Harvey Norman franchisees pay for misleading consumers
The Federal Court has ordered four Harvey Norman franchisees to pay a total of $116,000 in civil pecuniary penalties for making false or misleading representations to customers regarding consumer guarantee rights. The four franchisees are:
- Launceston Superstore Pty Ltd, located in Launceston, Tasmania ($32,000);
- Moonah Superstore Pty Ltd, located in Moonah, Tasmania ($28,000);
- HP Superstore Pty Ltd, located in Hoppers Crossing, Victoria ($28,000); and
- Salecomp Pty Ltd, located in Sale, Victoria ($28,000).
The Court found that each franchisee had made a number of false or misleading representations to consumers about their consumer guarantee rights. While the allegations made by the ACCC against each of the franchisees differ, examples of the misrepresentations include representations that:
- the franchisee had no obligation to provide remedies for damaged goods unless notified within a short specified period, such as 14 days;
- the franchisee had no obligation to provide an exchange or refund for faulty goods supplied; and
- the franchisee had no obligation to provide a remedy independently of the relevant product manufacturer.
The representations were made orally by staff located inside the franchise store. In addition, Launceston Superstore Pty Ltd also stated on receipts that “No claims will be honoured on damaged goods unless notified within 24 hours of delivery or pick-up”.
“These penalties send a strong message to all businesses, including franchisees, that they must not mislead consumers about their rights to repair, replacement or refund for faulty goods under the Australian Consumer Law,” ACCC Chairman Rod Sims said.
“Complaints about consumer guarantees represent a quarter of the consumer protection complaints that the ACCC receives each year, The ACCC has moved from raising awareness of the law to taking enforcement action where it believes consumers have been misled about their rights under the consumer guarantee provisions of the ACL.”
In his judgment, Justice Middleton stated that:
“Processes to ensure that, if goods were not of acceptable quality when sold to consumers, consumers can obtain a remedy for faulty goods represent a cost on the retailer’s business. Retailers may need to incur costs to maintain a culture of compliance with the ACL, including by supervision of staff”.
In addition to penalties, the Court also made orders including declarations and injunctions in relation to each of the four franchisees. With the exception of Launceston Superstore Pty Ltd, which ceased trading on 30 November 2012, the franchisees are required to display in-store corrective notices and implement a consumer law compliance program.
Proceedings were issued on 13 June 2013 against the four Harvey Norman franchisees. Subsequently, the ACCC and each of the four franchisees came to an agreed settlement on the matter, with agreed orders put to the court for consideration.
The ACCC is awaiting judgment in proceedings against another six Harvey Norman franchisees for similar conduct, where the ACCC is seeking court orders including penalties, declarations, injunctions, corrective notices and compliance training.
The Australian Consumer Law gives consumers a set of rights called consumer guarantees for all goods purchased after 1 January 2011. These guarantees include a guarantee that:
- goods will be of acceptable quality;
- goods will be fit for any disclosed purpose;
- goods will match any description under which it is sold;
- goods will have spare parts available for a reasonable time; and
- all express warranties offered will be honoured.
For goods purchased on or after 1 January 2011, where a good develops a major fault, consumers have a right to a replacement or refund from the supplier of the good. For goods that develop a minor fault, a consumer has a right to have the good remedied (at the suppliers discretion) within a reasonable time. If the supplier doesn’t do so, the consumer can either reject the goods and get a refund or have the problem fixed and recover reasonable costs of doing so from the supplier.
For further information, see Consumer rights & gurantees.