Electronics giant LG has been slapped with penalties of $160,000 after it was found to have misled two customers about their warranty rights. Yet this was substantially less than what had been sought by the ACCC.
On Friday (6 September), the ACCC announced that it had secured the penalties in the Full Federal Court against LG over the matter, having appealed against a previous court ruling that dismissed the ACCC’s claims.
Legal action was launched by the competition regulator in December 2015, with allegations that LG had misrepresented that consumer remedies were limited to its own manufacturer’s warranty.
It also had allegedly claimed that where a defect occurred after its manufacturer’s warranty had expired that consumers would have to pay for the costs of assessing the failure, that LG had no further obligations and that any further actions it took were simply goodwill, that consumers could only have the television repaired (and not have the choice of a refund or a replacement) and/or that the customer was liable for repair costs.
It followed complaints from consumers that had purchased faulty LG televisions.
However, the ACCC’s initial case was rejected by the court in September 2017. The ACCC appealed this verdict, with the appeal partially upheld in June 2018, it said, ultimately leading to the penalties being handed down this month.
That ruling agreed with the ACCC’s case in relation to two consumers, but again rejected other contentions put forward by the competition watchdog.
‘Understandable human error’: LG
Approached for its response to the court ruling, LG Australia said in a statement that the two convictions were the result of “understandable human error” in the “long-running case” about statements made to two consumers back in 2014.
“The court accepted that these ‘were cases of understandable human error that took place in a call centre that received thousands of calls every month and in the context of a complex legal regime’ and that LG did not show ‘a disregard for its obligations’ under the Australian Consumer Law,” the company said.
“Importantly, the court stated that there was no finding ‘that there was a widespread or systematic program of LG misleading consumers in the manner alleged by the ACCC’.”
LG concluded by stating that it “did not intend to misrepresent the rights that the two individual consumers had under the Australian Consumer Law and remains committed to honouring our obligations at law and providing quality service experiences for our customers”.
The court’s judgment
According to the court, the ACCC alleged that LG had “made 41 false or misleading representations”, not only to consumers but also to retailers and repairers, about product warranties and consumer rights to them.
In handing down its judgment, the court said it had “concluded that LG had engaged in two instances of false or misleading conduct”, but did not agree with assertions that LG had a “widespread or systemic” practice of misleading consumers about their legal rights.
“The contraventions occurred when LG’s agents represented that certain ACL consumer guarantees did not exist, were excluded, or had no effect in relation to LG televisions.”
However, it found that “the ACCC did not prove that the consumers would have had a cause of action against the person who supplied the television to them or that LG would have been bound to indemnify the supplier as provided for in ss 259, 271 and 274 of the ACL”. As also held by the Full Federal Court, “the ACCC also did not prove that either LG or the persons with whom it dealt knew or believed that the consumers would have any such cause of action or LG any such liability”.
As a result, a “pecuniary penalty” of $80,000 was ordered for each of the two cases. That fell well short of the total of $700,000 in penalties that had been sought by the ACCC.
ACL, not business warranties, set the benchmark for consumers
According to the ACCC, consumer are legally able to choose between a repair, a refund or a replacement of a product they purchased which is faulty under Australian Consumer Law, and that a business’s own warranty or statements don’t take precedence over this.
“Consumer guarantee rights are separate to warranties offered by manufacturers and will always be available to consumers who find they have been sold a faulty product,” said ACCC commissioner Sarah Court.
“The court’s decision is a reminder that making misleading statements about consumer guarantee rights, even to only one or two consumers, can result in penalties being imposed.”
More information on consumer guarantees under Australian Consumer Law can be found on the ACCC website.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.