Extended warranty claim comes out in the wash


Posted By on 25/10/15 at 1:35 PM

New Zealand-based appliance manufacturer Fisher & Paykel and warranty provider Domestic & General have been found guilty of misleading and deceptive conduct in relation to representations to consumers regarding extended warranties.

What they did

Domestic & General was contracted by Fisher & Paykel to offer extended warranties to customers who purchased Fisher & Paykel dishwashers. The extended warranty offer was contained in a letter sent to customers via Domestic & General. The text of the letter included the following wording:

When you purchased your Dishwasher it came with a warranty protecting you against the cost of repairs for a total of 2 years. Your Dishwasher is now a year old, which means you have 12 months remaining – after that your appliance won’t be protected against repair costs.

The reverse of the letter contained ‘fine print’ wording, which said (amongst other things) that consumers may have rights under the Australian Consumer Law (ACL).

Why this is wrong

Under the ACL, various rights are automatically provided to consumers on purchase of consumer goods, including that the product be of acceptable quality and fit for purpose. Manufacturers generally provide warranties (for a limited time) regarding repair or replacement, if something goes wrong with the product. However, the effect of the consumer guarantees under the ACL means that manufacturers may be liable for repair or replacement of a product, even if this occurs outside their warranty period.

Fisher & Paykel’s letter implied that consumers would be solely responsible for any repair costs associated with their appliance, once their manufacturer’s warranty had ended. The fine print wording on the reverse stated that consumers may have rights under the ACL, however the judge ruled that this wording was by no means prominent. The key message conveyed by the letter is that customers would be out of pocket post expiration of their manufacturer warranties, unless they purchased an extended warranty.

The verdict

The Federal Court found that Fisher & Paykel and Domestic & General breached s18 (misleading or deceptive conduct) & s29 (false or misleading representations about goods or services) of the ACL, and fined them $200,000 each. In addition, the Court ordered each company to update their compliance programs and contribute towards the ACCC’s costs in relation to the proceeding.

Know your rights

Extended warranties are only of value if they offer protection over and above the consumer guarantees contained within the ACL. Otherwise, they aren’t worth the paper they are written on.

If you’re concerned that your warranties may not stack up against the ACL, contact a member of our marketing law team. We can review your consumer facing terms, create a compliance program and provide training to your staff. We eat this stuff for breakfast.

Naomi Stephens Paralegal

Naomi is a paralegal in the Competition Law & Regulatory Compliance team, focusing on marketing activations, advertising review and trade promotions compliance.  She joined KHQ after having spent... Read More