Fisher & Paykel’s extended worry

Extended warranties have traditionally been seen as the cash cow of whitegoods and electronics. The fries with your burger if you like. The recent Australian Competition and Consumer Commission (ACCC) case against Fisher & Paykel Customer Services Pty Ltd (Fisher & Paykel) and Domestic & General Services Pty Ltd (Domestic & General) serves as a timely reminder that extended warranties should be offered with caution – unlike fries. The harsh penalties and bad publicity these companies now face for their misleading and deceptive conduct demonstrates that this kind of ‘easy-money’ strategy is something every business should avoid.

A fish out of water

In the Federal Court, Justice Michael Wigney found that Fisher & Paykel (the appliance and whitegoods company) and Domestic & General (the company who issued the extended warranty on behalf of Fisher & Paykel) made misleading and deceptive representations concerning customers’ rights under sections 18 and 19 of the Australia Consumer Law (ACL). Both companies were fined $200,000, as well as costs totalling $15,000, for:

1. sending approximately 48,000 letters to purchasers of dishwashers telling them that they needed to buy an extended two-year warranty (between $100 and $220) to protect their dishwashers against repair costs, on top of their original warranty, which was something already protected by the ACL guarantees; and
2. putting the law in ‘relatively fine print on the reverse side of the letter’.

After the proceeding began in November 2013, the extended warranty product ceased and consumers were contacted and ‘unconditionally offered a full refund’.

All washed up

A warranty against defects offered by any company is in addition to the consumer guarantees on certain products provided under the ACL.¹ A warranty cannot limit or replace these rights. Further, after the warranty has expired, a consumer might still be able to claim a remedy under these laws. Consumers should be made aware of these rights prior to entering into this type of contract.

Every dog has its day

In addition to consumer product guarantees, the Australian watchdog has also been pushing a national campaign promoting consumer rights awareness since 2012 called ‘if it’s not right, use your rights. Repair, replace and refund’.²

Retailers are also required to state in plain English what benefits a warranty offers you over what your rights are under law.³ Indeed, businesses must think twice before selling an extended warranty.

This case is part of a collection of recent cases where the consumer watchdog has made harsh crack downs on questionable warranties, such as in 2013 when Harvey Norman was fined over $100,000⁴ and Hewlett-Packard Australia paid a penalty of $3 million.⁵

The wash up?

This is a timely reminder that businesses must take extreme care when making representations about extended warranties and must consider whether their terms and conditions are ACL compliant. And if your representations are faulty, take them back and demand a refund.

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¹https://www.accc.gov.au/consumers/consumer-rights-guarantees/consumer-guarantees
²http://www.accc.gov.au/consumers/consumer-rights-guarantees/repair-replace-refund
³https://www.accc.gov.au/consumers/consumer-rights-guarantees/warranties#warranties-in-plain-language
⁴http://www.accc.gov.au/media-release/harvey-norman-franchisees-pay-for-misleading-consumers
⁵http://www.accc.gov.au/media-release/hp-to-pay-3-million-for-misleading-consumers-and-retailers