Whitegoods and appliance company Fisher & Paykel has been fined $200,000 for telling customers they needed to buy an extended warranty to protect their product against repair costs, while putting the truth in fine print.
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Warranty provider Domestic & General, who issued the extended warranty on behalf of Fisher & Paykal, was also fined $200,000.
The Australian Competiton and Consumer Commission commenced action against Fisher & Paykel and Domestic & General in the Federal Court in late 2013 over the warranty documents accompanying dishwasher sales.
Under Australian consumer law, consumers may be entitled to a repair, replacement or refund on a product beyond the time period covered by the manufacturer's warranty if the product suffered "major failure" or is not of "acceptable quality".
However, the ACCC alleged that Domestic & General sent out 48,214 letters to purchasers of a dishwasher that had a two-year warranty. The letter stated that "your dishwasher is now a year old, which means you have 12 months remaining - after that your appliance won't be protected against repair costs. Fisher & Paykel can help."
The letter then offered, for a fee, an extended two-year warranty on top of the original warranty.
Federal Court Justice Michael Wigney said in his judgment, released on Friday, that Fisher & Paykel conceded that the statement was "false and misleading and the making of it was conduct that was misleading and deceptive".
The misleading statement was "prominent" in that it was displayed in the main text of the letter on the front page, he ruled.
Even though the relevant part of Australian consumer law was mentioned in the letter, said Justice Wigney, it was "in relatively fine print on the reverse side of the letter".
The fine print included the statement that "you are entitled to a replacement or refund for a major failure and compensation for any other reasonably forseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure."
The court heard that 1326 consumers purchased extended warranties, paying between $100 and $220.
After proceedings against Fisher & Paykel and Domestic & General began in the Federal Court, all of these consumers were contacted and "unconditionally offered a full refund" on the extended warranty, said Justice Wigney.
Only 107 consumers did so. It is "unclear why so few consumers claimed a refund," said Justice Wigney.
Fisher & Paykel and Domestic & General were also ordered to pay $15,000 in costs.
The Australian Competition and Consumer Commission began a national awareness campaign on extended warranties in 2012.
"While extended warranties may offer protection over and above that provided by the Australian Consumer Law, they do not replace the underlying consumer guarantees," according to the ACCC.
