SOME of Australia’s leading car makers have signed up to a de-facto version of US lemon laws after continued pressure from the ACCC over the industry’s handling of warranty claims.
Volkswagen, the world’s largest car maker, is the latest brand to enter into a voluntary court-enforceable undertaking with the ACCC to better comply with warranty claims under Australian consumer law.
Hyundai and Holden have both signed similar voluntary deals, while Ford also signed an undertaking after being fined $10 million by the ACCC for unconscionable conduct in relation to a recall of faulty automatic transmissions.
The Volkswagen move puts further pressure on Mazda and Toyota, Australia’s top two brands, to enter similar arrangements.
Volkswagen will replace faulty cars within 60 days of purchase under its new agreement with the consumer watchdog.
The ACCC says Volkswagen’s decision to replace faulty cars within the first two months of purchase goes beyond what is legally required.
“We are pleased Volkswagen will offer its new car customers remedies in some cases beyond what the law requires,” said ACCC Commissioner Sarah Court.
Volkswagen’s ‘60-day policy’ will offer refunds or replacements “without the need for a consumer to demonstrate a major failure, if a defect prevents a vehicle from being driveable within the first 60 days after purchase”, says the ACCC.
A statement from Volkswagen said in part: “This undertaking reinforces our existing obligations to customers. Volkswagen Group Australia is the only car brand that publishes information on its website about the performance of each dealer based on the direct feedback of 80,000 customers annually.”
Volkswagen is the fifth car company to come under the ACCC’s scrutiny in three years, following investigations into consumer complaints about Chrysler-Jeep in August 2015, the catalyst for a broader review of the automotive industry in Australia.
As part of the ACCC’s investigations, Holden (in August 2017) and Hyundai (in February 2018) also signed court-enforceable agreements to improve their warranty and consumer protection policies, including a review of previous warranty claims.
In April, Ford Australia was fined a record-equally $10 million for “unconscionable conduct” after failing to fix known faults in cars over an extended period of time.
The ACCC is poised to put other automotive brands under the microscope, but the department would not disclose who is next.
“This undertaking is part of the ACCC’s ongoing work to seek responses from manufacturers … to the ACCC’s concerns about industry-wide noncompliance with consumer guarantees,” a statement from the ACCC says.
“We will continue to pursue manufacturers to ensure they are honouring the rights of consumers under the law,” said Ms Court.
Support for the ACCC inquiry into the automotive industry has come from an unlikely source: the peak body representing car dealers.
David Blackhall, the CEO of the Australia Automotive Dealer Association, says he welcomes the extra scrutiny into warranty claims because “it will help dealers deliver better service and better warranty resolutions to their customers”.
“Across the industry in many cases the administration procedures on warranty claims are convoluted and outdated and the dealer often gets caught in a squeeze between the customer and the car company,” said Mr Blackhall.
“The dealer is at risk of not getting paid for warranty work performed or could even lose their franchise. That’s the power car companies have over dealers and that’s why sometimes there is a stand-off when it comes to fixing some cars under warranty.”
Mr Blackhall added: “Australian Consumer Law is not vague. Any consumer that has purchased any product with a major defect is entitled to a remedy or a refund.”
Federal assistant shadow treasurer Andrew Leigh told an automotive industry conference this week: “When the competition watchdog brought down a report on new car retailing, it outlined significant areas of concern. The power imbalance between multinational manufacturers and Aussie car dealers, many of whom are small businesses and family owned firms, has gotten out of control.”
Mr Leigh said there had been instances of car manufacturers who “haven’t dealt appropriately with issues of recalls and haven’t ensured that the Australian Consumer Law is adequately complied with”.
Meanwhile, the ACCC also announced this week it has published a one-page consumer guide to be supplied with each new car sold, to educate buyers of their rights.
However, it is not compulsory for dealers to supply the leaflet when delivering a new car.