False Or Misleading Extended Warranty Representations Can Land You In Hot Water

A recent court decision (and the ensuing penalties handed out) serves as a good reminder to Dealers about extended warranty compliance.

The Federal Court recently found that both Fisher and Paykel Customer Services Pty Ltd (Fisher and Paykel) and Domestic along with General Services (Domestic & General) made a false and misleading representation in the course of offering an extended warranty to consumers.

As a result, a pecuniary penalty of $200,000 has been imposed on each business.

Motor vehicle dealers and businesses that sell extended warranties must understand the differences between a manufacturer’s warranty and consumer guarantees under Australian Consumer Law (ACL) in order to avoid trouble.

Fisher and Paykel and Domestic & General sent letters to consumers who purchased a Fisher and Paykel appliance inviting them to purchase an extended warranty. The letters contained a number of statements, including:

Your Fisher and Paykel [appliance] is now a year old. Which means that you have 12 months remaining – after that your appliance won’t be protected against repair costs.

The Court held that the letters contained a false or misleading representation to consumers that they would not be protected against repair costs for their appliance after a period of two years from the date of the purchase (being the period of the manufacturer’s warranty) without the purchase of an extended warranty.

ACCC Chairman Rod Sims said; ‘Under the ACL, consumers may have a right to repair, replacement or refund regardless of any extended warranty or express manufacturers’ warranty’

HWL Ebsworth Lawyers have clearly set out the implications for motor vehicle dealers who offer products such as extended warranties:

The ‘traditional’ manufacturer’s warranty offered by motor vehicle manufacturers and Dealers is a voluntary, private contract between the manufacturer, the Dealer and the consumer. It is usually a promise made to a consumer to fix or replace a part for free for a limited period of time or a certain number of kilometres and it is conditional on the consumer obeying whatever the specific conditions of the contract are.

The consumer guarantees under the ACL impose a legal obligation on manufacturers (which is also enforceable against Dealers as retailers) to guarantee the performance of their vehicles and their component parts. The specific conditions of these guarantees are set out in the ACL and they are commonly referred as a Statutory Warranty. Whether a Statutory Warranty has been breached is a question of fact and law and depends on the circumstances of each individual case. It does not depend on the conditions of any manufacturer’s warranty and the Statutory Warranty is not limited to a specific amount of time, rather, whether there has been a breach of a Statutory Warranty can depend on whether a good has lasted as long as a consumer would ‘reasonably’ expect, having regard to a number of factors which would depend on a case by case basis.

Whilst it is not unlawful for a manufacturer or Dealer to offer extended manufacturer warranties or inform consumers that doing certain things will breach a manufacturer or Dealer warranty, manufacturers and Dealers must be very careful to ensure they do not make any representation about warranties generally that is capable of being construed as a misleading representation about consumer’s rights under the ACL.  The ACL consumer Statutory Warranty is a current enforcement priority area for the ACCC, especially in the context of the sale of extended warranties by motor vehicle manufacturers and Dealers.

AADA recommends that the implications of making false or misleading warranty claims be brought to the attention of all staff and that documentation be reviewed with your legal advisors should any doubts exist.

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