Return to Sender – ACCC Cracks Down on Online Retailers

Australian Consumer Law Automatic Guarantees

The ACL provides consumers with automatic guarantees in respect of products and services they purchase. These guarantees include that goods will be of acceptable quality, fit for purpose, and match their description.

If a product or service fails to meet a consumer guarantee, the consumer has a right to a remedy, which could be a repair, replacement or refund, depending on the nature of the fault. These consumer rights, known as ‘consumer guarantees’, are automatic and cannot be overridden by a business’s own policies and terms and conditions.

The ACCC’s sweep identified several widespread issues in the terms and conditions of many online retailers, including:

• Imposing strict or arbitrary time limits for returning faulty items. For example, stating that a faulty product must be reported within 30 days of delivery to be eligible for a replacement.
• Enforcing blanket ‘no refund’ policies, particularly on sale or custom-made items. Statements such as “Sale items cannot be returned, exchanged or refunded” and “Made to order products cannot be returned” were found to be problematic.
• Incorrectly directing consumers to manufacturer warranties as the sole remedy for faulty goods.
• Unlawfully restricting a consumer’s right to a remedy including refusing to refund delivery fees for faulty items and charging “restocking fees” for their return.
• Statements that “opened or used items cannot be exchanged or refunded”.

Penalties for Breaches

A breach of the ACL can attract substantial financial penalties. For a company, a court may impose a penalty of up to the greater of the following:

• $50 million
• three times the value of any benefit reasonably attributable to the contravention, if that value can be determined, or
• 30% of the corporation’s adjusted turnover during the breach turnover period, if the value of the benefit cannot be determined

Australian Competition and Consumer Commission’s Actions

As a result of these findings, the ACCC has issued warning letters to numerous businesses, prompting many to amend their online statements to comply with the law.

Recent enforcement actions by the ACCC highlight the financial risks of non-compliance:

• Mazda Australia
  • Ordered by the Federal Court to pay $11.5 million in penalties for making false or misleading representations to 9 consumers about their consumer guarantee rights.
  • The court found Mazda gave consumers the “run-around” and failed to genuinely apply the ACL.
• Koala Living
  • The furniture retailer paid $56,340 in penalties after the ACCC issued infringement notices for misleading statements, including that consumers only had a 72-hour window to seek remedies for faulty products.
• Mosaic Brands
  • The ACCC has initiated Federal Court proceedings against Mosaic Brands for allegedly misrepresenting consumer guarantee rights in the terms and conditions published on 8 of its brands websites and failing to meet advertised delivery times.

Implications for Online Retailers

The ACCC’s sweep makes it clear: returns policies are under the microscope. If you are an online retailer, it is not enough to assume your T&Cs are “industry standard” – if they contradict or restrict the automatic guarantees under the ACL, you are exposed.

Key steps to take now:

• Audit your returns policy and website statements against ACL requirements. Remove or amend any wording that could be misleading, such as blanket “no refunds” or arbitrary time limits.
• Train customer service staff to respond consistently with ACL obligations, not just internal policy. Many enforcement actions arise from what staff say to consumers.
• Review manufacturer warranty references. While warranties can be valuable, they cannot replace or override statutory consumer guarantees.
• Plan for transparency. Clear, consumer-friendly language reduces both the risk of complaints and the cost of enforcement.

With penalties now reaching tens of millions of dollars and the ACCC actively pursuing enforcement, treating compliance as an afterthought is no longer an option. A proactive review now could protect both your bottom line and your brand reputation.

More information

KCL Law can assist you with understanding and complying with your obligations under the Australian Consumer Law.

If you are unsure whether your current online returns policies and procedures are compliant or if you require assistance in reviewing and updating your terms and conditions of trade, please do not hesitate to contact us for tailored advice.

This is a guide only and does not constitute legal advice.