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Harvey Norman Franchisee to pay $52,000 in penalties for contraventions of the Australian Consumer Law

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Between 2012 and 2013, the Australian Competition and Consumer Commission (“ACCC”) issued proceedings in the Federal Court against 10 Harvey Norman franchisees alleging that they each had misrepresented consumer rights. As at the end of 2015, 9 of the 10 franchisees had been ordered to pay a cumulative $234,000 in penalties.

On 12 January 2016, the Federal Court delivered judgment against the remaining franchisee, Bunavit Pty Ltd (“Bunavit”), ordering it to pay penalties totalling $52,000.

Bunavit’s contravening conduct related to its employees’ interactions with two customers between 2011 and 2012. Both customers had spoken to unidentified sales representatives seeking repair, refund or replacement with respect to computers purchased from Bunavit. Statements made by Bunavit’s employees included “since it is still covered by the manufacturer’s warranty you will have to go through Sony. We can’t help you” and “I cannot assist you further unless you want to pay for the repair“.

The ACCC alleged that in the course of these discussions, Bunavit contravened sections 18 and 29(1)(m) of the Australian Consumer Law (“ACL”). Section 18 provides that “a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive“. Section 29(1)(m) provides that “a person must not, in trade or commerce‚Ķmake a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy‚Ķ“.

The Federal Court found that Bunavit made 10 representations in contravention of section 29(1)(m) of the ACL and in doing so, contravened section 18 of the ACL. In determining the penalty, consideration was given to:

  • the deliberateness of the contravention and the period over which it extended;
  • whether senior management were involved;
  • whether Bunavit had a corporate culture conducive to compliance;
  • whether Bunavit had cooperated with the ACCC;
  • whether Bunavit had engaged in similar conduct in the past; and
  • Bunavit’s financial position.

These proceedings highlight the importance of ensuring that there is an effective compliance framework and a culture conducive to compliance throughout all levels of a franchise system, from the franchisor to the franchisee and the franchisee’s employees.

Should you require any advice in relation to consumer law obligations, please contact our Franchise Law team by email franchise@mst.com.au or by telephone +61 3 8540 0200.