AADA responds to Productivity Commission

On 10 August 2021, AADA submitted its response to the Productivity Commission’s Draft Report into Right to Repair.

The AADA welcomes the opportunity to provide feedback given the automotive industry is somewhat advanced on the issue.

With car Manufacturers obliged to make available service and repair information from 1 July 2022, AADA believes the operation of this legislation will provide significant learnings. We support the Commission’s recommendation of a review after three years.

We agree with the report’s finding that there is scope to enhance the consumers ability to exercise their rights and we would argue that the strengthening of indemnification of suppliers as recommended by Consumer Affairs Ministers in 2019 should proceed as soon as possible.

Our industry is not opposed to legislating against warranty voiding terms as they do not exist in Manufacturer warranties, but it is important that any such change is accompanied by the right to include terms which limit Manufacturer and Dealer liability in the event of damage caused by unauthorised repairs or parts.

Automotive Manufacturers and their Dealers stand by their products and offer generous warranties. We believe our products are durable and can last for decades if appropriately serviced and maintained. Durability guidance for vehicles is fraught with risk given there are many variables which exist in owning and operating a motor vehicle. We believe our industry is not one that typically requires durability guidance, and as such argued that motor vehicles should be exempt from any minimum durability guide.

We also questioned the need to formally implement a system for super complaints. Customer complaints need to be as organic as possible, and we are unaware of any limitations which currently exist to stop consumer groups from lodging such complaints.

Finally, product obsolescence is not a problem in our industry. E-waste is a growing problem, particularly the emerging problem of electric vehicle lithium-ion batteries. We believe this is something Government and industry will respond to, and we believe the best way to do this is to allow the automotive industry to take on a stewardship role and handle it in a similar manner to how recalls are dealt with.

Other issues we addressed include:

  • Dealers, as retailers of new cars, have direct responsibility to provide remedies to consumers under the Australian Consumer Law (ACL). Dealers also have a right to recover the costs of remedies from Manufacturers, where the Manufacturer is responsible for the failure. In practice, Dealers often have difficulty enforcing their indemnification rights due to the nature of their commercial relationship with the OEMs to whom they are franchised.

  • The ACL provides consumers with considerable legislative rights to obtain a remedy (repair, replacement or refund) for defective products through consumer guarantees. The consumer guarantees are comprehensive and operate reasonably well but there is scope to enhance consumers’ ability to exercise their rights when their product breaks or is faulty — by providing guidance on the expected length of product durability and better processes for resolving claims.

  • All franchise agreements are specific, to varying degrees, as to performance requirements including stipulating compliance with policies effecting warranty payments, prior approval levels and authorities to repair or replace components and vehicles. In a number of instances, Manufacturers in their Dealer Agreements:

a. Require Dealers to adhere strictly to the Manufacturers’ ‘policy’ regarding warranty or potential product defect claims (which policies can be unilaterally varied by the Manufacturers at any time);

b. Prohibit Dealers from making any admission of liability to a consumer in relation to a potential product defect without the prior approval of the Manufacturer;

c. Require Dealers to obey any instructions received from a Manufacturer in relation to a consumer’s request, complaint, claim or legal proceeding in relation to a potential product defect; d. Grant the Manufacturer the ability to assume total control of a Dealer’s handling of a request, complaint, claim or legal proceeding in relation to a potential product defect (in some cases at the Dealer’s cost); and e. State that Dealers will lose their right of indemnity against Manufacturers if the steps set out above are not adhered to.

  • Dealers that breach the terms of their franchise agreements risk loss of franchise. While Dealers do all in their power to satisfy customer concerns, in the final analysis they are limited to responding as per the Manufacturers directives. Often, what may appear to be reluctance on the part of a Dealer to assist a customer may in fact be the result of the influence of a Manufacturer’s policies and procedures. Even if the terms of a particular Dealer Agreement are not as prescriptive as those set out above, Dealers still face commercial pressure to cede to and obey the wishes of Manufacturers when it comes to any potential product defect, by reason of the significant imbalance of power described in this paper. In addition, the statutory indemnity against Manufacturers available to Dealers under section 274 of the ACL is of very limited practical value as it can only be exercised if there is an actual finding of liability against a Manufacturer. This rarely occurs as most claims are settled before any ‘finding of liability’ by a Court or Tribunal of competent jurisdiction.
  • In the automotive industry, Manufacturer warranties on motor vehicles generally do not contain voiding clauses. While these warranties do have conditions limiting coverage in the event that the product is damaged due to non-authorised repairs, maintenance or modification, this is perfectly reasonable given the complexities of the modern-day motor vehicle and the costs associated with repairing defects caused by poor workmanship. Manufacturer warranties generally specifically acknowledge the pre-eminence of the ACL and a number of them have a 60-day money back guarantee in the event that the vehicle is undrivable.
  • While the AADA takes the point that some consumers are operating under the mistaken belief that their warranties will be void if they undertake third party repair, this represents a failure in consumer education. Following the ACCC’s new car retail market study, we have encouraged our members to distribute a new car fact sheet for consumers. The fact sheet provides customers with an understanding of their rights under the ACL and how these exceed but intersect with both Manufacturer warranties and extended warranties.

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