ACCC raps Apple and Harvey Norman for deceiving customers over warranties: why The Good Guys and JB Hi-Fi could be next

The ACCC was concerned that Apple was applying its own warranties and refund policies excluding the consumer guarantees contained in Australian Consumer Law. Photo: Simone De Peak

Australian retailers should prepare for regulators to enforce new consumer protection laws after the competition watchdog slammed Apple for misleading consumers about warranties.

This follows action against Harvey Norman franchisees earlier in the year.

The Australian Competition and Consumer Commission rapped Apple on Thursday for misleading consumers into thinking they were entitled to less recourse than the new Australian consumer law prescribes.

“The ACCC was concerned that Apple was applying its own warranties and refund policies effectively to the exclusion of the consumer guarantees contained in the Australian Consumer Law,” ACCC chairman Rod Sims said.

“This undertaking serves as an important reminder to businesses that while voluntary or express warranties can provide services in addition to the consumer guarantee rights of the ACL, they cannot replace or remove those ACL guarantee rights.”

Mr Sims added that consumer guarantees did not have a time limit, but applied for as long as “reasonable to expect given the cost and quality of the item”.

But Apple is not the only culprit. Earlier in the month the Federal Court fined four Harvey Norman franchisees a total of $116,000 and a fifth franchisee $32,000 for making false or misleading representations about consumer rights.

In his judgment Justice Middleton notes that “retailers may need to incur costs to maintain a culture of compliance with the ACL, including by supervision of staff”.

The fine was an agreed settlement between the ACCC and the four franchisees. Similar cases against six other Harvey Norman franchisees are still before the courts.

Mystery shopping shows problem widespread

Other major electronics retailers are no better. Choice says a shadow shop in September demonstrated that ignorance or deception over warranty protection and Australian consumer law was rampant.

The consumer advocacy organisation sent journalists into 80 Harvey Norman, The Good Guys and JB Hi-Fi stores across every state and territory to pose as a customer interested in buying a $2500 big-screen television. Violations of the law were widespread.

When asked about returning big ticket items, 85 per cent of sales staff demonstrated limited or no understanding of their obligations under the law, saying that the retailer would have no responsibility if the television failed after one year.

In every case, the shop assistants offered consumers the option to purchase an extended warranty - which Choice says is unnecessary.

“The advice given by major electronics retailers flies in the face of the Australian consumer law,” says Choice spokesman Tom Godfrey.

“The fact that 85 per cent of sales staff got it wrong and 100 per cent offered an extended warranty is very concerning. Consumers need to be wary of warranty advice they are given in-store.

“Consumers should not be fooled into purchasing extended warranties they don’t need and we’d like to see the ACCC and fair trading bodies investigate these breaches.”

Choice contacted the corporate headquarters of the chains. Both Harvey Norman and JB Hi-Fi executives understood the principles behind the Australian consumer law and agreed that a customer should expect a refund, even without the purchase of an extended warranty. The Good Guys declined to answer Choice’s questions about customer rights.

The 2011 legislation says consumers have a right to refund, repair or replacement through the store for a reasonable time after purchase. The time period within which a good should be of acceptable quality depends on factors like the type of good and price of the item.

Choice reported its findings to the ACCC. The ACCC would not confirm to BRW whether other retailers were under investigation.

The practice of selling extended warranties is not confined to electronics and computer equipment. When this reporter tried to buy a children’s wooden train set from TopBuy, she was given the option of buying up to five years of additional warranty protection.

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