Businesses must be able to stand behind their word

Nov 10, 2021

By Business Law Team

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The Australian Consumer Law contains provisions which prohibit misleading and deceptive conduct and false and misleading representations, and which require organisations to stand behind any promises or warranties they give to consumers.

The repercussions of conduct in breach of the foregoing have been recently highlighted, as the Federal Court ordered AA Machinery Pty Ltd (trading as Agrison) to pay a penalty of $220,000 after Agrison admitted that it made false or misleading representations to consumers about warranties and its after-sales services, in breach of the Australian Consumer Law.

Furthermore, the Federal Court ordered Agrison to pay redress to four consumers that bought tractors or wheel loaders, which will amount to approximately $64,000.

Agrison admitted it made false or misleading representations that its tractors came with a five-year nationwide warranty and that in circumstances where the tractor was defective, they would at no cost to the consumer, provide a replacement for all defective parts. Not all parts were however covered by the warranty for five years or at all and the full cost was not covered.

Agrison also admitted it misled consumers in representing that it had a national service network accessible throughout Australia, and that customers would be able to obtain all necessary spare parts for tractors within a reasonable time if and when required. However, Agrison did not have a national service network and had no reasonable grounds for making the claim about spare parts.

The ACCC took the action against Agrison as it was particularly concerned by the lack of communication made by Agrison to its consumers. Those who approached Agrison with their complaints were unable to make contact and struggled to obtain access to any of the repair services which were advertised.

“The ACCC took court action after it received complaints from consumers who had experienced multiple significant failures with their tractors, such as faulty hydraulics, brakes failing and parts such as wheels falling off,” ACCC Chair Rod Sims said.

“Consumers rely on the representations made to them when they are looking to buy agricultural machinery, and the warranties given by the supplier and reliability of aftersales service are critical factors for consumers making these expensive purchases.”

Justice Murphy said that “Agrison’s conduct was deliberate and it was not isolated, having occurred over several years.”

To address the ACCC’s concerns, Agrison also provided the ACCC with a section 87B court enforceable undertaking that it will, in summary:

  • cease and remove all advertising that does not comply with the undertaking;
  • set out the limitations that apply, either in time or scope, in respect to any advertised express warranty for tractors or wheel loaders;
  • publish limitations of a warranty in advertising in the same font as the reference to the warranty itself;
  • include a clear and prominent link to the terms of any warranty that is referenced on a website controlled by Agrison;
  • ensure that a full copy of the terms of an applicable warranty is given to a customer before Agrison accepts payment for a new tractor or wheel loader;
  • require all Agrison employees and representatives involved in advertising, sales or after-sales support to attend practical training on compliance with the ACL on an annual basis and maintain documents relating to the training;
  • create a complaint handling system; and
  • report in writing to the ACCC on complaints received within 7 months of the system being set up.

In addition, Agrison’s sole director, Mr Volkan (Nick) Yokus, has undertaken that, for a period of 5 years, he will not be involved in any other business that sells tractors, without the ACCC’s consent.

The case serves as a reminder to all businesses to not make representations about their products, services or warranties without the ability to back them up.  The legal and brand ramifications flowing from non-compliance are significant, as evidenced by the scope of the penalties applied and the terms of the court enforceable undertaking detailed above.

We strongly encourage businesses to have the terms of their warranties legally reviewed and to ensure that all advertising in connection with their products, services and warranties are approved before entering the public domain.

Important Disclaimer: The content of this article is general in nature and for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.

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