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

Ateco Automotive Pty Ltd, trading as LDV Automotive Australia (LDV) is in hot water for allegedly making false and misleading representations to consumers and engaging in misleading or deceptive conduct, as well as conduct liable to mislead the public in relation to the durability and suitability of certain LDV vehicle models between 23 April 2019 and 30 November 2024. During this period, LDV received over 5,000 consumer complaints regarding rust or corrosion across their LDV T60 (excluding the eT60) and G10 models.

The Australian Competition and Consumer Commission (ACCC) has commenced proceedings in the Federal Court of Australia against LDV over claims that the LDV T60 and G10 models have a propensity to rust or corrode within five years of manufacture. Advertisements from the company that drew the ACCC’s attention included images of LDV T60 utes charging through mud, gravel and flowing creeks, implying that driving the vehicles in these environments was appropriate given the ‘toughness’ and resilience of the vehicles. The ACCC alleges LDV’s claims that “the T60 Ute has the tough build and all the robust features needed to take you anywhere, be it work or play” and the “G10s are built to stand up to the everyday and so much more” respectively were misleading and LDV’s conduct is likely to have caused harm to affected consumers because the propensity for rust or corrosion lowered the value of their vehicles, and they were deprived of the opportunity to make informed purchasing decisions.  This is quite an interesting matter as the vehicles were covered by warranties, and there is no inference by the ACCC that the warranties were not honoured. This is not the end of the story however.

Warranties generally, and LDV’s anti-corrosion warranty concerns

It is commonly known that motor vehicles are sold with factory warranties, and usually they are limited by both duration (e.g. 5 years) and mileage (100,000 kms), and frequently this is a “whichever occurs first” style limitation. In addition, depending on the features added to the vehicle, or the nature of the vehicle itself, other warranties may also apply. For electric vehicles for instance there may be separate warranties on the life of the battery in the vehicle.  These manufacturers’ extended warranties all serve to provide comfort to buyers that the Original Equipment Manufacturer (OEM) stands by the build quality and reliability of their vehicles, and if something was to occur during the duration of the warranty, it would be repaired or replaced by the OEM or its service network. Ultimately, these warranties are extremely important factors in the buying decision for most motorists. These warranties apply over and above any statutory consumer warranties that apply by default, and usually extend the duration of what may otherwise be claimable under statutory warranties for longer periods.

In this case, LDV allegedly advertised a 10-year anti-corrosion warranty between 23 April 2019 and 31 August 2020, despite knowing about “prevalent” rust and corrosion issues prior to the relevant advertising campaigns, making the warranty claims and the applicable campaigns potentially misleading. While LDV has not yet issued a recall or service campaign, the allegations raise questions about the level of corrosion protection applied during manufacturing and the company’s response to customer complaints.

Looking at this case holistically, at all material times relevant to the matter at hand, LDV vehicles were manufactured by SAIC Maxus Automotive Co, Ltd (SAIC), a company incorporated in the People’s Republic of China. These vehicles were imported to Australia by LDV pursuant to a Distribution Agreement between LDV, SAIC and Shanghai Automobile Import & Export Co, Ltd. Then the question becomes why is the ACCC going after LDV and not SAIC? – Well, the answer is simply because SAIC does not have a place of business in Australia. For this reason, the ACCC is pursuing LDV as the importer (who becomes the deemed manufacturer for the purposes of the Australian Consumer Law (ACL)).   While the ACCC alleges that SAIC, the manufacturer of the T60 and the G10 vehicles failed to adopt adequate anti-corrosion measures, with the result that those vehicles had a propensity to develop early rust and/or corrosion within the first five years of manufacture. LDV, on the other hand, did not require SAIC to specify the cause of the rust issue or to provide adequate evidence of the effectiveness of measures adopted to address that propensity. As such, LDV did not have a reasonable basis to consider that SAIC had taken adequate measures to eliminate the rust propensity in those models and have therefore failed their obligations as the manufacturer of the vehicles in Australia.

What about consumer guarantees?

Consumers rightfully expect that the goods or services they purchase will live up to the quality and uses that they were advertised to include. That being said, regardless of any warranty provided by a supplier or manufacturer, suppliers and manufacturers automatically provide guarantees to consumers under the ACL in relation to certain goods they sell, hire or lease, and services they provide to consumers. Motor vehicles are covered by these guarantees. In this case, LDV being the importer of the vehicles is essentially treated as the manufacturer for the purposes of the consumer guarantee regime and must therefore comply with these guarantees, even if the actual manufacturer is located overseas.

However, it has been noted in the Concise Statement filed by the ACCC with the Federal Court of Australia, that the ACCC did not mention any intention to pursue LDV in relation to breaches of consumer guarantees, such as lack of fitness for purpose; failure to correspond with description; and breach of express warranties. It is possible, if not likely, that the ACCC does not consider LDV to have any case to answer on these issues, which as flagged above makes this matter particularly interesting.

As an aside, when it comes to failure to comply with consumer guarantees, the remedy available to the consumer will depend on whether the failure (such as the rust and corrosion issues in this case) is rightly classified as a ‘major’ or ‘minor’ failure. Under the ACL, these rust and corrosion issues would be considered major failures on the basis that a reasonable consumer would not have purchased the vehicle had they known about the problem, or where the vehicle is substantially unfit for the specific purpose the consumer bought it for. In the case of a major failure, the consumers would be able to choose their remedy, including replacement or refund, and to pursue the supplier for compensation.

The ACCC appears to be focusing principally on the misleading and deceptive conduct and misleading advertising elements of this case, no doubt because the ACCC considers this its strongest argument.

What now?

It will be very interesting to see how the ACCC goes in pursuing LDV in this matter, and we will continue to report on the matter as it progresses. Ultimately, the most interesting element of the outcome will be how far OEMs, their suppliers, and their marketing and advertising agencies can press marketing claims that are ultimately unsupportable. Further, how those claims can be made with confidence if they are supported by strong warranties that protect consumers, even if the claims end up being unsupportable.  In other words, in cases like this one, if a manufacturer provides vehicles that are susceptible to rust, but provides a very strong and consumer-friendly warranty that makes the consumer whole in the event the vehicle does indeed suffer heavy rust issues, the OEM/supplier can still be exposed for misleading the buyer in the first place. Ultimately, just because an OEM will repair or replace a vehicle does not mean it is not painfully annoying, expensive, and irritating for a buyer, causing them to suffer significant loss.

This proceeding is part of the ACCC’s ongoing focus on holding businesses accountable for the claims they make about the performance and suitability of vehicles sold in Australia. LDV has not yet publicly responded to the ACCC’s court action. The proceedings seek penalties, declarations, consumer redress, costs and other orders to prevent LDV from making similar advertising claims in the future.

LDV is not the first vehicle-related case investigated by the ACCC. The ACCC instituted proceedings against Mazda for allegations of unconscionable conduct and misleading representations about consumer guarantee rights for serious vehicle faults, against Grays ecommerce Group for making false or misleading representations in the descriptions of their cars listed for sale online, and against Toyota for their compliance with consumer guarantees. All three motor vehicle retailing companies were put under the spotlight and made accountable to their breaches of the ACL and faced with a penalty for their admitted breaches of the ACL, highlighting that this is an enforcement focus area for the ACCC. Consequently, we can expect a similar outcome for LDV based on these previous cases.

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In Australia, motor vehicle advertising is regulated by the ACL, aiming to prevent misleading or deceptive advertising practices. If you would like further information or advice on motor vehicle advertising and understand your obligations or rights under the ACL, with respect to consumer guarantees, we have a dedicated team of advertising law experts ready to assist you.