Competition and Consumer Law update: Who is covered by consumer guarantees? It’s about to get stricter for suppliers

Under the Australian Consumer Law (ACL), suppliers of goods and services to consumers are automatically required to provide certain guarantees. These provide a minimum level of protection in relation to the goods and services that they purchase, and suppliers cannot exclude or contract out of these protections.

Consumer guarantees provided for under the ACL exist regardless of and operate to bolster (if applicable) any express warranty provided by the manufacturer or supplier. Consumers’ rights under the ACL will override any contradictory contractual clauses.

A transaction will be classed as a ‘consumer transaction’, to which these mandatory guarantees will apply, provided that the goods or services in question are below a certain monetary value. The amount of this threshold is about to change very significantly.

At present, a person is taken to have acquired goods or services as a consumer if the following criteria have been met:

• the amount paid or payable for the goods or services is $40,000 or less; or
• the goods or services were of a kind ordinarily acquired for personal, domestic or household use
• or consumption.

For the purpose of the ACL, both businesses and individuals are classed as ‘consumers’.

Changes to ‘consumer’ effective 1 July 2021

New regulations are set to increase the monetary threshold for the definition of consumer referred to above from $40,000 to $100,000. As such, contracts for the supply of goods or services up to a value of $100,000 will automatically be treated as consumer contracts and will by law incorporate the mandatory guarantees.

What are the consumer guarantees?

Consumer guarantees provided for under the ACL include that:

• goods must be of acceptable quality;
• goods must reasonably fit for any purpose specified by a particular consumer to the seller;
• services must be provided with due care and skill;
• services must be reasonably fit for any purpose made known by the consumer; and
• services must be provided within a reasonable time (where no specific time has been agreed to).

Impacts of consumer guarantees

A failure to meet these guarantees entitles the consumer to a range of remedies under the ACL depending on whether the non-compliance is major or minor. These types of remedies include but are not limited to:

• repair, replacement, refund;
• cancelling a service; or
• compensation for damages and loss.

A supplier needs to ensure they do not make any false or misleading statements as to whether a customer is entitled to a refund or such other remedy. This conduct could result in the supplier receiving the maximum penalty which is the greater of, $10 million, three times the amount gained from the conduct or 10% of the annual turnover.

The consumer guarantees do not apply to all goods and services even if they meet the monetary thresholds. For example, financial products and services, transportation or storage of business goods and insurance contracts are governed by separate regimes.

What does this mean?

This change in definition will mean that a wider range of goods and services will be captured by the consumer guarantees regime.

Businesses should:

• understand what consumer guarantees will be implied and ensure that their goods or services comply with these guarantees;
• ensure that any express warranties provided with goods or services contain mandatory wording mandated under the ACL;
• educate their employees in relation to the new obligations and ensure they understand what rights and remedies consumers are entitled to under the ACL for a breach of a consumer guarantee; and
• review their current sale and supply contracts and terms and conditions to ensure they comply with
• the requirements of the ACL.

Businesses have less than 12 months to prepare for this change. We advise businesses to take the time now to review their compliance programs and terms and conditions to ensure they are prepared to comply with the necessary changes prior to the Regulations taking effect.

More information

For more information or advice, please contact:

Author

This Competition and Consumer Law update was authored by Daniel Kovacs, Principal Lawyer.

Note: This update is a guide only and is not intended to constitute legal advice.