Scope of purchases protected by the Australian Consumer Law enhanced

The amendment

The Treasury Laws Amendment (Acquisition as Consumer—Financial Thresholds) Regulations 2020 (Regulations) give effect to a proposal of the Australian Consumer Law Review (ACL Review) presented by Consumer Affairs Australia and New Zealand, which recommended increasing the monetary threshold in the definition of ‘consumer’ for the purposes of the Australian Consumer Law (ACL) from $40,000 to $100,000.

In 1986 the threshold was raised from $15,000 to $40,000, to broadly account for inflation since 1977. The ACL Review found that the scope of purchases protected by the ACL has again eroded over time and the $100,000 amount reflects the effects of inflation since the $40,000 threshold was set.

The new monetary threshold is set to apply from 1 July 2021.

Implications for consumers

From 1 July 2021, businesses that purchase goods or services in the range of $40,000 to $100,000 may benefit from newfound protection under the consumer guarantees. Given the consumer guarantees are non-excludable, the process of negotiating guarantee and warranty provisions within a given contract may be simplified. If a dispute arises about the supply of substandard goods or services, eligible businesses may also have rights to a repair, replacement, refund, cancellation or compensation for damages or loss (as applicable).

Implications for suppliers

Businesses that supply goods or services valued between $40,000 and $100,000 will from 1 July 2021 be subject to the consumer guarantee regime and potentially liable to pay financial penalties for any breach thereof, even if those goods or services are not of a kind ordinarily acquired for personal, domestic or household use or consumption.

On 23 August 2018, legislation was passed to give effect to another proposal in the ACL Review – namely, to increase the maximum financial penalties available under the ACL. Penalties for a breach of the ACL were raised from $1.1 million for companies to the greater of: $10 million; three times the value of the benefit received; or where the benefit cannot be calculated, 10 per cent of annual turnover in the preceding 12 months. Penalties against individuals under the ACL also increased from $220,000 to $500,000 per breach.

Any attempt to contract out of or limit liability arising from the consumer guarantees under the ACL will be void. Further, any attempt to limit or exclude consumers’ rights under these guarantees may constitute misleading or deceptive conduct and false or misleading claims under the ACL.

Businesses should carefully consider whether or not the legislative amendment requires them to:

• review their offerings and business practices to ensure that they meet the guarantees;
• provide training to their staff on their new obligations and develop internal policies to govern same;
• amend their terms and conditions to ensure that they are consistent with the consumer protection requirements and are not at risk of being deemed void or breaching key provisions under the ACL;
• review their insurance policies to ensure that coverage extends to any claims by consumers; and
• review their warranty documents to ensure that they comply with the ACL requirements.

Queries

If you have any questions about this article please get in touch with the authors or a member of our Corporate & Commercial team.

Disclaimer

This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.