Refused the right to refund and replacement: Australian Competition and Consumer Commission v Mazda Australia Pty Ltd [2021] FCA 1493

By Alicia Hill, Principal and Helena Swidron, Law Clerk

The case of Australian Competition and Consumer Commission v Mazda Australia Pty Ltd [2021] FCA 1493 (ACCC v Mazda Australia) concerned allegations made by the ACCC that Mazda had engaged in unconscionable conduct as well as misleading and deceptive conduct.

This case addressed how Mazda’s representations regarding consumer’s rights to a refund or replacement car constituted false and misleading conduct, emphasising the importance of adhering to consumer guarantees under Australian Consumer Law.

The Court also observed how a corporation’s conduct may seem to be ‘appalling’ and ‘preposterous’, but may not always constitute unconscionable conduct.

Background:

Mazda Australia (Mazda) is a corporation wholly owned by Japanese vehicle manufacturer Mazda Motor Corporation (MMC). MMC supplies vehicles to Mazda, of which Mazda supplies to dealerships throughout Australia. Mazda has minimal, if any, retail facilities, meaning Mazda itself does not engage in retail sale and supply to end customers. Thus, Mazda relies on Dealers to sell, service, repair the vehicles and to provide Mazda parts to customers, pursuant to relevant agreements.

The ACCC sought declarations that Mazda, between 2015 and 2019, had:

• contravened s 18 of the Australian Consumer Law (ACL) by engaging in misleading or deceptive conduct;
• contravened s 29(1)(m) of the ACL by making false or misleading representations regarding the existence, exclusion or effect of the consumer guarantees under Part 54 of the ACL; and
• contravened s 21 of the ACL by engaging in conduct that was unconscionable.

These allegations stood in regard to nine consumers (Consumers) who owned seven Mazda vehicles.

Misleading and deceptive conduct:

Under the ACL, a consumer is entitled to a refund or replacement of a good, at no cost, where there has been a major failure of the good.

The ACCC alleged, and Mazda denied, the following representations made to the Consumers:

• that certain faults of the vehicles they owned were not considered “major failures’ under the consumer guarantee provisions of the ACL;
• a major failure under the consumer guarantee provisions meant a major failure of a major component of the vehicle;
• the Consumers were not entitled to a refund or replacement vehicle for no cost under the ACL because Mazda was entitled to repair the vehicle when a fault occurred regardless of the time it would take, the number of previous attempted repairs, the customer’s rejection of the vehicle, or any customer request for refund or replacement; and
• Mazda was under no obligation to provide a refund or replacement vehicle at no cost due to the age or mileage of the vehicles.

In some cases, Mazda would provide a consumer with a partial refund or offer a replacement car conditional upon a significant payment from the consumer.

But ultimately, these representations resulted in the Consumers being trapped in a cycle of unsuccessful attempts to repair the vehicles for months, or even years, including one Consumer enduring three engine replacements.

The Court predominantly agreed with the ACCC’s submission due to the fact that there were no reasonable grounds for Mazda to make these representations, especially where Mazda rarely made enquiries as to whether the failure of the Consumer’s vehicles were actually “major” ones or not.

Unconscionable Conduct:

Under section 21 of the ACL, a corporation must not engage in conduct that is, in all circumstances, unconscionable. Unconscionability has been said to ‘often involve dishonesty, predation, exploitation, sharp practice, unfairness of a significant order, a lack of good faith, or the exercise of economic power in a way worthy of criticism’.[1]

Generally, the ACCC alleged, and Mazda denied, that the following conduct concerning the Consumers should be characterised as unconscionable:

• Mazda did not give any proper or genuine consideration to the Consumers’ expressed safety concerns, and the Consumers’ rights under the ACL to refunds and replacements.
• Mazda made false and misleading statements to consumers in contravention of ss 18 and 29(1)(m), particularly in representing to the Consumers that their request had been escalated to “senior management” and “legal” when this had not occurred.
• Mazda had taken advantage of their dominant bargaining position when dealing with the Consumers’ requests by placing unfair commercial pressure on them to accept unreasonable and unjustified offers.

Despite the Court forming the view that Mazda’s conduct constituted ‘appalling customer service’ and how the ‘customers were rightly frustrated at Mazda’, the conduct was not to be characterised as unconscionable.[2]

The Court assessed each Consumer as a separate case, providing individual reasonings on his determination. An example was the consumer ‘EG’ who had allegedly experienced a 4-month delay in the payment of reparations for her vehicle. Evidence was provided suggesting that Mazda had made several offers for limited compensation to EG, that Mazda had not given proper consideration as to EG’s rights to refund or replacement, that it had rejected EG’s requests without consideration on the merits and more.

Although the Court sympathised with EG and the ‘poor consumer outcome’ she received, it found that the evidence provided by the ACCC did not show that Mazda was not considering EG’s safety concerns seriously and did not ultimately reach the level of unconscionable conduct. Therefore, although Mazda providing ‘appalling customer service’, it was not appalling enough to be considered unconscionable.

Orders:

The Court ordered that the Parties have until mid-December 2021 to confer and submit to the Court a joint or separate proposal/s. The proposals are to outline the further conduct for the proceeding having consideration to remedies, costs and any other potential orders. A hearing will take place at a later date to determine these matters.

Take-aways:

This case demonstrates the importance of having consistent and clear guidelines as to warranty and consumer laws for all sales representatives and members of a company in order to minimise the occurrence of misrepresentations as to consumers rights under the ACL. Breaching these consumer guarantees can potentially result in extensive reputational or financial damage that no company wishes to endure.

Consumer guarantees are non-negotiable for corporations that fall within the threshold– they must be complied with. Thus, a company should ensure that their company procedures reflect the way the law operates in this space, for example, into their customer complaint services and repair services communications and keep these current.

If you have any queries about any of the matters raised by this case, then please contact Alicia Hill on (03) 8540 0292 or alicia.hill@mst.com.au

[1] Unique International College Pty Ltd v Australian Competition and Consumer Commission (2018) 266 FCR 631 at 667, [155].

[2] Australian Competition and Consumer Commission v Mazda Australia Pty Ltd [2021] FCA 1493, [135].