Last week, the ACCC confirmed its renewed focus on consumer guarantees and protecting consumers in ecommerce with the announcement of its 2024-25 enforcement and compliance priorities . The ACCC has called for reforms to enable the ACCC to take action and seek penalties against businesses that do not comply with the consumer guarantee regime in the Australian Consumer Law (ACL) and emphasised a focus on delivery times from online sales.
At the moment, the ACCC cannot seek penalties for failures by businesses to comply with the consumer guarantee regime under the ACL. Instead, the ACCC has taken to bringing cases for false or misleading representations made by businesses about their consumer rights - for example, when a business tells a customer they have no rights to any remedy at all after purchasing faulty goods.
Whilst the ACCC’s consumer guarantees focus in last year’s 2023-24 compliance and enforcement priorities concerned high value goods such as motor vehicles and caravans, the ACCC will shift its focus this year to consumer electronics and retailer misconduct in respect of delivery timeframes.
This area of focus comes hot on the heels of the ACCC commencing proceedings in the same week it launched its 2024-25 priorities against one of Australia’s largest specialty fashion retailers Mosaic Brands Limited (Mosaic) for alleged breaches of the ACL. The ACCC alleges that Mosaic made false or misleading representations by failing to deliver goods within the time frame advertised online, and representing to consumers that they were not entitled to a refund for faulty goods unless the refund was sought within six months of purchasing the product from Mosaic. The ACCC also alleges that Mosaic’s warranty terms did not comply with requirements under the Competition and Consumer Regulations 2010 (Cth) (Regulations).
These proceedings demonstrate the ACCC’s continuing commitment to improving industry compliance with consumer guarantees, using the means available to them to enforce the laws and seek penalties and other relief for a contravention until such time that any consumer guarantee reforms are implemented.
ACCC calls for reform to the consumer guarantees regime
Whilst consumers are entitled under the consumer guarantees regime to certain rights for supplies of goods and services, non-compliance by retailers or manufacturers with consumer guarantees is not currently illegal. This, the ACCC says, has led to a track record of poor compliance with the consumer guarantees regime.
In recent years, the ACCC has called for changes to the law to make non-compliance with consumer guarantee obligations illegal. In last week’s ACCC announcement of their 2024-25 enforcement and compliance priorities, ACCC Chair Cass-Gottlieb once again called for reforms to enable the ACCC to take action against businesses who do not comply with the consumer guarantee regime:
Whilst improving compliance by businesses with the consumer guarantee regime is important, there is a need to consider what more should be done. The law should be strengthened, access to justice needs to be improved, and a culture of compliance by manufacturers in their dealings with retailers and by retailers in dealing with consumers is essential. One important reform the ACCC considers is necessary is for failure to honour consumer guarantees to be a contravention of the ACL incurring penalties.
The ACCC is frustrated with the limited recourse available where businesses systemically fail to comply with the consumer guarantees regime under the ACL, with Court enforcement means only available to the ACCC where businesses mislead consumers about their entitlements and rights. Under the ACL, businesses are prohibited from engaging in conduct, in trade or commerce, that is misleading or deceptive or likely to mislead or deceive. Businesses are also prohibited from making false or misleading representations in relation to quality, sponsorship, price, the availability of spare parts, place of origin and the existence or effect of any warranty, guarantee, right or remedy (including the consumer guarantees regime provisions).
In January this year, the ACCC encouraged Australians to take advantage of their consumer guarantee rights, with ACCC Deputy Commissioner Catriona Lowe confirming: “The ACCC and state and territory consumer protection agencies will also continue to take action against businesses that misrepresent consumers’ rights under the law”.
The ACCC also recently provided some examples that may be misleading about consumer’s rights:
Your product is out of warranty, so we can only repair it for a fee.
No refunds under any circumstances.
To be eligible for a refund, you must return the product within 10 days. Refunds are not available under any circumstances after this time.
You will need to contact the manufacturer to have this issue resolved.
If you don’t buy the extended warranty, you’ll have no protection once the 12-month warranty expires.
We understand your concern that if you were made aware about this fault beforehand, you would not have purchased the product. We can offer you 50 per cent of the original purchase price as a goodwill gesture.
The damaged item must be returned in its original packaging to receive a refund.
We identified the screen is cracked on your product. The warranty doesn’t cover damaged screens, so we can’t help you today.
Further information on the consumer guarantees regime and it they may affect your business is available on Gilbert + Tobin’s Smart Counsel platform .
As a result, the ACCC instead takes enforcement action where businesses mislead consumers about their entitlements and rights under the consumer guarantees regime.
Are you delivering when you say you will? ACCC’s increased scrutiny on delivery time frames
In addition to calling for reforms to enable the ACCC to take action against businesses who do not comply with the consumer guarantee regime, the ACCC emphasised a focus on delivery times for 2024-25, ACCC Chair Cass-Gottlieb said:
A key concern that has recently emerged is the delay in delivery and non-delivery of consumer products. Delivery timeframes are a key consideration for many consumers when choosing a retailer. The ACCC and other consumer agencies have noticed an increase in complaints from consumers in relation to delays. There is a concern that misleading conduct by retailers about delivery timeframes can not only impact consumers decisions, but it will also have an impact on those businesses that are accurately representing the true delivery timeframes.
Mosaic pattern of misleading conduct is forming - a poster child for not delivering on what they promise three times in three years
The ACCC has already demonstrated their appetite for enforcement in respect of misrepresented delivery times in 2024, with the proceedings commenced by the ACCC against Mosaic on 4 March 2024. In discussing the new proceedings, ACCC Commissioner Liza Carver confirmed that “[t]he ACCC has received hundreds of complaints about Mosaic Brands in relation to delivery delays” .
The ACCC alleges that Mosaic breached the ACL by failing to deliver products to customers within delivery timeframes displayed on its websites, and representing to consumers that they were not entitled to a refund for faulty goods unless the refund was sought within six months of purchasing the product from Mosaic. Mosaic is one of Australia’s largest specialty fashion retailers, whose brands include Rivers, Noni B, Rockmans, Millers, Autograph, BeMe, Crossroads, Katies and W. Lane.
This is not the first time Mosaic’s sales practices have attracted ACCC attention, with the ACCC taking compliance action over the past few years:
In September 2022, Mosaic paid $266,400 in penalties after receiving two infringement notices from the ACCC relating to false or misleading representations that products were approved by regulatory authorities when in fact they were not.
In May 2021, Mosaic was issued with and paid five infringement notices totalling $630,000 in respect of false or misleading representations concerning hand sanitiser and face masks advertised on Mosaic’s brands’ websites. The infringement notices related to false certification and alcohol percentage claims, and representations that face masks were ‘non-refundable’ when in fact under the consumer guarantee remedies consumers have a statutory right to a refund. Mosaic also provided a court-enforceable undertaking for three years until 26 May 2024, to properly substantiate its claims with respect to hand sanitisers and face masks, refund customers, and implement a three-year compliance program.
Mosaic’s pattern of non-compliance would only have increased the ACCC’s appetite for an enforcement outcome in Court.
Misrepresentations regarding advertised delivery within advertised timeframes
The ACCC alleges that between 23 September 2021 to 31 March 2022, Mosaic engaged in false or misleading conduct under s 18(1) of the ACL by failing to deliver goods purchased online to customers within the time frame advertised, and wrongly accepted payment for these goods by delivering them late or not within a reasonable timeframe (if delivered at all), thereby contravening s 36(4) of the ACL.
While the advertised delivery times across Mosaic’s brands were 2 to 14 days (with the exception of 2 to 17 days for brand ‘Katies’), the products ordered during the time period took much longer to be dispatched from Mosaic’s warehouses. 741,077 products (26.4%) were dispatched from Mosaic’s warehouses 20 or more days after the order date, 435,857 (15.5%) were dispatched 30 or more days after the order date, and 267,852 (9.5%) were dispatched 40 or more days after the order date. This time period does not take into account the time it took Mosaic’s carriers (such as Australia Post) to deliver the products, as Mosaic did not keep track of when the products were actually delivered to consumers.
The ACCC alleges that the advertised delivery times were misleading or deceptive, or likely to mislead or deceive, and Mosaic did not have reasonable grounds for making the representations. COVID-19 shipping and delivery delay disclaimers were not sufficient to eliminate the effect of the delivery time representations. The ACCC also alleges that by accepting payment from consumers and failing to dispatch the products until 20, 30, 40 or more days after the order date despite the advertised delivery times, or within a reasonable time, Mosaic contravened s 36(4) of the ACL (which requires goods to be provided within a specified period or within a reasonable time).
Misrepresentations regarding consumer guarantees and non-compliance with Regulations
The ACCC also alleges that Mosaic made false or misleading representations to consumers in relation to warranties and consumer guarantees under s 18(1) and 29(1)(m) from 23 September 2021 to at least 23 October 2022. The terms and conditions published on Mosaic’s brands’ websites included a term that Mosaic would only refund consumers for faulty products within six months from the date they purchased the goods. However, under the ACL, a consumer’s right to a refund for faulty products cannot be excluded or limited to a specific expiry date. Consumer guarantees, such as that the product will be of acceptable quality, apply for a period time that is considered reasonable when considering the price paid and nature of the products or services.
The court-enforceable undertaking given by Mosaic in May 2021 included that Mosaic would not make any representation to the effect that a consumer is not entitled to a refund for a product in circumstances where the consumer is entitled to a refund under the consumer guarantees regime. The ACCC has highlighted that Mosaic’s representation that the refund period for faulty products was limited to six months was made notwithstanding this undertaking.
In addition to preventing consumers from exercising consumer guarantee rights available to them, the ACCC alleges that Mosaic’s terms and conditions are not compliant with the form and content requirements prescribed in the Regulations, and therefore Mosaic has also contravened s 102(2) of the ACL. The ACCC characterises the warranty in the terms and conditions as a warranty against defects (under s 102(3) of the ACL), and alleges it was non-compliant with reg 90 of the Regulations. Regulation 90 sets out requirements for warranties against defects, including that consumer guarantees cannot be excluded under the ACL, which Mosaic was in effect doing by placing a time limit on the warranty period for faulty goods.
The ACCC is seeking declarations, pecuniary penalties, injunctions, compliance orders and orders as to findings of fact and costs.
Key implications
It is important that businesses:
Are aware of their obligations under the consumer guarantees regime, and ensure they are not misrepresenting consumers’ rights in product or service listings, or in terms and conditions. This is especially important given the ACCC’s calls for a strengthening of the consumer guarantee regime and that the ACL be amended so that the ACCC can enforce non-compliance with the regime. In the meantime, the ACCC will continue to take enforcement action where businesses mislead consumers about their entitlements and rights under the consumer guarantees regime, as they have in the Mosaic Proceedings.
Be prepared for increased ACCC scrutiny on advertised delivery timeframes. Businesses should ensure that they have reasonable grounds to make delivery timing claims on any websites and promotional platforms, such as ensuring that average tracked delivery times are consistent with those displayed, so that businesses can substantiate such claims.
Ensure that any warranties against defects are compliant with the Regulations. Whilst the ACCC had previously accepted a court-enforceable undertaking from Pandora in respect of non-compliance with section 102 of the Regulations, this is the first time the ACCC has included this as a claim in Court proceedings, which demonstrates the ACCC’s commitment to enforcing non-compliance with the Regulations where needed.
With the number of consumers online shopping continuing to increase year-on-year and the ACCC’s focus on delivery for 2024-25, we will be keenly monitoring developments in these proceedings and beyond.
Please reach out to one of our experts should you have any questions about the application of these parts of the ACL to your business and any products or services you supply.