One look at the ACCC’s compliance and enforcement priorities for 2025-26 makes it clear that compliance with consumer guarantees under the Australian Consumer Law (ACL) should be a priority for manufacturers and suppliers.
Most goods bought in Australia after 1 January 2011, come with consumer guarantees automatically provided by law (that cannot be excluded, restricted or modified) that the goods will, amongst other things:
- be of acceptable quality
- be fit for a particular purpose
- match their description
- match the sample or demonstration model.
These consumer guarantees apply regardless of any other warranties a business may give, such as for example, an express manufacturer’s warranty.
Under the ACL, depending on whether a minor or major problem arises in relation to a product, a consumer may have the right to a repair, replacement or refund of the purchase price paid, or to get reimbursed for damages and loss (including reasonably foreseeable consequential loss). Businesses must ensure that they handle consumer claims within this legal framework, as a failure to do so, may expose the business to significant penalties. For corporations, depending on the nature and scale of any offending conduct which gives rise to non-compliance, such penalties may be the greater of:
- $50,000,000
- if the Court can determine the value of the ‘reasonably attributable’ benefit obtained, 3 times that value, or
- if the Court cannot determine the value of the ‘reasonably attributable’ benefit, 30% of the corporation’s adjusted turnover during the breach turnover period for the contravention.
Further to the foregoing, the High Court’s judgment in November 2024 in the high-profile class actions against Toyota and Ford, provided clarity on how to assess loss and damage in connection with breaches of the “acceptable quality” guarantee under the ACL. One of the key findings of the High Court was that ‘reduction in value’ (RIV) damages assessed under section 272(1)(a) of the ACL are to be assessed at the time the goods were supplied and not at the time of hearing. In essence, the question is, had a consumer been aware of the defects and the consequences of those defects that would subsequently arise, with the knowledge that they had at the time of trial, what price would the consumer have paid at the time of supply?
Importantly, as RIV damages are assessed on the basis of the difference between the price actually paid by the consumer, and what a hypothetical reasonable consumer with knowledge of the defect (including any available ‘fix’) would have paid at the time of supply, a ‘fix’ that is made available in close proximity to the time of supply may minimise RIV damages or even potentially cause them to become nil.
The High Court also found that while RIV damages run with the title holder of the defective goods, ‘consequential losses’ do not, meaning that consequential losses can be claimed by anyone who suffered loss as a result of defective goods.
Further, proving actual loss or damage is not required to claim RIV damages, meaning that an award of RIV damages is not contingent upon whether the consequences of the defects actually materialised.
Whilst a deep analysis of the High Court’s findings is not possible in the context of this article, what is clear is that if a manufacturer discovers a defect in their products, the manufacturer should find and propose a “fix” as soon as possible, in mitigating the manufacturer’s exposure both to RIV damages and to potential claims for consequential loss.
It is advisable in light of the above that manufacturers take steps to ensure that their internal systems for addressing consumer complaints in compliance with the ACL are robust, and that prompt action is taken to address any product defects, even where those defects are latent and may not have manifested.
Important Disclaimer: The information contained in this publication is of a general and introductory nature only and is current as of the date of publication. It does not constitute legal advice and should not be relied upon as such. You should always obtain legal advice based on your specific circumstances before taking any action relating to matters covered by this publication.
