Retail businesses are urged to consider what their extended warranties offer in addition to the statutory rights available under the Australian Consumer Law (ACL). A class action is testing whether JB Hi-Fi has engaged in misleading or unconscionable conduct by selling extended warranties that allegedly provide benefits to consumers equal to or no better than rights available under the ACL’s consumer guarantees for free.

JB Hi-Fi is currently the subject of a class action before the Supreme Court of Victoria, where it has been alleged that JB Hi-Fi engaged in misleading or deceptive conduct, or unconscionable conduct, in relation to extended warranties they sold to customers between 2011 and 2023. Over eight million customers that purchased warranties are estimated to be impacted, with the trial focusing on about one million warranties sold alongside fridges, televisions, laptops and other household appliances.

The proceeding raises a broader question about how consumer guarantees under the ACL should be compared with paid protection products. A central issue will be whether ACL rights can properly be treated as equivalent to warranty coverage, or whether the certainty and potential ancillary benefits offered by extended warranties constitute meaningful additional value.

What has been alleged?

JB Hi-Fi sold extended warranty products (‘Extended Care’ or ‘Extra Care Plans’) that were marketed as providing meaningful additional protection when, according to the plaintiff, consumers already received substantially equivalent or superior rights for free under the ACL. Some key benefits in the extended warranty products that JB Hi-Fi is arguing went beyond the ACL include:

• certainty from a defined period of coverage, where the duration of protection under the ACL depends on the particular circumstances of the product and defect;
• more convenient claims processes due to having experienced staff handle claims;
• repair time guarantees, under which customers could become entitled to a replacement product if repairs were not completed within a specified timeframe;
• access to a loan product where an item covered under the extended warranty was expected to be unavailable for an extended period during repairs;
• access to technical support services, including troubleshooting assistance and product support;
• coverage for certain mechanical and electrical failures arising from normal wear and tear or deterioration;
• for fridges and freezers, access to reimbursement for food spoilage caused by failure from a covered product, up to specified monetary limits; and
• for washing machines and dryers, reimbursement of laundry expenses incurred while the appliance was unavailable due to a failure covered under the extended warranty.

The lead plaintiff’s case is not that these features did not exist, but that many of the benefits promoted to customers as being additional to the ACL either substantially overlapped with rights already available under the ACL or offered limited additional value compared with those existing statutory protections. The existing ACL benefits may have also lasted longer and applied more broadly than the extended warranty products. JB Hi-Fi argues that the plans provided meaningful additional value in the form of certainty of time period covered, convenience of process in relation to having dedicated staff support and access to loan products, and other supplementary features beyond those in the ACL.

The lead plaintiff alleges that, as part of the in-store sales process, consumers:

• frequently decided to purchase the product first and only then were offered the warranty;
• often received warranty brochures only shortly before or after purchase;
• were not given a meaningful opportunity to read the documents; and
• were not adequately informed of ACL rights.

The lead plaintiff also alleges that he was not told about ACL protections and bought the warranty due to statements about the ACL coverage being shorter than the extended warranty product he purchased.

The lead plaintiff also alleges the comparison tables failed to disclose important ACL benefits such as:

• rights to refunds;
• rights to choose remedies in some circumstances;
• consequential loss claims;
• rights extending to gift recipients; and
• coverage for a broader range of defects.

JB Hi-Fi has denied the allegations, and is pleading that consumer guarantees under the ACL do not operate as a fixed period of warranty coverage. JB Hi-Fi submits that the ACL remedies depend on whether a product failed to meet the statutory standard of acceptable quality at the time of supply, whereas the Extended Care products provided certainty as to the duration and operation of warranty cover.

JB Hi-Fi’s defence alleges that its brochures repeatedly informed consumers that:

• ACL rights continued independently;
• ACL rights may continue after warranties expire;
• ACL rights may last longer than warranties; and
• consumers could obtain ACCC information.

JB Hi-Fi has also submitted that its staff were required to and had regularly engaged in training programs in relation to the operation of the ACL and the sale of the JB Hi-Fi extended warranty products.

What the ACL already covers

The consumer guarantees under the ACL provide the following statutory guarantees in relation to goods supplied in trade or commerce:

• the supplier of goods has a right to dispose of the goods and pass the title of the goods to the consumer (ACL s 51);
• the consumer has the right to undisturbed possession of the goods (ACL s 52);
• goods are supplied free from any undisclosed or expressly consented to security, charge or encumbrance (ACL s 53);
• goods supplied to a consumer (other than auctioned goods) are of acceptable quality (ACL s 54);
• goods provided are reasonably fit for any disclosed purpose, and for any purpose for which the supplier represents the goods are reasonably fit (ACL s 55);
• goods correspond with the description by the supplier (ACL s 56);
• goods correspond with the sample or demonstration model in quality, state or condition (ACL s 57);
• spare parts and repair facilities will be made reasonably available by the manufacturer for a reasonable period after the goods are supplied (ACL s 58); and
• the manufacturer and supplier of the goods will comply with any express warranty given or made by the manufacturer and supplier respectively in relation to the goods (ACL s 59).

The key guarantee that the lead plaintiff/Group Members are alleging was already covered was the acceptable quality guarantee under section 54 of the ACL. The lead plaintiff alleges that many of the failures said to be covered by the extended warranty products would already have attracted statutory remedies because consumers are entitled to goods that are durable and free from defects for a reasonable period having regard to the nature and price of the goods. They are alleging that there were a number of remedies that were accessible to consumers for free and no strict time limit under the acceptable quality consumer guarantee in comparison to the extended warranties provided by JB Hi-Fi.

Misleading or deceptive conduct

To establish that JB Hi-Fi engaged in misleading or deceptive conduct, the Court will have to determine whether JB Hi-Fi making the statements or representations about the benefits of the extended warranty products was misleading or deceptive, or likely to mislead or deceive. The key question will be whether the statements made by JB Hi‑Fi, considered in their full context, were capable of leading ordinary consumers into error about the value, scope or duration of the protections offered by the extended warranty products.

The lead plaintiff/Group Members allege that they relied on various representations and misrepresentations in relation to the brochures and explanations they received when purchasing the extended warranty. These representations and misrepresentations related to supposed additional benefits that are alleged to have substantially overlapped with or offered limited additional value to those available for free under the ACL.

Unconscionable conduct

The ACL prohibits unconscionable conduct in connection with the supply and acquisition of goods or services.

Unconscionable conduct is conduct that is not done in good conscience, irreconcilable with what is right and reasonable, or conduct that is so far outside of societal norms of acceptable commercial behaviour as to be offensive to conscience. Given its seriousness, a court must be satisfied that conduct is offensive to conscience based on prevailing values in contemporary Australian society. Conduct does not have be dishonest, and there is no requirement in order to satisfy statutory unconscionable conduct that a person has a special vulnerability that may make them more susceptible to such conduct.

The lead plaintiff/Group Members are alleging that their bargaining position and the bargaining position of JB Hi-Fi was grossly unequal, the extended warranties purchased were of ‘little or negligible’ value, the pricing and sales tactics in relation to the extended warranties were unfair, and the extended warranty terms and unfair sales tactics were not reasonably necessary to protect the legitimate interests of JB Hi-Fi. As such, the lead plaintiff/Group Members are alleging that JB Hi-Fi engaged in conduct that unfairly took advantage and exploited them.

Key takeaways

The proceedings against JB Hi-Fi are ongoing. However, the case should put suppliers on notice about whether the extended warranties that they sell offer benefits to consumers that are in addition to the statutory rights available to consumers for free under the ACL and the representations that are made both in documents (eg brochures) and verbally by sales staff. Suppliers should also be aware that claims against them for breaches of the ACL may not be limited to those from regulators and that they may also be exposed to claims by private litigants.

Please contact us if you would like more information about the ACL, consumer law protections, or other competition and consumer law related issues.

This article was written by Simon Ellis, Partner, and Laura Fiebig, Solicitor.