On 20 February 2018, the ACCC announced that new car retailing was among its top 2018 compliance & enforcement priorities.

Specifically, the ACCC identified as a priority consumer issues in new car retailing, including responses by manufacturers and Dealers to consumer guarantee claims and other matters identified in the ACCC’s 2017 New Car Retailing Industry Report.

By ‘new car retailing’, the ACCC is referring to conduct occurring:

(a) before the sale of a vehicle (such as advertising and representations about a vehicle’s performance or emissions)

(b) at the time of sale (such as the sale of add-on finance and insurance products and representations about different types of warranties), and

(c) after sale (such as maintenance and repair costs and the availability of parts).

While launching the 2018 compliance & enforcement priorities, ACCC Chairman Rod Sims described consumer guarantees as a ‘perennial issue’ for the ACCC, and stated that the ACCC will have a low tolerance for practices that mislead consumers or fail to deliver the full level of protection to which consumers are entitled. Based on the level of focus the ACCC gave to the new car retailing industry in 2017, the industry can expect the same amount of focus from the ACCC in 2018.

The 2017 New Car Retailing Industry Report identified a number of consumer issues the ACCC regarded as ‘of concern’. These included:

(a) the need to update complaint handling systems and improve the approach to the handling of consumer guarantee claims

(b) enhancing the Australian Consumer Law to provide additional clarity to consumers about when they are entitled to a refund or replacement under consumer guarantees, and

(c) the need for ACCC to work with manufacturers and dealers to develop a concise and simple explanation of consumer guarantee rights under the Australian Consumer Law and their interaction with manufacturer warranties – to be provided to consumers when they buy a new car.

The 2017 New Car Retailing Industry Report came following the ACCC’s market study on new car retailing in which the ACCC identified what it perceived to be, among other things, a systematic failure in consumers enforcing consumer guarantees after the purchase of a new car, and a compliance problem with respect to information given to consumers about their Australian Consumer Law rights at the point of sale.

New car retailing and consumer guarantees was a similar priority for the ACCC in 2017. In 2017 the ACCC used a varied approach to address its concerns. Other than the New Car Retailing Industry Market Study, the ACCC was very active in its compliance and enforcement activities affecting the new car retailing industry. Among other things, the ACCC engaged in litigation and obtained court enforceable undertakings against a number of manufacturers (such as Holden) as well as distributors of consumer goods.

However, in addition to its enforcement activities, the ACCC made recommendations following its 2017 Report about reforms to the Australian Consumer Law to specifically tackle its concerns in respect of new car retailing. Some of these recommendations would have a particularly significant practical impact on Dealers if implemented. For example:

(a) developing an approved explanation of Australian Consumer Law consumer guarantees and their difference to a factory warranty, to be provided to consumers at the point of sale

(b) introducing a 30 or 60 day refund or replacement guarantee regardless of whether a failure is a major failure or a minor failure, and

(c) targeting representations about OEM parts requirements and authorised Dealer network warranty servicing.

The extent to which the ACCC’s draft recommendations will be implemented is unclear. In particular, there is real doubt about the legal basis for manufacturers and Dealers being required to develop an ‘approved explanation of Australian Consumer Law consumer guarantees’ (other than by displaying the existing mandatory text in warranty documentation).

Significantly, this issue was tested unsuccessfully by the ACCC in 2017 in the case of ACCC v LG Electronics Australia Pty Ltd. In that case, the Court held that, aside from displaying the mandatory text in warranty documents, there was no obligation on LG to provide information to a consumer about the consumer’s rights under the Australian Consumer Law. The ACCC has appealed that decision and the appeal will be heard in mid 2018. The outcome of that decision will have a significant impact on sales practices in new car retailing.

Finally, although not specifically part of the ACCC’s 2018 compliance and enforcement priorities, the ACCC’s report also identified submissions made by the AADA in relation to the imbalance of power between Dealers and manufacturers in their commercial arrangements. The ACCC has stated that it considers these issues may require further examination, including:

(a) minimum tenure and capital investment requirements

(b) reasons for non-renewal

(c) unilateral changes to dealer agreements, and

(d) reimbursement for consumer law remedies provided by dealers.

This article was written by Evan Stents – Lead Partner, and Christian Teese – Senior Associate, Automotive Industry Group | HWL Ebsworth Lawyers

Evan Stents
Lead Partner, Automotive Industry Group, HWL Ebsworth Lawyers