Beware of consumer rights: $75,000 penalty imposed on Jayco for misleading a consumer about consumer guarantees

Jayco is the largest manufacturer of recreational vehicles (RVs), such as caravans and campervans, in Australia. In December 2014, a customer purchased a new RV manufactured by Jayco from a dealer, Jayco Newcastle. The consumer found several “serious issues” with the RV, including that the pop top roof failed to raise, and water was not coming out of either of the water tanks on the RV. She made her concerns known to Jayco’s representatives on several occasions, including by emailing Jayco’s warranty team requesting “a full refund or a new replacement van”.

On 4 May 2015, the consumer received an email from a Jayco customer service employee:

“[…] I cannot help you with another van or money back. You have to go back to the place you have your contract of sale with. That being Jayco Newcastle. I cannot guarantee this will be the outcome for you as the terms and conditions of warranty are to repair van.”

The Australian Competition and Consumer Commission (ACCC) brought proceedings against Jayco, alleging that Jayco had engaged in misleading or deceptive conduct under the ACL. The ACCC alleged that Jayco contravened s 18(1) of the ACL and made a false or misleading representation in contravention of s 29(1)(m) of the ACL concerning the existence of a right or remedy. Under the ACL, consumers may reject goods and seek a refund or replacement goods if there is a “major failure” to comply with a statutory consumer guarantee. The ACL contains consumer guarantees that, among other things, goods sold must be of acceptable quality and fit for any purpose that the consumer makes known to the supplier.

The Court held that the RV in question had serious defects and was not of acceptable quality. The Court stated that “the vice with [the employee’s email] is that it represented that the only remedy to which [the consumer] could be entitled was repair, because that was the claimed effect of [Jayco’s] warranty. That was not the case, because the warranty did not limit the rights of a consumer under the ACL to reject the goods and to seek a refund or replacement goods in the event that there was a “major failure” to comply with a statutory consumer guarantee”. The Court held that by making this communication to the consumer, Jayco engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18(1) of the ACL, and that in addition, Jayco made a false or misleading representation in contravention of s 29(1)(m) of the ACL concerning the existence of a right or remedy.

In determining the penalty for the contravention, the Court took into account that although a false or misleading representation made to a consumer about their rights under the consumer guarantees is serious, the conduct was limited to a single instance – it was not a case of systemic or repeated contravening conduct. Further, Jayco’s conduct was not undertaken with an intention to mislead or deceive, but was inadvertent. There was also no claim that the consumer suffered specific monetary loss or damage as a result of the contravening conduct, or that Jayco profited, or sought to profit from the contravention. The Court also took into account that the Jayco employee who sent the impugned email was not in senior management: he was a customer service manager of 10 years’ experience with Jayco with limited authority who reported to more senior employees and escalated matters as necessary. Lastly, the Court took into account that Jayco had not previously been found to have contravened the ACL or its predecessor or to have engaged in similar conduct.

This decision highlights the need for training of consumer facing employees in relation to consumer guarantees. In this case, a single instance of a breach of the ACL, in the form of an email sent by an employee who is not in a senior position, without any intention to mislead or deceive, led to a significant penalty, court costs and the associated business time spent on Court proceedings. As stated by the Court, “This is a case where general deterrence is of greater significance than specific deterrence” and that “such deterrence will encourage [Jayco] and others in its position to employ systems which are directed to ensuring that warranty staff at all levels are aware of consumers’ entitlements under the ACL, and do not communicate incorrect information on that topic to consumers.” Companies should heed the warning of this case as penalties can be far higher.