Aust-Consumer-Laws

Consumer guarantees – what, who, how?

Katie Akpinar, ||

Co-authored by Olivia Camilleri

The Australian Consumer Law (ACL) requires businesses to provide automatic consumer rights known as consumer guarantees. It is essential Australian businesses understand and comply with these consumer guarantees.

This article breaks down the what, who, and how of consumer guarantees by:

  • Providing a brief outline of what the ACL is;
  • Explaining what consumer guarantees are;
  • Considering who a consumer is;
  • Detailing who must comply with consumer guarantees;
  • Setting out how consumer guarantees apply to goods;
  • Describing how consumer guarantees apply to services;
  • Explaining how a breach of consumer guarantees is handled;
  • Detailing how exceptions to consumer guarantees apply; and
  • Summing up the key takeaways.
What is the ACL?

The ACL is found in Schedule 2 of the Competition and Consumer Act. It is aimed to promote competition and fair trading and offer consumers with protection. Under the ACL, all Australian businesses have the same obligations, and all consumers have the same rights, no matter where they transact in Australia. The ACL is a national, generic law which applies in the same way to all sectors and in all Australian jurisdictions.

The ACL:

  • Provides general standards of business conduct;
  • It also disallows unfair trading practices;
  • Further, it regulates particular types of business-to-consumer transactions;
  • Additionally, it comprises consumer guarantees for goods and services; and
  • It regulates the safety of consumer products and services related to products.
What are consumer guarantees?

Consumer guarantees provide consumers with a broad set of rights for the goods and services they purchase and give consumers assurance that when they buy a good or service, that good or service will work or do what it is meant to.

Consumer guarantees apply automatically and set out the conditions under which a business must provide a consumer with a remedy. Businesses must not exclude consumer guarantees and must provide them irrespective of any other warranties they give.

It’s imperative organisations don’t mispresent consumer guarantee rights under the ACL to avoid legal action by the Australian Competition and Consumer Commission (ACCC) and the substantial penalties imposed under the ACL.

Who is a consumer?

It’s important for businesses to consider whether their customers are defined as a consumer for the purposes of the ACL.

Under the ACL, a consumer is an individual or a business who acquires:

  • Goods or services that cost less than $100,000; or
  • Goods or services that cost more than $100,000, but are the type ordinarily acquired for personal, domestic, or household purposes; or
  • A commercial vehicle or trailer mainly used to transport goods on public roads.

The definition of a consumer under the ACL changed as of 1 July 2021. Under the change, the monetary threshold for the acquisition of goods or services increased from $40,000 to $100,000. This change means that more businesses must comply with the consumer guarantees regime under the ACL.

Who must comply with consumer guarantees?

Businesses that provide goods or services to consumers in Australia must comply with consumer guarantees. This applies to brick-and-mortar and e-commerce businesses alike.

Suppliers and manufacturers must comply with consumer guarantees for most goods they sell, hire or lease, and services they supply.

A supplier includes anyone who sells, leases, or hires goods or services in trade or commerce to a consumer. This can be a trader, retailer, or service provider.

A manufacturer includes a person or a business that makes or puts goods together or has their name or brand on goods. It also includes a person who imports goods into Australia, where the person isn’t the manufacturer of the goods, and the maker doesn’t have an Australian place of business.

The responsibility of suppliers to ensure consumer guarantees are upheld was emphasised when the ACCC accepted a court enforceable undertaking from Big W and Target in 2019. Big W and Target admitted to failing to uphold the consumer guarantee of providing a remedy by redirecting customers to return their faulty products to the manufacturers of the products (Dyson and Sony) because customers did not return the product within the timeframe stipulated in their return policies. The responsibility of the supplier to the customer is not removed due to the failure of a customer not meeting an arbitrary period. Accordingly, Big W’s and Target’s actions were found to be a significant breach of the ACL. This decision reinforced retailers’ obligations under consumer guarantees to ensure adequate remedies are available for customers beyond capricious timeframes.

How do consumer guarantees apply to goods?

Businesses that sell goods must guarantee those goods:

  • Are of acceptable quality. For example, goods are of acceptable appearance and finish, do not have defects and are safe, durable, and fit for all the purposes for which goods of that kind are commonly supplied;
  • Are fit for any purpose that the consumer made the business aware of before purchase, whether express or implied;
  • Fit the purpose the business specified;
  • Are accurately described. For example, as they are described in advertising:
  • Match any sample or demonstration model;
  • Meet any express warranties. For example, any extra promises made about the quality, state, condition, performance, or characteristics of goods are satisfied;
  • Come with clear title, unless the consumer is alerted before purchase;
  • Have undisturbed possession;
  • Don’t have any undisclosed or hidden securities, or any charges and will remain so, except in certain circumstances; and
  • Have spare parts and repair facilities for a reasonable period of time and with reasonable availability unless the consumer is otherwise informed.

Manufacturers and importers must guarantee that goods:

  • Are of acceptable quality;
  • Are accurately described;
  • Meet any express warranties; and
  • Have spare parts and repair facilities for a reasonable period and with reasonable availability unless the consumer is otherwise informed.
How do consumer guarantees apply to services?

Businesses that supply services must guarantee those services are:

  • Provided with due care and skill. Suppliers must use an acceptable level of skill or technical knowledge and take all necessary care to avoid any loss or damage when providing the services;
  • Fit for any purpose specified by the consumer, whether express or implied; and
  • Provided within a reasonable time when no time is specified. What is reasonable depends on the nature of the service as well as any other relevant factors.
How is a breach of consumer guarantees handled?

A breach occurs when goods or services fail to meet a consumer guarantee, in which case a consumer is entitled to a remedy. Depending on the circumstances, and whether the problem is minor or major, consumers have the right of:

How do exceptions to consumer guarantees apply?

The right to repair, replacement, refund, cancellation, or compensation do not apply to:

  • Goods that cost more than $100,000 and are typically for business use. For example, machinery;
  • Goods purchased as a one-off sale from private sellers. For example, from a garage sale or school fete. However, consumers do have rights to full title, undisturbed possession, and no unknown debts or additional charges;
  • Goods purchased for on-sale or that are changed for re-supply as a business;
  • Goods purchased at a traditional auction where the auctioneer acted as an agent for the owner. Consumers do have rights to full title, undisturbed possession, and no unknown debts or additional charges;
  • Services for transport or storage of business goods; or
  • Fit for purpose of professional services provided by a qualified architect or engineer.

There are also different laws that apply to:

Consumer guarantees do not apply if a consumer:

  • Got what was asked for but had a change of mind;
  • Decided they did not like or had no use for the purchase, or found it cheaper elsewhere;
  • Knew or was made aware of faults before making the purchase;
  • Misused goods in any way that caused the problem; or
  • Requested a service be undertaken in a way that the business advised against or was unclear about what they wanted.
The key takeaways

It’s crucial that Australian businesses understand and comply with consumer guarantees under the ACL. Businesses have an automatic obligation to provide a broad set of consumer guarantee rights for the goods and services a consumer purchases.

Consumer guarantees must not be excluded and must be provided irrespective of any other warranties a business gives. Consumers must be provided with a remedy if goods or services fail to meet a consumer guarantee.

For more information on meeting your obligations to consumers, please contact Coleman Greig’s Commercial Advice team.

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