Companies could face big problems over extended warranties if the ACCC has its way

LG is in some hot water with the ACCC. REUTERS/Robert Galbraith

The consumer watchdog, the ACCC is launching legal action that could spell the end of tech companies and retailers exploiting a lack of understanding about Australian Consumer Law.

The case, against home electronics maker LG, could serve as a first step to making warranty rights clearer and potentially cramp the lucrative cash profits generated by extended warranties offered by manufacturers and stores.

Currently major brands and stores try to sell consumers extended warranties that consumer groups such as Choice consider unnecessary, without informing buyers what Australian Consumer Law (ACL) covers.

Under ACL, consumers automatically receive a guarantee when they buy products that they will be of acceptable quality. That means the product should be defect free and last as long as a reasonable user would consider acceptable.

The guarantee is not limited to the period of the manufacturer’s warranty, and more often than not applies for longer than the manufacturer’s warranty. If the product is faulty, the company needs to fix it at no cost to the consumer.

ACCC chairman Rod Sims said his organisation “will not hesitate to take appropriate action against manufacturers who misrepresent consumers’ rights and remedies for defective products under the Australian Consumer Law.”

The ACCC has launched proceedings against the Korean electronics manufacturer, claiming that the company misled customers around their rights in relation to faulty LG TVs.

The ACC alleges LG was telling customers who approached them about a faulty product after the manufacturer’s warranty had ended that they needed to pay the costs to fix the failure, and that any further steps were simply an act of goodwill.

Several other electronics brands, including Fisher and Paykel, and LG in 2006, have been targeted by the ACCC previously over the issue.

LG issued a statement saying it had no comment to add, but is “committed to its customers and compliance with its obligations under the Australian Consumer Law”.

The case is listed for a case management conference in the Federal Court in Melbourne on February 5.

NOW WATCH: Tech Insider videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.