Big Warehouse fined under the Australian Consumer Law for misleading retail practices

Misleading refund policies and contraventions of the Australian Consumer Law¹ relating to the supply of goods are again in the spotlight as online spare parts retailer Big Warehouse Pty Ltd (Big Warehouse) gives undertakings to the Australian Competition and Consumer Commission (ACCC).

This article discusses the retail practices which caught the attention of the ACCC.

Having a refund policy which is false or misleading about consumer’s rights

Big Warehouse is a supplier of spare parts for domestic and commercial appliances. Big Warehouse’s “very strict no returns policy” offered consumers a remedy subject to one or more of the following:

• Charging a restocking or cancellation fee;
• Providing a refund in the form of store credit;
• Providing a refund of only the purchase price excluding shipping costs; and/or
• Providing a replacement part at a discounted price.

Under the Australian Consumer Law, consumers are entitled to non-excludable remedies, including but not limited to a full refund if there is a major failure of the consumer guarantees applicable to goods.² Examples of major failures include where goods:

• Have a problem that would have stopped a consumer from buying them if they’d known about it;³
• Are significantly different from the sample or description;⁴
• Are substantially unfit for their common purpose and can’t easily be fixed within a reasonable time;⁵
• Are unfit for the consumer’s disclosed purpose and can’t easily be fixed within a reasonable time;⁶ or
• Are unsafe.⁷

Consumers are generally responsible for returning the goods if they can be posted or easily returned and are entitled to recover reasonable postage or transportation costs from the supplier if the goods are confirmed to have a problem.⁸

When goods are too large, heavy or difficult to remove without incurring significant cost to the consumer, the supplier is responsible for paying the shipping costs or collecting the goods within a reasonable time of being notified of the problem.⁹

It is a breach of section 18 of the Australian Consumer Law to, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. It is also a breach of section 29(1)(m) of the Australian Consumer Law to make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (including a consumer guarantee available under the Australian Consumer Law).

Big Warehouse conceded that its refund policies likely breached sections 18 and/or 29(1)(m) of the Australian Consumer Law.

Accepting payment for goods and not supplying them within a reasonable time

Big Warehouse represented to consumers that certain spare parts were available when in fact, Big Warehouse had to order them from the manufacturer which entailed a significant lead time for their delivery. The ACCC alleged that Big Warehouse wrongly accepted payment for spare parts when it could not supply those parts within a reasonable time.

It is a breach of section 36(4) of the Australian Consumer Law, in trade or commerce, to accept payment or other consideration for goods or services and not supply the goods or services within a reasonable time. Big Warehouse admitted that the conduct described above likely contravened sections 36(4) and/or 18 of the Australian Consumer Law.

Representing that goods are of a particular style or model when they are not

Big Warehouse also made representations on its website that a spare part suited a particular appliance model (including providing photos to this effect), when in fact some consumers received a spare part that was not compatible or significantly differed from what was advertised.

It is a breach of section 29(1)(a) of the Australian Consumer Law, in trade or commerce, to make a false representation that goods are of a particular style or model. Big Warehouse admitted that the conduct described above likely contravened section 29(1)(a) and/or 18 of the Australian Consumer Law.

Consequences of breaching the Australian Consumer Law

Big Warehouse has agreed to pay an infringement notice under section 134A of the Competition and Consumer Act in the amount of $12,600 and has provided the ACCC with a section 87B undertaking that it will:

• Cease the conduct of concern for a period of three years from the commencement of the undertaking;
• Make changes to its websites to clearly disclose that spare parts listed as ‘available’ need to be ordered from the manufacturer;
• Provide compensation to eligible consumers, which will comprise a full refund of the price originally invoiced including costs of shipping, or where consumers were charged for a replacement, the amount of any additional fee imposed by Big Warehouse; and
• Report on their compliance with the undertaking to the ACCC and reasonably provide information to the ACCC if a request is made.

Suppliers need to be mindful of the information included in their communications with consumers, including on their website and particularly in relation to their refund policy. Any statements that are false or misleading about a consumer’s rights under the Australian Consumer Law are unlawful and could result in financial penalties, adverse publicity and business disruptions.

This article was written by Teresa Torcasio, Partner, Marian Ngo, Senior Associate and Basimah Memon, Solicitor.

¹Competition and Consumer Act 2010, Schedule 1.
²Australian Consumer Law, section 259.
³Australian Consumer Law, section 260(a).
⁴Australian Consumer Law, section 260(b).
⁵Australian Consumer Law, section 260(c).
⁶Australian Consumer Law, section 260(d).
⁷Australian Consumer Law, section 260(e).
⁸Australian Consumer Law, sections 259(4) and 272(2).
⁹Australian Consumer Law, section 263(2)(b) and 263(3).