By Natalie Chua, Law Graduate and David Crino, Solicitor

The Federal Court has imposed a $52,000 penalty on a Harvey Norman franchisee, Bunavit, for making false or misleading representations to customers about their consumer guarantee rights.

This isn’t the first time Harvey Norman franchisees have faced the music, as the ACCC has now achieved penalties totally $286,000 against ten Harvey Norman franchisees for making false or misleading representations concerning consumer guarantees.

In this case, the Federal Court held that sales assistants at the Harvey Norman Superstore Bundall in Queensland made ten false or misleading representations to two customers concerning the existence, exclusion or effect of a guarantee. These included representations that Bunavit:

• had no obligation to provide a remedy and the consumer should pursue the manufacturer’s warranty directly with the manufacturer;
• could not assist further unless the consumer paid for some or all of the cost of the repairs.

The franchisees were found to have contravened section 29(1)(m) of the ACL for making a false or misleading representation concerning the existence, exclusion or effect of a guarantee, relevantly that goods sold are of “acceptable quality”. This is a non-excludable statutory consumer guarantee which must be provided in addition to any express or voluntary warranties.

In calculating the penalty required, Justice Dowsett found that the conduct in this case was more serious than other comparable cases because that conduct involved more impugned statements and continued over a longer period, more staff members were involved, and Bunavit’s turnover and profit were substantially higher than those of other offending companies. To Bunavit’s favour, no senior staff members were involved.

The Federal Court chose not to make declarations or injunctions, in part because Bunavit has ceased trading.

Key takeaways for businesses

ACCC Acting Chair, Dr Michael Schaper, said in relation to the decision that “businesses are expected to take appropriate and effective steps to ensure that their staff understand the rights of consumers and the obligations of businesses under the consumer guarantees provided by the Australian Consumer Law.”

For businesses, it highlights the importance of:

• staff training on consumer guarantee rights and the obligations of a business;
• taking appropriate and effective steps to ensure staff understand the rights of consumers;
• implementing robust processes around dealing with claims for warranty claims; and
• implementing customer focused complaints processes to help avoid escalation.

In anticipation of the ACCC Enforcement and Compliance Policy Update for 2016, this penalty is a timely reminder that the ACCC is continuing to place priority on imposing significant pecuniary penalty for breaches of consumer protection. In the September 2015 quarter, the ACCC was involved in 30 proceedings relating to consumer protection. The ACCC also has four ongoing proceedings alleging false or misleading representations, and two relating to consumer guarantees.

At the same time, State and Territory regulators also remain active in upholding consumer guarantees.  By way of example, Consumer Affairs Victoria continues to conduct store visits to test sales peoples’ knowledge, and recently brought unsuccessful proceedings against The Good Guys in relation to representations by five stores relating to consumers’ warranty rights.

Businesses will do well to revisit internal processes to ensure understanding and compliance by staff, and avoid going past the point of “no returns”.

Photo credit: londoncyclist via Foter.com / CC BY