New Australian Consumer Law from January 2011

From 1 January 2011 Australia will have new consumer laws when the Australian Consumer Law (ACL) comes into force. 

The purpose of the amendments is to strengthen the rights of consumers and provide uniform protection and rights across the country replacing State based provisions in Fair Trading Acts and similar.

Changes in the following areas may affect you:

• Supplier Reporting Obligations
  
  
• Statutory Guarantees against Defects
  
  
• Product Recall
  

Mandatory Reporting of Safety Incidents

There are new mandatory reporting obligations on the suppliers of consumer goods and product related services to report to the ACCC, within 2 days of becoming aware of where a consumer good or product related service is associated with the death, serious injury or illness of any person.

Consumer goods are defined as (among other things) goods supplied to a person costing up to $40,000 and goods which cost more than $40,000 which are normally used for personal, domestic or household purposes. Goods purchased by businesses which cost more than $40,000 which would normally be bought for business use, bought to on-sell or used to manufacture or repair other goods, are not consumer goods.

Note:

1. This obligation arises whether or not the death, serious injury or illness was caused, or may have been caused by the use, or foreseeable use, of the goods or the supplier becomes aware of another person who considers this to be the case.
   
   
2. All participants in the supply chain are required to notify should they become aware that the goods have, or may have, caused the death or serious injury.
   
   
3. There is an obligation to report the event within 2 days of the entity first becoming aware of the incident.
   
   
4. The ACCC have advised that, even if it is not clear whether the product caused the incident or not, there is an obligation to report the fact and that liability will not flow from this report.

There is therefore an obligation for all participants in the supply chain to be aware of these obligations and it is important for all businesses to have in place the necessary internal processes and reporting procedures to be able to quickly and effectively respond as to a safety related event.

Notification can be made by utilising a form on the ACCC website. Norman Waterhouse, should the need arise, can assist you immediately it is suspected that such an event has occurred.

Note that this is a strict liability and criminal offence and any failure to comply may attract a penalty of $16,500.00 for a body corporate. 

Warranties against Defects in Contracts for Supply of Goods or Services

The ACL will make Federal, State and Territory laws on implied conditions uniform. The uniform laws will be that all consumer goods are of acceptable quality including that they are free from defects, safe and durable and that the manufacturer will comply with an express (or manufacturer’s) warranty.

Should a manufacturer’s warranty be provided, that is a warranty for goods outside the requirements of the ACL, the ACL prescribes the wording to be included in that warranty.

This latter requirement, regarding the wording of express warranties, will not come into effect until 1 January 2012 to allow suppliers an opportunity to ensure that their warranties are compliant. 

Product Recall

The legal regime relating to product recall has not altered greatly however, the following are changes you should be aware of:

1. Consumer goods will need to be recalled not only where it appears ‘the goods will or may cause injury’ but also where it appears ‘a reasonably foreseeable use (or misuse) may cause injury’.  Therefore, even if the goods are not used for the primary intended purpose, if that use or misuse is foreseeable and it may cause injury, then the product will need to be recalled.
   
   
2. The procedure and requirements relating to voluntary recalls have been clarified to some extent.  This is a positive step however, note that there is now a requirement to advise the ACCC within 2 days of commencing a voluntary recall.
   
   
3. Notification is only required to the Commonwealth Minister or his delegate (and no longer to the State Regulators).
   
   
4. It is expected that suppliers will notify both the domestic and overseas supply chains. 
   
   
5. With respect to communication about recalls, although not specifically regulated, the ACCC have in recent times formed views about effective communication to consumers. On-line communication is expected to be considered.  Manufactures and suppliers are therefore advised to give consideration to a warranty card system which may assist in tracking consumers and enable a more immediate and effective communication should there be a recall.  For this purpose it is also important that the products be differentiated to ensure notification (and retrieval if necessary) of the correct product. Record keeping of all of those within the supply chain is vital for this purpose.
   
   
6. We refer to the information below under Warranties Against Defects for further guidance on Warranties.

For further information and assistance please call:

Alison Adair on 8210 1227
Steven Hagivassilis on 8210 1232
Tom Burke on 8210 1276

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