06.Reform of warranty law
Current laws give consumers rights when they purchase goods and services that are faulty.
But there is some confusion about the law. One of the key protections provides that goods should be of ‘merchantable quality’. Essentially this means they should work as a reasonable consumer would expect given the type of goods and the price paid.
This can be quite confusing in practice. The phrase ‘merchantable quality’ is very unclear to consumers. Moreover it is not at all clear how long a consumer can expect their warranty to last. It seems reasonable for a consumer to expect a fridge to work without problems for five years or even 10. On the other hand no one expects a pair of cheap shoes to last that long. We’re also concerned that retailers give consumers the warranty run-around.
There is a clear need for reform of the law to make it easier for both consumers and retailers. CHOICE has welcomed the review of warranties law undertaken by the Commonwealth Consumer Affairs Advisory Committee (which provides advice to the Commonwealth Minister for Consumer Affairs). We also see a need for stronger enforcement action by consumer protection regulators where retailers deny consumer’s rights. CHOICE believes that following reforms are key:
A) Consumers do not adequately understand their statutory warranty rights. To address this information failure:
Consumers should receive clear information about their statutory warranty rights at the point of sale, including a clear explanation of how these rights relate to the manufacturer’s warranty and any extended warranties. This could be provided through in-store signage and included with any material promoting extended warranties
B) Consumers often feel pressured to buy extended warranties in store, at the time they purchase the main product. CHOICE believes Australian consumers should be provided with legislative protection, such as the UK’s The Supply of Extended Warranties on Domestic Electrical Goods Order 2005. It requires retailers:
To provide consumers with a written quote for an extended warranty valid for 30 days.
When providing a quote, to give a written explanation of the relationship between the extended warranty and the manufacturer and statutory warranty rights.
C) Consumer warranty complaints are often not resolved due to retailers failing to accept their responsibilities. To address retailers’ and traders’ poor understanding of how warranty laws operate, retailers and traders should:
Be provided with information from regulators, clearly explaining their warranty responsibility and rights.
Be subject to vigorous enforcement action by regulators in the case of abuse of consumer warranty rights or misleading conduct about rights.
Further, the ACCC and other agencies need to the power to take up a legal matter directly on behalf of a consumer. At present only the consumer can take action to enforce their warranty rights.
D) Inconsistent laws between jurisdictions means Australians have varying warranty rights.
A report prepared for the Productivity Commission Comparison of Generic Consumer Protection Legislation identified the different standards of consumer protection around Australia. CHOICE looks forward to national consistency under the new Australian Consumer Law. We support the Productivity Commission’s view that if standardisation does not occur through the implementation of the national generic consumer law, then at the very least the ability to exclude statutory conditions should be repealed in those jurisdictions that currently allow this.