Imagine buying a product that inherently has a defect. Is it right for companies to continue charging customers for repairs even after the expiration of the warranty period? This issue is explored in the following excerpt regarding the case of TV manufacturing giant, LG.

Making sure that you have the right warranty, refund and replacement policy for your product is essential to avoid scrutiny down the track. It is always recommended that you seek professional advice with a business lawyer when it comes to drafting policies relating to consumer rights.

Background

On December 2015, ACCC launched a class-action case against LG for an alleged misleading conduct. LG was accused of luring customers into believing that they had no option but to pay for repairs after the expiration of the manufacturer’s warranty. Under Australian Consumer Law (ACL), customers who buy faulty products were entitled to a full refund, replacement and and/or repair at no cost, as per the Consumer guarantee. This guarantee is not limited by and should remain effective even after the manufacturer’s warranty expiration.

Court Decision

The issue at hand at the Federal Court of Australia was whether LG had led customers into believing that they had no option but to pay for repairs. In support of their case, the ACCC put forward examples of agreements made by customers to pay for LG repair parts and labour, which is in contravention of ACL consumer guarantees.

Justice John Middleton however, held that there was no misleading conduct. He said that in every instance, LG merely made an offer and that offer was accepted by the customer.

“LG was entitled to so conduct itself,” Justice Middleton said. “There is no allegation in this proceeding of bad faith, deliberate falsehood going to ultimate liability, or other unconscionable conduct.”

He continues: “Unless there is placed upon LG some additional obligation to disclose the existence of the (ACL), which may or may not have provided a remedy which (the customer) may have wanted to pursue, I cannot conclude the conduct of LG was in contravention of the ACL.”

ACCC also attempted to attack LG on their website layout and positioning of the manufacturing warranty. They argued that that the text was misleading because it was too “small and closely spaced text” such that it was hard for consumers to read.

Justice Middleton rejected this allegation, saying that LG has no obligation to inform customers of their rights and that it was ‘obvious’ to customers that the information was there to provide information about LG’s warranty.

Further Actions?

Delia Rickard, the Deputy Chairman of the ACCC is ‘carefully considering the judgment’ and weighing the decision to appeal the judgment. The ACCC remains concerned that customers would continue to be misled and therefore be deprived of the appropriate remedies.

Final Thoughts

To reiterate, ensuring that you observe the consumer guarantees in the Australian Consumer Law is very important to avoid scrutiny and potential legal costs down the line. It begins with you asking whether your product is of reasonable quality and free of potential defects especially from a customer standpoint. Then it is about ensuring that your warranty, replacement and refund policies are fair and in compliance with the law.

If you need to draft a refund or replacement policy or any consumer rights policy for that matter, we recommend seeking professional advice. Lawpath has a marketplace of 750+ business lawyers that specialise in Business and Consumer Law.

Let us know your thoughts on the LG-ACCC lawsuit by tagging us at @lawpath or #lawpath.

Tony Zhen

Tony is a legal Intern at LawPath who is working with the contents team to provide legal insight for SMEs. With an interest in contract and business law he is currently completing his Finance and Law degree at the University of New South Wales.