The Treasury Laws Amendment (Acquisition as Consumer–Financial Thresholds) Regulations 2020 has passed, introducing significant changes to the Australian Consumer Law (ACL), which is contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth).
From 1 July 2021 the definition of a “consumer” changes. The updated definition now captures goods and services valued at up to $100,000 (previously $40,000) when identifying where the consumer guarantees apply.
This increased threshold means these automatic guarantees will now apply to many businesses previously exempt, including B2B sellers, manufacturers, and importers where the manufacturer is not in Australia.
Consumer guarantees are automatic guarantees that must apply to all consumer transactions, and it is not possible to contract out of these guarantees.
What are the consumer guarantees for Goods?
- Guarantee that goods come with full title and ownership;
- Guarantee that good come with undisturbed possession so no one else can take the goods away;
- Guarantee that there is no undisclosed securities over the goods;
- Guarantee that it is of acceptable quality – so it is safe, free from defects, durable, acceptable in appearance and finish and is fit for common purposes;
- Guarantee that goods and services are fit for purpose intended by consumer provided this purpose has been disclosed to the supplier;
- Guarantee the goods match descriptions by business and packaging of goods;
- Guarantee goods match any demonstration model or sample;
- Guarantee goods can get repaired and there are spare parts; and
- Guarantee that any express warranties made by business will be upheld.
What are the consumer guarantees for Services?
- Guarantee that services will be undertaken with proper care and skill; and
- Guarantee services will be delivered within a reasonable time.
Are there any exceptions?
Consumer guarantees do not apply in the following circumstances:
- Goods for re-supply;
- Gift cards for purpose pf re-supply in trade or commerce;
- Goods acquired in process of production or manufacture;
- Goods acquired in course of repairing or treating other goods or fixtures on land; or
- Services that provide insurance, transportation or storage of goods.
If a business breaches any of the Guarantees, consumers can pursue claims for:
- cancellation of service; or
- compensation for loss and damages (so the business seller could face significant liabilities).
Which remedy a consumer is entitled to will depend on whether it is a ‘minor’ or ‘major’ fault.
- Minor faults which can easily be remedied or cured do not entitle consumers to an automatic refund, the supplier is entitled to offer a repair or replacement within a reasonable time.
- Major faults (goods are substantially unfit for purpose, unsafe, significant departure from description or demonstration model) mean the consumer must receive a refund and they may be entitled to compensation as well.
Note: ACL section 64A, which gives a business a right to limit liability where the goods purchased are of a type not ordinarily acquired for personal or domestic use.
What should businesses do?
To ensure compliance, and reduce the potential of claims for misleading representations, businesses should:
- Determine if they fall under the new threshold, and if they do, they should familiarise themselves with the consumer guarantees.
- Train all employees in the guarantees and where remedies apply.
- Take care to ensure that statements made by the business/its employees are accurate, and do not exclude or modify the application of the automatic guarantees.
- Review all supply agreements, terms and conditions and policies and amended to reflect the correct wording where necessary.