Changes to consumer guarantees

The definition of "consumer" has recently been expanded and suppliers of higher value goods and services may now be subject to consumer laws.

Introduction

The recent passing of the Treasury Amendment (Acquisition as Consumer Financial Thresholds) Regulations 2020 (Cth) marked a significant change in Australia's consumer protection system. The regulations have extended the application of the Australian Consumer Law (ACL), by expanding the value of goods that encompass the definition of "consumer".

Changes

From 1 July 2021, the Australian Consumer Law will now apply to goods that are valued up to $100,000 (previously this was $40,000). Suppliers who provide goods or services within this threshold will now be subject to statutory consumer guarantees such as:

• repair, replacement or refund;
• cancelling a service; and/or
• compensation for damages & loss.

The extended definition of "consumer" means that these guarantees will now apply to more transactions, including when businesses sell to other businesses. A person or business will not be considered a consumer where they acquire goods for the purpose of resupply or to transform in the process of production or manufacture.

This is a significant change as prior to 1 July 2021, a consumer was considered a person or a business who acquired goods or services:

• for $40,000 or less; or
• which are ordinarily acquired for personal, domestic, or household use or consumption; or
• consisting of a vehicle or trailer acquired principally for the transport of goods on public roads.

Consumer guarantees now cover business-to-business transactions, assisting in the improvement of economic transactions by restoring the level of coverage for business purchases in real terms and providing minimum standards of protection.

The increased scope is particularly relevant for buyers of:

• high value-equipment such as agricultural equipment;
• industrial air-conditioning units;
• software and electronics;
• water tanks; and
• commercial vehicle purchases.

Suppliers of these types of equipment should be wary of the new more stringent obligations that are imposed upon them.

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What does this mean for suppliers?

Many businesses that were not previously subject to the provisions of the ACL due to the $40,000 cap, are now mandated to provide consumers with the following guarantees:

• Goods are fit for purpose, of acceptable quality, comply with any express warranties and comply with their descriptions.
• Services must be fit for purpose, provided with due care and skill, and delivered within the stated, or a reasonable, time.

If breached, the ACL provides an extensive range of remedies, which include entitlement to a repair, refund, replacement, and/or compensation, depending on the type and severity of the failure.

It is advisable for businesses to:

• update all relevant contracts, warranty policies (both internal policies and those that are published), and terms and conditions, to ensure compliance with these amendments; and
• provide consumer law compliance training for relevant staff, especially those dealing directly with customers, about the effect of this change on consumer guarantees and other provisions of the ACL.

Businesses should take this opportunity to review their terms and conditions of supply, to ensure that they are following new changes under the ACL, particularly for business-to-business transactions that may have previously exceeded the limit.

Pragma Lawyers can provide advice to you and your business to help minimise your risk.

Contact us today by clicking here or call us (08) 6188 3340.