On Wednesday 26th July, ACCC took legal action against Ford for misleading customers into buying cars with faulty transmission boxes and for on-selling surrendered cars without disclosing the internal issues.

Background

Ford has allegedly been selling the 2011-2016 Fiesta, EcoSports, and Focus models that had transmission box issues. Whilst the gearbox used, the PowerShift Transmission was advertised to be more fuel efficient and smoother in terms of gear transition, many customers who bought these models experienced major problems with the car, including sudden jerks during acceleration, sudden loss of power and excessive noise. Of the 70,000 cars that were sold, at least 50% needed at least 1 significant repair and some cars had as many as 7.

Criticisms

Rod Sims, the chairman of the ACCC claims that Ford knew about the systemic issue in their cars since 2013, yet they continued to mislead existing customers. Ford allegedly told customers that their cars had ‘no problem’ and that the issues arose from their ‘poor handling’ of the car. Thus, deserving requests for repairs, replacements and refunds were refused and the only customers who did get replacements were those who made an upfront payment of $7,000 to the PowerShift Loyalty Program. By the end of July 2016, 800 replacements were transacted, totalling to approximately $5.6 million.

Under Australian Consumer Law, the purchase of a product would automatically give way to a customer guarantee, which entitles customers to a repair, refund or replacement should the product be faulty. Therefore, should these claim be true, Ford’s non-compliance would receive heavy legal scrutiny.

On the other end, the CEO of Ford Motors Company Australia, Graeme Whickman, denies these claims, adamantly insisting that the company on the contrary has been executing repairs, replacements and refunds as necessary and reaching out to affected customers.

“We’ve continued to improve our response times to customers and have been repairing vehicles, compensating customers, and depending on the circumstances, providing full refunds and providing replacement vehicles,” Mr Whickman said.

The ACCC has made further allegations of unconscionable conduct regarding Ford’s on-sale of surrendered cars, without fault disclosure, but Mr Whickman all the same has denied these claims.

To learn more about what is unconscionable conduct, check out our previous guide.

Final Thoughts

This incident highlights the importance of not only abstaining from any forms of misleading and deceptive conduct but also understanding the laws behind it to prevent it from happening inadvertently. Any exchange of goods and services are done so under a customer guarantee, which means that should the product be faulty or be different to how it was advertised, the customer is entitled to a refund, replacement or repair.

What are your thoughts on the Ford incident? Let us know your thoughts 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.