Don’t let your defect warranties be defective

Do you provide services directly to customers? Or do you supply both goods and services together? And when you do, do you also offer a defect warranty for your services?

If you’ve answered yes to the above, here is one last question: are you aware of the recent changes to the mandatory wording requirements for defect warranties under the Australian Consumer Law?

Changes? What changes?

The Australian Consumer Law (ACL) currently requires that defect warranties for the supply of goods include mandatory wording.

However, from 9 June 2019, recent changes will now require mandatory wording for services as well as goods.  

So, if you provide services (or goods and services together) and offer consumers a defect warranty, you will need to update your documentation to comply with this change.

 

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Time to review your warranty documents

What is a defect warranty?

Under the ACL, consumers are given a bundle of automatic rights in relation to the goods and services they purchase. These are known as consumer guarantees. These guarantees protect consumers if they are sold faulty products or services, giving them remedies against the supplier, including the right to repair, replacement, or refund.

Alongside these consumer guarantees, suppliers and manufacturers often offer defect warranties in respect of the quality and standard of their goods and/or services.

A defect warranty is a promise that, if a customer receives defective goods and/or services, the supplier will:

  • repair or replace the products;
  • resupply or fix a problem with the services; or
  • compensate the customer.

The ACCC provides the following example:

“A consumer purchases a motor vehicle that comes with a three year or 100,000km written warranty outlining what the manufacturer will do if there are certain problems with the vehicle. This is a warranty against defects and must comply with the requirements of the ACL.”

It’s important to note that a defect warranty need not be set out on a warranty card, or similar. It might be in any of your business documentation, such as your consumer contracts, terms & conditions, receipts, or even on product packaging.

What is the mandatory wording?

The reason for the inclusion of the mandatory wording is to ensure that consumers are informed of their rights under the ACL and are aware that the consumer guarantees cannot be excluded by the warranty.

The existing mandatory wording for defect warranties for goods is:

“Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure.”

The new mandatory wording for services is as follows:

For the supply of services only:

“Our services come with guarantees that cannot be excluded under the Australian Consumer Law. For major failures with the service, you are entitled:

  • to cancel your service contract with us; and
  • to a refund for the unused portion, or to compensation for its reduced value

You are also entitled to be compensated for any other reasonably foreseeable loss or damage.

If the failure does not amount to a major failure, you are entitled to have problems with the service rectified in a reasonable time and, if this is not done, to cancel your contract and obtain a refund for the unused portion of the contract.”

For the supply of goods and services together:

“Our goods and services come with guarantees that cannot be excluded under the Australian Consumer Law. For major failures with the service, you are entitled:

  • to cancel your service contract with us; and
  • to a refund for the unused portion, or to compensation for its reduced value.

You are also entitled to choose a refund or replacement for major failures with goods. If a failure with the goods or a service does not amount to a major failure, you are entitled to have the failure rectified in a reasonable time. If this is not done you are entitled to a refund for the goods and to cancel the contract for the service and obtain a refund of any unused portion. You are also entitled to be compensated for any other reasonably foreseeable loss or damage from a failure in the goods or service.”

Are there any other warranty requirements?

The ACL also requires that your warranty documentation is in clear and plain language that is easy for consumers to read and understand. You must also provide a number of specific details into the warranty document, including:

  • the business contact details, such as the business name, address, phone number, and e-mail address;
  • information of how a consumer may make a claim under the warranty, and what the business must do to honour the warranty;
  • the remedies available for defects; and
  • the warranty period.

What should you do now?

With the 9 June 2019 deadline right upon us, we recommend you review and update your warranty documentation to ensure you have included all the relevant mandatory text.

If you have any concerns or questions about how these changes may affect you, or if you would like more information about compliance with the ACL, please contact us.

Author: Blake Motbey, Paralegal.

ACCC announces 2019 enforcement priorities

influence legal canberraEarlier this week, the ACCC announced its enforcement priorities for 2019.

As well as the enduring priorities of:

  • cartel conduct;
  • anti-competitive conduct;
  • product safety;
  • conduct affected vulnerable and disadvantaged consumers; and
  • conduct affecting Indigenous consumers,

this year’s focus areas include:

  • consumer guarantees on high value electrical products and whitegoods;
  • anti-competitive conduct and competition issues in the
    financial services sector, including foreign exchange services where fees “seem to remain stubbornly high“;
  • opaque pricing of essential services, including telecoms and energy;
  • protection for small business, including under franchising and unfair contract requirements; and
  • customer loyalty schemes.

A new focus is on emerging issues in advertising and subscriptions on social medial platforms, especially for younger consumers.

In announcing the 2o19 priorities, Chair Rod Sims stated that the ACCC expects 3 significant cartel investigations to be referred to the Commonwealth DPP. The ACCC will also be occupied with the Consumer Data Right, where pilots and generic data sharing are expected to be in place in July, with consumer data to be shared by February next year.

Highlights of 2018 and areas to watch in 2019

2018 came and went in a flash. France celebrated glory in the FIFA World Cup in Russia; Banksy sold his ‘Girl With Balloon’ painting for $1.86 million before the artwork shredded itself seconds after the gavel dropped; and the online world was captivated by the World Record Egg. And as we say goodbye to summer and settle into the working year, why not take the chance to reminisce on some of the more important developments of 2018, and look forward to those that 2019 has in store?

Influence Legal developmentsLooking back on 2018

  • New obligations were enforced under the European Union General Data Protection Regulation (the GDPR). While the GDPR is an EU regulation, the obligations have a wide reach, applying to all Australian businesses who have an establishment in the EU, offer goods & services to the EU, or monitor the behaviour of individuals in the EU.
  • As part of the government’s safe harbour and insolvency reforms, we saw the introduction of the ipso facto insolvency reforms by way of the Treasury Laws Amendment (2017 Enterprise Incentives No.2) Act 2017. The reforms apply to contracts entered into on or after 1 July 2018, affecting the ability of contracting parties to exercise termination, enforcement or other rights that are triggered by a company restructuring or insolvency.
  • The European Parliament voted in favour of introducing the controversial EU Copyright Directive, a legislation designed to better meet the needs of copyright protection in the internet age. The proposed directive caused significant global debate around the detrimental effects of Articles 11 (the Link Tax) and 13 (the Meme Ban), headlined as the ‘death of the Internet’.
  • The ACCC highlighted its hard stance against franchises attempting to contract out of their obligations under the Franchising Code of Conduct and the Competition and Consumer Act. The ACCC’s case against Husqvarna Australia highlighted the importance of all companies that appoint dealers, distributors, licensees or similar, to confirm whether their contracts are in fact franchise agreements.
  • A Victorian Supreme Court cast some doubt over the enforceability of contractual provisions that attempt to limit the period in which parties can claim for misleading or deceptive conduct. This arose in the case of Brighton Australia Pty Ltd v Multiplex Constructions Pty Ltd [2018] VSC 246, where the court considered the enforceability of a contractual provision requiring claims (including for misleading or deceptive conduct) to be made within 7 days.Justice Riordan, deciding in contradiction to a number of NSW decisions, ruled in favour of the “no exclusion principle”, stating that allowing the enforceability of such time limitations on claims would be against the public policy underpinning the provisions of the Australian Consumer Law (ACL).

Some areas to watch in 2019

  • Discussions over the EU Copyright Directive continue, with negotiators for the European Parliament aiming to finalise the directive shortly. However, negotiations have broken down, with the three-way discussion between Council, Parliament and member states  derailed over the exact wording over Article 11 and Article 13. Consequently, the “trialogue” discussion that was set to take place on  23 January was cancelled. With upcoming EU elections in May, there likelihood of any closure on this matter in the near future is low, with a final vote likely to take place under the next parliament.
  • The Telecommunications and Other Legislation Amendment (Assistance and Access) Act 2018, commonly referred to as the AA Bill, was passed in December of last year. The Bill’s aim is to compel various companies, especially those in communications industries, to assist Australian security and law enforcement agencies by allowing access to encrypted communications they believe may contain plans for illegal or terrorist activity. The implications of the Bill will be an interesting area to watch throughout the year, with a number of people, especially those within the tech and start-up communities expressing their concerns.
  • On 10 December 2018, the ACCC released its Digital Platforms Inquiry Preliminary Report. The ACCC’s report is founded on questioning the role and accountability of the global digital platforms (such as Facebook and Google) in the supply of advertising, news and journalism in Australia. The final report addressing these issues will be due on 3 June of this year.
  • There has been some debate globally and in Australia regarding the “hipster antitrust” laws, questioning the standards of competition law. The current foundation of competition law in Australia is focused on consumer welfare. However, concerns have been raised that this standard is too narrow and does not allow for prosecution of some types of conduct that some commentators believe competition law should cover.While this debate is likely to continue throughout the year, ACCC Chairman Rod Sims has reinforced Australia’s consumer welfare position, expressing their opposition to the introduction of broader interest considerations of public policy into competition law enforcement.

Author: Blake Motbey, Paralegal.

If it quacks like a franchisor …

McDonald’s, Subway, KFC – all well-known global giants in both fast-food and franchise systems.

These companies, among many others around the world (not just within the fast food industries), are easily recognisable to us as franchisors.

However, franchise systems come in many shapes and sizes, and there are some franchises that are not quite as well-known and obvious as the ones above. Companies may even try to distance themselves from the F word, and associated franchise regulation, by telling everyone (or at least the parties contracting with them) that they are expressly not franchisors.

This situation can be seen in the recent ACCC action against the Australian subsidiary of Swedish power-tool powerhouse, Husqvarna Australia.

Husqvarna and the ACCC

Earlier this year, the ACCC took action against Husqvarna.

The ACCC was concerned that the company was in breach of the Franchising Code of Conduct (Code) and the Competition and Consumer Act (Act). Husqvarna had told its dealers that their “dealership agreements” were not franchising agreements and, consequently, they were not entitled to protections for franchisees under the Code.

The ACCC also argued that the company was likely to have contravened the Act as a result of making misleading representations and that the dealer agreements contained unfair contract terms.

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… and swims like a franchisor …

In the result, Husqvarna admitted that categorising its agreements in the way it had, ‘probably’ did in fact mislead the dealers. To resolve the issue, Husqvarna also agreed to rewrite its agreements to ensure they complied with the Code and the Act. Also, the company agreed to enter an undertaking with the ACCC that it will not enforce any unfair contractual terms in the existing agreements.

Define: “Franchise Agreement”

An agreement will be covered by the Code when:

  1. A party, having substantial control over a business, grants another party the right to carry on that business;
  2. The business is associated with a specific brand name or trade mark; and
  3. The other party is required or agrees to pay for the right to use the brand and operate the business.

If an agreement satisfies all of the above, it will be considered a franchise agreement and will therefore be covered by the Code.

Importantly, a franchisor cannot simply attempt to waive or exclude the mandatory obligation to comply with the Code and the relevant protections for franchisees.

The Husqvarna case provides an important lesson for all companies that appoint dealers, distributors, licensees or similar, highlighting the importance of carefully assessing your agreements to ensure whether they may be considered a franchise agreement.

As Mick Keogh, the ACCC Deputy Chair, put it: “if it looks and smells and appears to be a franchise agreement, it’s considered to be one, irrespective of what the franchisor says.”

Are you a franchisor or franchisee?

If you are a business concerned that your agreements may be considered a franchise agreement, or if you are considering becoming a franchisee and would like to know your protections under the Code, please contact us.

Author: Blake Motbey, Paralegal

My business idea is being copied – what can I do?

You’ve put time and thought into a great idea, invested in R&D, brought your idea to market – and now you find a competitor marketing the same idea.  What can you do?

Influence Legal idea
How can you protect your idea?

The different aspects of intellectual property can help to an extent, but the issue of copying a concept can become complex.

Copyright protects the original material expression of an idea, rather than the idea itself. Unless your competitor copied your original artwork, wording or code, copyright won’t assist – for example, if you have had an idea for a scheduling program, and a competitor saw your idea and released a scheduling program which doesn’t use any of the original coding or graphical elements of your program, you won’t be able to make a copyright claim.

What about trade marks? Have you applied for trade mark protection of your product’s distinctive name? If the competitor used your name or a substantially similar name to promote similar products, you can make a claim based on your registered trade mark.

Patents protect inventions. They must be new to the market. If you think that your idea may be patentable, consult a patent attorney – but you must keep your idea confidential until the patent application is filed. If you have publicised it yourself, it may no longer be patentable. You can use confidentiality agreements where you need third parties to develop your invention. Also, take practical steps to protect confidentiality – limit distribution and keep information in secure files.

The law of passing off and consumer protection law can help where the competitor is making their offering look like it is, or is associated with, yours. For example, your competitor might be marketing compatible goods which have the look and feel of your brand, or suggesting that they are your authorised distributor or licensee.

If none of these will help in your specific situation, there are still practical steps you can take:

– make sure that you have all the relevant variations of your domain name so that there is no chance that an unscrupulous competitor can pick up similar names to direct traffic to their own website;

– make sure you have your domains set to auto-renew, or diarise renewal dates, so that you don’t accidentally drop your domain and have it picked up by your competitor;

– ensure that your website security is strong so that you reduce the risk of losing customers if your website is offline;

– make sure you are actively marketing on all relevant social media channels;

– if you are using a name or logo that is distinctive, apply for a trade mark, including in relevant overseas markets you plan to expand to;

– once you have your trade mark, ensure you diarise renewal dates;

– keep a record of your marketing activities, including promotions, press releases and media coverage, in case you need to demonstrate your reputation in the market in future years; and

– ensure that your concepts are kept confidential, including using effective confidentiality agreements, until they are ready for release.

If you have any questions about how to protect your ideas, contact us.

Know your customers’ rights

In a previous post we looked at the issue of written terms and conditions so dense that it was practically impossible for consumers to understand them.

This issue was highlighted last month when Purple WiFi revealed that it had hidden community service requirements for free WiFi users inside its clickwrap terms.  Only one person claimed the prize that was also concealed in the terms, while 22,000 agreed to clean toilets, hug stray animals and paint snail shells “to brighten up their existence”.

Lululemon website screenshot
Screenshot – Lululemon website

What about when terms and conditions don’t actually match your customers’ rights at law?

The recent Lululemon issue provides a great example. Lululemon has agreed to pay $32,400 in penalties after the ACCC issued infringement notices relating to misleading representations about consumer rights.

The Australian Consumer Law provides guarantees for faulty consumer goods and services.

Lululemon listed sale items on its website under the heading “We Made Too Much” with the statement “We made a little extra – don’t be shy, help yourself. It’s yours for keeps so no returns and no exchanges”.

Lululemon’s return policy also said “Final sale items like underwear, water bottles + We Made Too Much gear are yours for keeps”.

In addition, staff were alleged to have stated that there was no refund right for faulty products.

The ACCC alleged that these statements were representations that customers were not entitled to a refund or replacement for faulty goods, which is not the case under the Australian Consumer Law.  The consumer guarantee rights provide for refunds in the case of a major failure of goods or services.  This applies equally to full price and sale price products.

Importantly, these guarantees cannot be excluded in consumer transactions, and it’s a contravention of consumer law to attempt to exclude them in your terms and conditions.  However, they can be limited.  Check your terms and conditions to see if they include an up to date statement of your customers’ rights under the Australian Consumer Law as well as any permissible limitations.

If you would like us to review your terms and conditions, contact us.

 

“Terms and conditions apply”

influence legal conditions apply choice
Photo: CHOICE

CHOICE has made a compelling case for readability of contract terms and conditions, having hired Sydney actor Laurence Rosier Staines to read the 73,198 words of the Amazon Kindle terms and conditions – aloud.

Laurence starts out with enthusiastic professionalism …

Eight hours and 59 minutes later, he’s lost the will to live.

CHOICE head of media, Tom Godfrey, said, “Right now, the law protects us from unfair legal terms. But we think the practice of expecting a customer to spend hours of their lives reading a contract for a simple product is unfair. Companies need to do better and they should be explaining any conditions in a way that’s simple and easy to read.”

It’s not just a question of overly lengthy terms being unattractive for consumers to read. Unreadably long terms and conditions:

  • are often based on an approach of throwing in everything the drafter can think of, without working through what’s applicable for your individual business and tailoring accordingly.
  • can be less effective than clear, readable terms – for example, if disclaimers are not reasonably prominent, courts may decide that your terms are misleading or deceptive.
  • can be inconsistent with the Australian Consumer Law if they purport to limit consumers’ rights in a way that is not permitted, for example if you exclude refund rights for faulty goods.
  • can actually create more potential for complaints and disputes, if consumers have found them so difficult to read, they don’t end up understanding your product or service offering – wasting your time and money to resolve.

If you would like a review of your terms and conditions to check whether they work for your business and Australian law, contact us.

Highlights of 2016 and areas to watch in 2017

Influence Legal ParliamentHere is a round-up of some key developments in 2016:

  • The Telecommunications Sector Security Reforms went through 2 rounds of public consultation and have now been referred to the Parliamentary Joint Committee for Intelligence and Security. These reforms will impose obligations on carriers and carriage service providers to take steps to ensure the security of networks and notify breaches, and provide powers to the Attorney-General to issue directions relating to security risks.
  • The Masters Bendigo case saw developments in relation to agreements to agree and good faith.
  • There were several key cases in the credit reporting area, including the Veda trade mark and SEO case, and the OAIC determination requiring Veda to improve accessibility of free credit reporting.
  • The Productivity Commission released its report on IP arrangements, prompting public debate in relation to fair use and the rights of copyright holders.
  • The OAIC consulted on its draft Big Data guide.
  • An exposure draft of the Harper review bill was released.
  • The unfair contracts rules for small business came into effect from 12 November.
  • The ACCC took landmark consent proceedings relating to attempted cartel conduct in the financial services industry.
  • The Federal Court found that Woolworths’ “Mind the Gap” payments were not unconscionable.

Areas to watch this year:

  • Data protection remains a key focus area with significant developments continuing in Australia (including the Notifiable Data Breaches Bill), the EU (the European Union General Data Protection Regulation will take effect in May 2018 and will significantly affect data relating to employees) and across the globe.
  • Trade secrets have become another focus area.  In 2016 the European Council approved the Trade Secrets Directive to harmonise European trade secrets protection. Member states will need to implement the directive by mid 2018. The US Defend Trade Secrets Act 2016 has created a federal jurisdiction for misappropriation of trade secrets including significant whistleblower protection which will need to be reflected in US employment and confidentiality agreements.
  • Ahead of the release of its 2017 priorities, we can anticipate that the ACCC will continue to focus on unfair contracts in business, cartel conduct (following the significant financial services case) and optional extra preselection in the airline industry. The ACCC is seeking submissions on a proposed FIFO airline alliance (due on 27 January) and on its draft decision for the declared superfast broadband access service (SBAS) and the local bitstream access service (LBAS) (due on 17 February).
  • CAANZ will report on the first Australian Consumer Law review by March.
  • Further legal and regulatory attention is likely in the problematic commercial VET sector, with reforms promised to address the significant consumer protection issues that were highlighted during 2016.
  • On the IP front, submissions are due by 22 January on the proposed IP Laws Amendment Bill.

Franchisors – are you ready for the new unfair contracts rules?

NotebookThe new unfair contracts rules will apply to protect small businesses in standard contracts that are made or varied from 12 November 2016.

Franchisors should already have amended their agreements and disclosure documents, and included the new information statement in their document packages, following the earlier amendments to the Franchising Code of Conduct that took effect last year.

Franchisors also need to remember to keep their disclosure documents up to date.

The unfair contract rules protect small business by prohibiting standard contract provisions which: Continue reading Franchisors – are you ready for the new unfair contracts rules?

Private vocational training provider admits consumer law contraventions

Careers Australia Group Limited has provided enforceable undertakings to the ACCC after admitting false or misleading conduct and unconscionable conduct in contravention of the Australian Consumer Law.

The ACCC confirmed this week that Careers Australia will repay Commonwealth funds, cancel enrolments and invite students to have their VET FEE-HELP debts cancelled.

Careers Australia admitted to conduct including:

  • misrepresenting that courses were free;
  • misrepresenting that courses would increase students’ employment prospects; and
  • offering iPads and laptops with claims that they were free if the student signed up to the course.

This conduct included signing up 80 students from the same remote Indigenous community, who were offered inducements and not informed of the debts they would incur.

The admissions highlight troubling issues in the private vocational training sector, with the ACCC and other Commonwealth and State agencies reviewing the activities of several other providers.