Car Manufacturers On Notice – Do Not Mislead Consumers About Their ACL Rights
On the 12-month anniversary of the Federal Court ruling against Mazda Australia, the Australian Automotive Aftermarket Association (AAAA) is calling on all car manufacturers to ensure they do not mislead consumers regarding their warranty and consumer guarantee rights under Australian law.
In February 2024, the Federal Court fined Mazda Australia $11.5 million for misleading and deceptive conduct, making false representations about consumer guarantees, and failing to meet obligations under the Australian Consumer Law (ACL). The ruling sent a clear message that misleading consumers about their statutory rights will not be tolerated.
Stuart Charity, CEO of AAAA, said, “This decision was a wake-up call to all car manufacturers. The ACL is clear: consumer guarantees cannot be limited, excluded, or overridden by manufacturer warranties. Yet, too often, we see manufacturers and dealers telling customers they have no right to a refund or replacement under a warranty, despite the clear protections provided under the ACL.”
In 2021, the Federal Court found that Mazda misled customers who experienced significant and recurring vehicle faults within two years of purchase. Instead of honouring their obligations under the ACL, Mazda falsely insisted that repair was the only remedy available, despite multiple failed attempts to fix the faults. The Court determined that Mazda failed to properly consider consumer guarantee provisions, did not seek appropriate technical advice, and prioritised its commercial interests over consumer rights.
“This ruling reinforced that manufacturers must act in good faith and ensure they provide accurate information about consumer rights,” Mr Charity said. “Consumers rely on their vehicles for work, family, and daily life, and they deserve to be treated fairly when things go wrong. Manufacturers cannot mislead consumers by implying that their only option is repair, nor can they refuse to honour these rights based on arbitrary warranty terms.”
Many consumers believe extended warranties provide additional protection. However, in many cases, extended warranties cover repairs and replacements that are already protected under the ACL, meaning consumers may be paying for rights they already have. Under the ACL, goods must be of acceptable quality, fit for purpose, as described or demonstrated, and free from defects. If a failure is minor and can be remedied, the consumer is entitled to a repair within a reasonable time. However, if the failure cannot be remedied or is a major failure (i.e. the vehicle is unsafe, substantially unfit for purpose, departs significantly from its description or demonstration model, or would not have been purchased had the consumer known about the issue) the consumer has the right to a refund or replacement under the ACL, regardless of any manufacturer or extended warranty.
Additionally, some extended warranties contain terms that imply consumers must service their vehicles at the dealership or use ‘genuine’ parts. This can be misleading if consumers are not informed that such requirements do not affect their rights to a remedy under the ACL for failures covered by consumer guarantees. Car manufacturers cannot void consumer rights based on servicing choices alone. Extended warranties also often come with strict conditions, exclusions, and limitations, leaving consumers without the coverage they expected.
The AAAA urges the ACCC to continue its scrutiny of misleading warranty practices in the automotive sector and will continue to advocate for stronger consumer protections.
Key Takeaways for Car Manufacturers:
- Consumer guarantees cannot be limited or excluded. Any suggestion that manufacturer warranties override ACL rights is misleading and unlawful.
- Consumer guarantees apply in addition to any manufacturer’s warranty or extended warranty. These guarantees are automatic and cannot be restricted.
- Car manufacturers must ensure their staff and dealerships understand ACL obligations. This includes proper handling of major failures and not discouraging consumers from exercising their rights.
- There is no requirement for consumers to use so-called ‘genuine parts’ to maintain their ACL rights. Car manufacturers and dealerships must not mislead consumers into thinking that only their branded parts or servicing options will protect their consumer rights.
- Certain extended warranties may not provide additional benefit beyond existing ACL protections. Consumers should be aware that these warranties frequently duplicate rights they already have under the law.