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The meaning of “consumer” is changing

22 July 2020

#Competition & Consumer Law

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The meaning of “consumer” is changing

A pivotal concept underlying the Australian Consumer Law (ACL) is that of “consumer”, which determines whether customers are entitled to certain protections and guarantees in respect of the goods and services they purchase.

The current value threshold for businesses in determining if a customer is a “consumer” under the ACL is $40,000 (and has been since 1986). Following recommendations by the Australian Consumer Law Review in 2018, that amount is set to increase by 150 per cent – to $100,000.

What is a consumer?

Under the ACL, a person is generally taken to have acquired goods or services as a “consumer” if:

  • the amount payable for those goods or services is $40,000 or less; or
  • the goods or services were of a kind ordinarily acquired for personal, domestic or household use or consumption. 

Where a customer is deemed a consumer, they will have the benefit of certain non-excludable rights and guarantees, including that goods are of an acceptable quality, fit for purpose and match the description given of them, and that services will be provided with acceptable care and skill, be fit for purpose and delivered within a reasonable time.

A failure to satisfy these requirements will entitle a consumer to various remedies, including repair, replacement, refund, cancellation and compensation.

What is the change and when does it take effect?

On 9 July 2020, the Treasury Laws Amendment (Acquisition as Consumer—Financial Thresholds) Regulations 2020 (Regulations) were approved, pursuant to which the current consumer price ceiling of $40,000 will be increased to $100,000. The change will take effect from 1 July 2021 and apply in relation to goods or services acquired on or after that date.

The changes will also apply to the Australian Securities and Investments Commission Regulations 2001 which contain mirror consumer protection provisions for financial products and services.

Why the increase?

The Regulations give effect to proposal 15 by the Austalian Consumer Law Review, which determined that the protection afforded to consumers had been gradually diminshed due to inflation, and the broad category of goods and services which were originally intended to be protected were no longer captured within the $40,000 ceiling. The increase is designed to ensure that the ACL itself remains fit for purpose and continues to offer adequate protections to redress the inequality of expertise and bargaining power between suppliers and customers. In particular, the Review considered the impact on small businesses, many of whom suffer the same weakness in bargaining power but to date have been denied the protections conferred on consumers due to the lower value cap.

What does this mean for business?

In preparation for the increase, businesses whose goods and services have traditionally fallen outside the scope of the ACL may need to review their position and consider whether this increase is likely to bring their operations within the parameters of what the ACL considers “consumer” goods and services. If this applies to you or your business, you should consider undertaking a review of your standard processes and existing contractual terms, to determine what needs to be updated to ensure compliance. For example:

  • terms & conditions – do they need to be updated? The ACL will void any contractual terms which run contrary to consumer guarantees, and requires mandatory wording be included where additional defect warranties are offered
  • new record keeping processes – can you accurately track your consumer sales? New processes may be needed to identify and record “consumer” sales for the purpose of ensuring compliance with ACL guarantees
  • staff training – do your sales and customer service staff understand consumer guarantees? It is important that your staff understand the ACL protections to ensure they don’t accidentally mislead or misinform consumers in a manner that contradicts the ACL
  • adjust your budget – will your financial performance be impacted by the changes? The increased threshold means more people and a wider range of goods and services will attract consumer guarantees, meaning more claims for refund, replacement or compensation.

The long lead time for the changes should give businesses reasonable opportunity to commence this process and get their processes up to speed.

Author: Georgia Milne

The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.

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