As a business owner, it is important that you understand your Australian Consumer Law (ACL) obligations. The ACL imposes duties and liabilities on manufacturers and suppliers of products. This includes obligations that businesses must comply with when dealing with “consumers”. Specifically, the ACL provides consumers with automatic guarantees. This means that if you supply a consumer with goods or services in Australia at any stage in the supply chain, you are legally responsible for ensuring the goods or services are of an acceptable standard.
The question often is, however, who is a consumer? On 1 July 2021, the threshold for who is considered a consumer for the purposes of the consumer guarantees is changing, meaning more businesses will be held accountable for providing goods or services of an unsatisfactory standard. This article explains:
- what is a consumer guarantee;
- who is a consumer;
- how the definition is changing; and
- Its implications for businesses.
What Are the Consumer Guarantees?
Under the ACL suppliers and manufacturers automatically provide guarantees about the goods they sell, hire or lease, and services they provide to consumers. These rights exist regardless of any warranty provided by the supplier or manufacturer and cannot be excluded.
Whenever a business supplies goods or services to a consumer there are guarantees, including, that the:
- goods are of acceptable quality;
- goods will match their description, or any sample or demonstration model;
- services will be provided with due care and skill and within a reasonable time; and
- goods and services will be fit for any purpose made known to the supplier.
If the goods or services fail to meet a guarantee, a consumer has rights against the supplier.
If the failure to meet a guarantee on goods or services is minor, the supplier can choose the remedy, including a repair. If the failure is major, the consumer can choose a repair, replacement or refund or can recover compensation for any reduction in value.
Understandably, these rights are very powerful and can have strong implications for businesses.
Who is a Consumer Currently?
For the purpose of consumer guarantees, the ACL is very clear on who is a consumer. The ACL provides that businesses must guarantee products and services they sell, hire or lease for:
- under $40 000; or
- over $40 000 that are normally bought for personal or household use; or
- commercial road vehicles or trailers used primarily to transport goods on public roads.
If goods or services were acquired for more than $40,000, and are not goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption, a business will not owe the purchaser any consumer guarantees.
Impending Changes to the Law
The definition of a consumer has been in place since 1986 but is changing to account for inflation. This will ensure the guarantees adequately protect consumers. Accordingly, reforms have been introduced to change the definition of ‘consumer’ in the ACL.
Under the amended definition, the threshold for goods acquired as a consumer will increase from $40,000 to $100,000. Therefore, businesses will be required to guarantee products and services they sell, hire or lease for under $100,000 regardless of whether they were acquired for personal, domestic or household use or consumption or not.
This will significantly increase the scope of protection for consumers under the consumer guarantees provisions of the ACL.
This reform does not come into effect until July 2021. This gives businesses sufficient time to ensure their internal policies regarding guarantees are updated in time. This gives you time as a business owner to start considering the implications of this reform and how it will affect your business.
You may need to:
- implement staff training;
- change the terms and conditions or materials provided to consumers regarding return and refund policies; and
- ensure no representations are made on promotional materials or orally to consumers that could mislead them into believing they have no rights in this regard.
Businesses that do not meet their ACL obligations could face enforcement actions by the ACL regulator, the Australian Competition and Consumer Commission (ACCC). If you have any questions about how the and consumer definition could affect you or your business, contact LegalVIsion’s business lawyers on 1300 544 755.
Charlotte is a Senior Lawyer in LegalVision’s regulatory and compliance and disputes teams, with a focus on intellectual property. Charlotte has a Masters degree in intellectual property from the University of California, Berkeley. Prior to joining LegalVision, Charlotte gained valuable experience in litigation, working on commercial, intellectual property and succession disputes for diverse clients. In her current role, Charlotte provides considered advice on regulatory frameworks and helps clients to resolve their disputes in the most pragmatic and effective way. In her spare time, Charlotte likes to sit down with a big bowl of pasta to watch a good thriller.