By Dalinee Bangaroo, Trade Mark Attorney/Solicitor and Clint Fillipou, Principal Partner

Have you ever had a headache seeking a refund on a faulty product you bought from an online retailer? Or have you ever been charged restocking fees (or some other fee) when returning a faulty item? Has the retailer pointed you to their terms and conditions of sale, and bamboozled you with something you apparently agreed to during the purchase process?  Or maybe you are a brand or an agency working in the online space, and you’re not quite sure whether you can actually say what you are saying in your store terms of sale… Well, things are about to get tighter. The Australian Competition and Consumer Commission (ACCC) has released a recent report outlining the findings from their internet sweep of Australian retail websites, which has highlighted that many businesses are failing consumers with deceitful terms and conditions and dodgy return policies.

Last year, the ACCC set out a list of Compliance and Enforcement Priorities that outlined the focus areas for the ACCC in 2024/25. The list included improving industry compliance with consumer guarantees, with a focus on consumer electronics, and also targeting misconduct by retailers in connection with delivery timeframes. It is therefore no surprise that the ACCC has looked specifically to the statements in retailer terms and conditions and consumer guarantees provisions across two thousand Australian retail websites, before releasing this report.

What did the ACCC uncover?

Remember, consumer guarantees apply automatically to goods and services purchased in trade or commerce by Australian consumers, with very limited exclusions and continue for a reasonable time depending on the product or service. The guarantees include basic statutory rights when buying a product or service, and these rights cannot be taken away from any consumer regardless of what a business says or does. Consumer guarantees specify that consumers are entitled to a repair, replacement, refund or cancellation if there is a problem or fault with a product or service, if the goods or services fail to meet the statutory standards of acceptable quality, fitness for a purpose, matching description, or matching sample or demonstration model. Clearly, these are very relevant on the issue of returns policies, but also general terms of sale.

These guarantees are entrenched by statute and cannot be contracted out of, for instance in terms and conditions, or “sales terms” or “returns policies”.  With online shopping booming over the years, the ACCC is committed to ensuring that businesses whose policies or terms and conditions raised concerns, are rectified in accordance with the Australian Consumer Law (ACL). Unless an exception applies, all retailers are required to comply with the consumer guarantees regime, as again, these are statutory protections that cannot be excluded or contracted out of.

The ACCC’s sweep has uncovered numerous examples of practices that could potentially mislead or deceive consumers regarding their rights to exchange, refund or return a product. The wide-ranging audit of online retailers identified several potentially misleading statements in the website terms and conditions and/or clauses that breach the consumer guarantees provisions of the ACL, which included:

• enforcing return of a faulty product within a specific timeframe;
• imposing an absolute ‘no refund’ policy on sales or specialised items;
• suggesting to consumers that their only avenue to claim remedies for faulty goods is under the manufacturer warranties; and
• placing restrictions on consumers’ right to a remedy, including stating that delivery fees paid for faulty items were non-refundable and charging restocking fees if customers returned faulty items.

The ACCC also came across other problematic statements, which are likely familiar to many consumers and included:

• items that have been opened and used cannot be exchanged or refunded – if this were legal, how would a consumer ever realise it was faulty?;
• made to order products cannot be returned – why? Again, if it is made to order and fails to meet consumer guarantees, it is still covered by the law;
• sale items cannot be returned, exchanged or refunded – while inconvenient for the retailer that has tried to clear inventory, if that inventory is faulty the retailer has no choice but to comply with the law; and
• in the unlikely event that an item arrives damaged or faulty, please notify the store within 30 days of delivery to receive a replacement – again, it may take some time for a fault to arise.

We see many of these sorts of terms and conditions, and dodgy warranty statements, included with packaging for products arriving in Australia. Some of these are from foreign suppliers, and others are from Australian suppliers. Ultimately it is irrelevant where the products originate – if they reach Australian consumers, the ACL applies.

What does this mean for you?

While some business may make extra voluntary warranties to consumers, these cannot replace, change or take away a consumer’s basic rights under the consumer guarantees. These basic rights can last longer than a business’ warranties in many instances.

If you are a retailer or if you otherwise offer goods or services to Australian consumers, you must be aware that you are required to ensure you comply with the consumer guarantees and that you do not make any false or misleading statements in your website terms and conditions that could potentially mislead or deceive consumers.

How did the ACCC remedy the issues?

This time around, the watchdog has been unusually sympathetic to businesses who were found in breach of the ACL by only sending them warning letters in the first instance. Their warnings have seemingly not been ignored, and the ACCC has seen businesses swiftly deleting misleading statements from their websites and updating their return policies.

However, last year, penalties were very common in cases where false and/or misleading statements about consumers’ rights to remedies or consumer guarantee rights were made. For instance, in February 2024, Mazda Australia Pty Ltd was ordered by the Federal Court to pay $11.5 million in penalties for engaging in misleading and deceptive conduct and making false or misleading representations to nine of their consumers about their consumer guarantee rights.

Not long after, in March 2024, the ACCC initiated proceedings in the Federal Court against Mosaic Brands Limited for allegedly misrepresenting consumer guarantee rights in the terms and conditions published on eight of its brands websites and making false or misleading representations to consumers about delivery times.

It is obvious that the ACCC intended to place online retailers on notice following their sweep. However, significant penalties can still be imposed for making false and/or misleading representations to consumers ranging from up to $2.5 million for individuals or up to $50 million for companies under the ACL if they do not act upon the warning letters issued. As a general rule, businesses should avoid statements that modify, restrict or exclude consumers’ rights to exchange, refund or return of products or services, as well as their consumer guarantees.

Additionally, the ACCC uses a range of tools to encourage compliance and prevent breaches of the ACL, including business and consumer education, and working closely with stakeholders and other agencies. In October 2024, it was announced that the Government would work with State and Territory Consumer Affairs Ministers and stakeholders to design proposed civil prohibitions and penalties for breaches of the consumer guarantees and supplier indemnification provisions of the ACL. This would introduce penalties for:

• businesses which fail to provide a remedy for consumer guarantees failures, when they are legally required to do so under the consumer guarantees; and
• manufacturers which fail to reimburse suppliers for consumer guarantees failures for which the manufacturers are responsible.

These amendments to the consumer guarantees provisions would significantly change business enticements to comply with their consumer guarantee obligations under the ACL, as well as more effectively supporting consumers in upholding their statutory consumer guarantee rights.

What happens now?

Online businesses are now on notice, and the ACCC will not hesitate to take enforcement action where it detects potential breaches or misleading statements in terms and conditions or return policies. With the ACCC advocating for law reform to consumer guarantees provisions and their collaboration with the Federal Government to work with state and territory consumer affairs ministers to design proposed civil prohibitions and penalties for non-compliance with the consumer guarantees and supplier indemnification provisions of the ACL, it is critical for businesses to review their return policies and terms and conditions and tread extra carefully in respect of their compliance with their consumer guarantee obligations under the ACL, as well as more effectively supporting consumers in securing their statutory consumer guarantee rights.

Contact us

If you have an online retail website and would like further information or advice on return policies, website terms and conditions and your obligations under the ACL with respect to consumer guarantees, please contact one of our experts below.