Consumer law and extended warranties

Salespeople at Australia’s major electronics retailers have a lot to learn about consumer law.
 
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01.ACL shadow shop

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A CHOICE shadow shop reveals sales staff at Australia’s biggest electronics retailers seem to have a limited or no understanding of their obligations under the Australian Consumer Law (ACL).

Either that, or the many salespeople we spoke to are wilfully flouting the consumer protections that came into effect in 2011. 

In this article, you'll find:

Our shadow shop

Over the course of three weeks in September and October this year, CHOICE shadow shopped at 80 Harvey Norman, The Good Guys and JB Hi-Fi stores across every state and territory. We encountered widespread violation of the ACL when we asked about returning big-ticket items. 

The set-up 

Posing as a customer looking for a big-screen TV priced at around $2500, we asked salespeople if the store had any responsibility should the TV cease to function after the manufacturer’s one-year warranty period. Under the ACL, the correct answer would be yes. However, 85% of the salespeople we talked to got it wrong, saying any repairs or returns would be out of the store’s hands. Every salesperson we spoke with also tried to sell us an extended warranty. 

What’s the problem?

Such sales tactics fly in the face of the 2011 legislation, which says consumers have a right to refund, repair or replacement through the store for a "reasonable" time after purchase. The definition of reasonableness depends on the quality and cost of the item, but a follow-up ACL guideline released in 2013 is crystal clear on the retailer’s responsibility when it comes to expensive electronics. 

"A consumer buys a top-of-the-range plasma television for $1800. It stops working two years later. The supplier tells the consumer they have no rights to repairs or another remedy as the television was only under the manufacturer’s warranty for 12 months. The supplier says the consumer should have bought an extended warranty, which would have given five years’ cover." 

"A reasonable consumer would expect to get more than two years’ use from an $1800 TV. Under the consumer guarantees, the consumer therefore has a statutory right to a remedy on the basis that the television is not of acceptable quality. The supplier must provide a remedy free of charge." (The law also stipulates that retailers must arrange transportation for unwieldy products like big-screen TVs, and that you don’t have to save the packaging.) 

The ACCC weighs in

We also talked to the ACCC, which confirmed that leading customers to believe they wouldn’t be able to take a pricey TV that’s out of warranty back to the store is a breach of consumer law.

Ongoing issue 

It’s hardly the first time retailers have ignored important parts of the ACL. In July 2013, Hewlett-Packard Australia paid a penalty of $3m after the ACCC took the company to the Federal Court. The charge was making false or misleading representations, including telling customers they would have to pay extra for any warranty protection outside of the manufacturer’s warranty. Similar cases are ongoing against 10 Harvey Norman stores across Australia at the time of publication, but that legal action didn’t stop the salespeople we talked to from engaging in similar conduct.

Retailers respond 

In contrast to what we heard from most of the salespeople, the corporate headquarters of two of the retailers we shadow shopped, Harvey Norman and JB Hi-Fi, seemed to understand the principles behind the ACL statutes:

  • Harvey Norman corporate compliance officer Michael Mecham said stores would be required to consider refunds or repairs outside of the manufacturer’s warranty depending on the product. “We would take a look at the product to determine if it’s a major or a minor fault and, depending on what that examination found, make a determination.” He agreed that a customer should expect a Harvey Norman store to replace, refund or repair a $2699 LG TV if it stopped working after the one-year manufacturer’s warranty expired, regardless of whether the customer had purchased a “product care” program.  

  • JB Hi-Fi marketing director Scott Browning took a similar line, saying the store would still be responsible for an expensive TV after the manufacturer’s warranty had expired without an extended warranty, “assuming the failure was due to material defects or an acceptable quality issue at the time of sale and not through accidental damage or customer misuse”.  

  • The Good Guys head office was less forthcoming. Citing the company’s status as a private company, manager for public relations Suzanne Tonks declined to answer our questions about customer rights outside the manufacturer’s warranty, the exact details of The Good Guys’ extended warranties, or whether its salespeople are incentivised to sell extended warranties.  

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