights under the Statutory Consumer Guarantees are not limited by the terms of any express warranty or guarantee. In particular, consumers may be entitled to remedies under the Statutory Consumer Guarantees after any express guarantee or warranty has expired. Those responsible for dealing with consumers’ complaints, such as service staff and call centre staff, need adequate training to ensure that they do not confuse consumers’ rights under any express guarantee or warranty with consumers’ rights under the Statutory Consumer Guarantees. Any such confusion on the part of those responsible for dealing with consumer complaints could result in them misleading consumers about their rights, in contravention of other provisions of the ACL.

• Arrangements between manufacturers and retailers

  : Manufacturers, including importers who are deemed manufacturers under the ACL, have an obligation under the ACL to indemnify retailers for some of the retailers’ liabilities under the Statutory Consumer Guarantees. Arrangements between such manufacturers and retailers regarding the provision of remedies to consumers for defective goods, and reimbursement of the retailers by the manufacturer for such remedies, need to be consistent with this obligation of manufacturers to indemnify retailers. For example, it is inappropriate for a manufacturer to simply tell a retailer not to provide a remedy without the prior approval of the manufacturer.

Implications for car retailing

• Auto industry under scrutiny

  : Like the ACCC’s media release announcing proceedings against Ford, the ACCC’s media release announcing its acceptance of Holden’s undertaking indicates that the ACCC’s new car retailing study has identified a number of significant compliance concerns. In this regard, the media release states “The ACCC’s new car retailing study draft report will be released shortly and will elaborate on the widespread compliance issues we have encountered across this industry.”

• Review systems for compliance

  : Somewhat ironically, the long-established industry practice of selling new cars with a new car warranty appears to be responsible for many of the compliance issues identified by ACCC. Compliance measures, complaints handling systems, distributor-dealers relations (in particular, warranty reimbursement procedures), employee training and customer information must all be reviewed to ensure that they adequately recognise the Statutory Consumer Guarantees and, in particular, recognise that rights and obligations under the Statutory Consumer Guarantees are not limited by the terms of new car warranties.

• Raising the bar

  : The undertaking appears to ‘raise the bar’ in what the ACCC expects of the industry. It suggests that ‘best practice’ means doing more than required by the ACL as it currently stands.

• New normal?

  In other industry contexts, we have seen undertakings like this become the ‘new normal’ for ACCC expectations of the relevant industry. It is possible that Holden’s undertaking will establish a ‘new normal’ for ACCC’s expectations of the automotive industry.

• Auto industry on notice

  : Those involved in car retailing, whether as distributor or dealer, ignore the warning from the Chairman of the ACCC in the ACCC’s media release at their own peril: “I urge all companies selling cars in Australia to get their consumer law compliance programs in order.”

What you can do to minimise risk of investigation by the ACCC

• Resolve consumer complaints quickly, efficiently, fairly and, above all, in accordance with consumers’ rights under the Statutory Consumer Guarantees;
• Ensure that you have in place a suitable ACL Compliance Policy and Complaints Handling System that are accessible to staff and customers;
• Train staff, particularly those involved in dealing with consumers’ complaints, so that they understand consumers’ rights under the Statutory Consumer Guarantees; and
• Ensure that arrangements between the manufacturer (including importers) and retailers are consistent with the manufacturer’s obligations to indemnify retailers under the ACL.

Gadens can help

We have extensive and recent experience in acting for multiple clients in the automotive industry, including component manufacturers, auto distributors and retailers, in a number of ACCC inquiries and investigations. As a result, we have a sound understanding of the ACCC’s concerns and expectations. We also have extensive experience in all aspects of competition and consumer law compliance, including within the automotive industry.

Please let us know if you would like our assistance in determining your response to these developments.