ACCC puts new car industry on notice about alleged consumer law breaches

The Australian Competition and and Consumer Commission (ACCC) has today released a draft report of its market study into Australia’s new car retailing industry. The draft report makes three key findings and makes a number of draft recommendations to address those findings which include law reform and enforcement action. The draft findings and recommendations have significant implications for motor vehicle dealers and other businesses involved in the new car retailing industry.

The draft report comes in the context of what ACCC Chairman Rod Sims has said is a ‘deep concern about the level of non-compliance with the Australian Consumer Law’ in the new car retailing industry. By ‘new car retailing’, the ACCC is referring to conduct occurring:

• Before the sale of a vehicle (such as advertising and representations about a vehicle’s performance or emissions);
• At the time of sale (such as the sale of add-on finance and insurance products and representations about different types of warranties); and
• After sale (such as maintenance and repair costs and the availability of parts).

Key findings

There are three key findings in the draft report. According to the ACCC:

1. There are ‘material deficiencies’ in the way that consumers are able to enforce their rights under the existing law when purchasing new cars, and the way these rights are represented to them by manufacturers and dealers;
2. There is a concern about the effect of what is said to be limited access to information and data required to repair and service new cars (for example, in the case of independent repairers who are not authorised by or affiliated with car manufacturers and are reliance on voluntary sharing of information and data); and
3. Consumers are not being given accurate information about the fuel consumption or emissions performance of new cars.

In addition to these key findings, the report contains some key assertions in relation to consumer guarantees. Namely, that:

• There is a ‘significant body of evidence suggesting a systemic failure in consumers enforcing consumer guarantees after the purchase of a new car’;
• The ACCC views this systemic failure as caused chiefly by a compliance problem with manufacturers and a dominant ‘culture of repair’ underpinning the approach to dealing with car defects and failures (for example, including the widespread used of non-disclosure agreements by manufacturers when resolving complaints); and
• There is an Australian Consumer Law (ACL) compliance problem with respect to information given to consumers about their ACL rights at the point of sale.

Draft recommendations

The ACCC has made the following recommendations in order to address its draft key findings:

• The Australian Consumer Law should be amended so that:
  • consumers are entitled to a refund or replacement if there is any failure of the good to meet a consumer guarantee within a specified period of time (such as 30 or 60 days after purchase) regardless of whether the failure is major or minor;
  • multiple minor failures can accumulate to a major failure (even if the minor failures are unrelated) entitling the consumer to elect a refund or replacement; and
  • require additional disclosure obligations for extended warranties, including a 10-day cooling off period.
• The ACCC work with manufacturers and dealers to develop an approved explanation of Australian Consumer Law consumer guarantees and their difference to a factory warranty, to be provided to consumers at the point of sale;
• Target, through enforcement action, any misrepresentations or misleading or deceptive conduct in relation to the use of independent repairers or non-OE spare parts (in the draft report, the ACCC asserts that this is because:
  • the majority of consumers have a ‘mistaken belief that the manufacturer’s warranty requires them to only use an authorised dealer‘; and
  • this is a ‘misunderstanding’ caused by ‘direct and implied representations made by a number of manufacturers in their logbooks and service manuals to the effect that authorised dealers must carry out services or repairs (or that Original Equipment (OE) parts must be used)’ and that ‘many of these representations are likely to contravene the provisions of the ACL, and may also raise competition concerns under the Competition and Consumer Act.).
  • it is unclear what the ACCC’s legal basis for either of these assertions is.
• Publish an updated version of the Motor vehicle sales & repairs Industry Guide including specific guidance on what amounts to a ‘major failure’;
• Target, through enforcement action, any complaints handling systems, policies and practices of manufacturers or dealers that do not comply with the consumer guarantee requirements of the ACL;
• Introduce a mandatory scheme for the sharing of technical information – on commercially fair and reasonable terms – by car manufacturers with independent repairs. The mandatory scheme is envisaged to cover real time access to the same digital files, codes and software updates made available to authorised dealers;
• Scrutinise, through possible enforcement action, any refusal by manufacturers to supply security-related OEM parts for repair and service by independent repairers (which the ACCC says is a reason being potentially abused in order to restrict independent repairer access to spare parts);
• Change the fuel consumption label affixed to new cars (including by introducing a star-rating system or estimate of annual operating costs in ‘real-world driving conditions’;
• Change the current fuel consumption and emissions testing regime; and
• Allow consumers access to all digitally held data about themselves.

Guides to the draft report

Alongside the draft Report, the ACCC has released two guides – for consumers and independent repairers. The guides summarise the findings as they relate to consumers and independent repairers and their publication suggests that the ACCC recommendations are targeted towards the enhancement of the rights consumers and independent repairers, not other industry participants.

Stakeholder submissions

According to the draft report, the market study on which it has been based was supported by commissioned research and stakeholder submissions and consultation. The stakeholders who participated in the forum included the Australian Automotive Dealers Association (AADA), AP Eagers, the Federal Chamber of Automotive Industries (FCAI),manufacturers Ford, Holden, Hyundai, Mazda, Nissan, Toyota and Mercedes Benz, aftermarket repairers such as UltraTune, Consumer Affairs Victoria, the State Offices of the Small Business Commissioner, the Victorian Automobile Chamber of Commerce (VACC) and the Australian Automotive Aftermarket Association.

Responses to the report

The ACCC have called for responses to the draft report by 7 September 2017. Following the submission and consideration of responses, the ACCC plans to conduct a roundtable with stakeholders on 25 September 2017, with its final report to be released in ‘late 2017’.

The draft report can be accessed here.