ACCC v Mazda – misrepresentations of the ACL not unconscionable.
In recent years, the Australian Competition and Consumer Commission (ACCC) has brought proceedings against various manufacturers in the automotive industry indicating the ACCC is seeking to improve the compliance of the automotive industry with the Australian Consumer Law (ACL). These proceedings have resulted in, for example, the issuing of:
- court-enforceable undertakings from Fiat, Chrysler, Jeep Australia, Holden Australia, Hyundai Australia, Volkswagen Australia and Toyota Australia; and
- pecuniary penalties for breaching the ACL provisions to Ford and Volkswagen Australia.
Australian Consumer Law
The general protections in the ACL prohibit misleading or deceptive conduct and unconscionable conduct in trade or commerce. The ACL also sets standards in relation to, for example, how businesses inform consumers of rights under the ACL consumer guarantees.
A consumer has an entitlement to be offered a solution when goods and services do not meet these consumer guarantees. In particular, the business must refund or replace goods which have a major failure, and in cases of minor problems, the business must offer a free repair. For services requiring a major failure, the consumer also has a right to cancel the contract.
ACCC v Mazda Australia Pty Ltd
In October 2019, the ACCC brought civil proceedings against Mazda Australia Pty Ltd (Mazda) seeking declarations that Mazda had contravened the ACL by engaging in misleading and deceptive conduct, making false and misleading representations, and engaging in unconscionable conduct. The allegations were made in relation to nine consumers who had purchased vehicles from Mazda and experienced serious and recurring faults within two years of purchase of the vehicle.
Misleading and deceptive conduct
The ACCC alleged that Mazda engaged in conduct that was misleading or deceptive and made false or misleading statements, which statements included that:
- certain faults with the vehicles were not major failures under the ACL;
- a major failure within the meaning of the consumer guarantee provisions of the ACL is limited to a failure of a major component of the vehicle;
- the consumers were not entitled to a refund or replacement at no cost under the ACL;
- the consumers did not have any ability under the ACL to seek to obtain a refund or replacement vehicle, because Mazda was entitled to repair the vehicle regardless of the number of attempts made to repair the faults or the time it took to repair the faults; and
- Mazda was not required to provide a refund or replacement vehicle at no cost to the consumer because of the age and/or mileage of the vehicles.
The Federal Court determined that Mazda had made 49 false and misleading representations to the consumers in respect of their consumer guarantee rights under the ACL, and made declarations to that effect.
The Court’s findings included that:
- Mazda’s conduct of making statements which implied to the consumers they were only entitled to have the vehicles repaired, and any refund or replacement would be at the cost of the consumer, was misleading. The conduct included reassurances that Mazda would repair the problem, implying that replacement was not an option, and pushing back on consumer’s requests for replacement to instead attempt to repair the fault;
- Mazda representatives had failed to give any real consideration to the consumers’ complaints and rights to a refund or replacement under the ACL, instead making assertions that the faults raised were not major faults without properly considering the complaints. The Court determined that Mazda had made poor attempts to make enquiries as to whether the faults were “major failures”, and it therefore did not have a reasonable basis to make the (ultimately misleading) statements to the consumers that there was no major failure;
- statements made by Mazda that cars are “‘actually not’ like” other consumer products for the purposes of relevant provisions of the ACL was a false assertion; and
- offers of refunds in amounts significantly less than the purchase price of vehicles to account for the age and milage of the vehicle constituted representations that Mazda was not required to provide a refund, or replacement at no cost to the consumer.
The Court also considered the conscionability of Mazda’s conduct. The ACCC had alleged Mazda’s conduct was unconscionable on the basis of:
- the consumers being in a substantially weaker bargaining position;
- Mazda’s refusal to provide a full refund or complete replacement vehicle at no cost to the consumer, and that this was an attempt to dissuade the consumers from continuing with their requests for a replacement or full refund;
- Mazda’s failure to give proper consideration as to the safety of the vehicles; and
- Mazda providing the consumers with limited time to consider and accept offers.
The Court determined that the conduct did not amount to unconscionable conduct, despite the Court finding that Mazda’s conduct was “appalling customer service”, could “correctly be characterised as subterfuge”, and its acceptance that the consumers were in a lesser bargaining position than Mazda. The Court relied on the test of whether the conduct, in the circumstances, was sufficiently divergent from community standards of acceptable business practice to be unconscionable, and found that on balance, it was not. Factors that were considered in this finding included:
- there were no allegations that Mazda had acted in bad faith or dishonesty;
- the conduct of Mazda did not place “unfair or unreasonable commercial pressure” on the consumers to accept any offers made by Mazda, as the consumers could have asked for extra time to consider the offer if required;
- in some instances, there was insufficient evidence to show that consumer’s safety concerns had not been taken seriously; and
- the ACCC had not alleged a pattern or system of conduct, rather dealing with each consumer individually.
Confirmation of the decision by the Full Federal Court
Following the decision of the Federal Court, appeals were lodged by both the ACCC and Mazda. The ACCC asserted that the Federal Court should have found that Mazda engaged in unconscionable conduct in addition to the findings of false and misleading representations. For its part, Mazda asserted that it had not made any of the 49 representations alleged.
On 23 March 2023, the Full Federal Court dismissed both appeals. In relation to the unconscionable conduct issues, the Full Court found that although the primary judge had made findings about the factual circumstances of the unconscionable conduct cases, he had not provided sufficient reasons or correct judicial technique for his conclusion that there was not unconscionable conduct.
The Full Court nevertheless maintained the finding of no unconscionable conduct, carrying out its own assessment to form the view that the conduct of Mazda did not involve a sufficient departure from the norms of acceptable commercial behaviour as to be against conscience or to offend conscience, and noting the absence of dishonest, trickery or good faith.
These decisions are another timely reminder to review compliance standards and processes in relation to requirements and protections under the ACL, and, in particular the practices of customer service and sale representatives in dealerships. Breaches against the consumer protections and guarantees under the ACL can result in court enforceable undertakings and/or substantial pecuniary penalties.
This article provides general commentary only. It is not legal advice. Before acting on the basis of any material contained in this article, seek professional advice.
Co-author: Abby-Rose Hill
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