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K&L Gates special counsel Travis Payne and lawyer Monica Lillas advise fashion retailers on their obligations around refunds and exchanges.
Refunds and replacement products can be a huge headache for the retail industry, but if you get it wrong, you will pay the price as a fashion business learned recently.
On 9 June 2016, the Australian Competition and Consumer Commission (ACCC) issued a media release advising that Sportscraft had paid penalties of $21,600 for two infringement notices issued by the ACCC for allegedly misleading consumer guarantee representations.
From at least 29 January 2016, Sportscraft had stated on receipts that consumers would not be able to return or exchange faulty goods purchased from a clearance store.
Further, from at least 29 March 2016 Sportscraft stated on its website that it would not refund, exchange or issue credit notes more than 21 days after purchase.
Commissioner Sarah Court said, "This is a timely reminder for all retail stores, particularly for clothing retailers, to review their refund or returns policies to ensure that they do not contravene the ACL…Consumer guarantees remain a priority area for the ACCC. It is concerning that we've seen a number of similar complaints in the fashion industry of late…The ACCC is continuing investigations against at least one other clothing retailer, and expects further action in this area."
Putting in place an appropriate policy to cover returns, repairs, replacements and refunds will not only mean fewer problems for your business and staff, but will also ensure a better customer experience and that your business is complying with its obligations under the Australian Consumer Law (ACL).
There are key tips to keep in mind when creating or reviewing your policy.
If there is a major problem with a product – for example, it's unsafe, or doesn't do what it's supposed to do, or what the salesperson said it would do – then the customer is entitled to return it, and receive either a replacement or refund.
If there is only a minor problem with either a product or service, the business can elect to either offer the customer a free repair or provide a refund.
If a customer simply wants to return a product for a change of mind, then your business is not legally obliged to offer an exchange or refund, however many businesses choose to include change of mind returns in their policies as a gesture of goodwill towards customers.
The rights of a customer to receive a refund, replacement or free repair form part of the consumer guarantee rights that are protected by the ACL and cannot be excluded by a business' terms and conditions of sale.
These rights apply regardless of how you conduct your business, whether you are an online business or a bricks and mortar store. It is also important to understand that retailers cannot simply refer customers to the manufacturer or importer, even if there is a valid manufacturer's warranty in place.
Businesses that fail to comply with the ACL put themselves at risk of facing court action and significant penalties.
In January this year, the Federal Court ordered a Harvey Norman franchisee, Bunavit Pty Ltd (Bunavit), to pay $52,000 in penalties for making false or misleading representations regarding consumer guarantee rights, in proceedings brought by the ACCC.
The Court found that sales representatives made ten false or misleading representations to customers that the store had no obligation to provide a remedy for a faulty product, that the consumer would need to pursue the manufacturer’s warranty directly with the manufacturer and that Bunavit could not assist further unless the consumer paid for some or all of the cost of the repair.
The ACCC has now obtained penalty orders totaling AUD286,000 against ten Harvey Norman franchisees in respect of false or misleading representations regarding consumer guarantees.
So what can your business do to ensure it is ACL compliant?
Develop a clear policy that is consistent with the consumer guarantees referred to above and covers refunds, repairs, exchanges and replacements, that can be easily followed by store staff.
Ensure all staff are appropriately trained in the policy and have a good knowledge of customers' rights.
If you are in doubt, arrange for a lawyer to review your business' policies and procedures, and offer training to staff.