Author: John Phillips (Ocean Computing Solutions)
Please note, I am not a lawyer and nothing in this article should be construed as legal advice.
In this article I will examine the question “Is the Trade Practices Act fair, or does it place an unreasonable burden on small business traders?” For this purpose I will consider a small business to be one that employs less than 20 staff.
It would be difficult to argue that consumers don’t need to be protected from unscrupulous traders, and that such protection shouldn’t be enshrined in legislation. That being said, I believe the Trade Practices Act goes too far, providing the purchasers of goods and services with rights that are excessive and unreasonable.
The specific provisions of The Act which are of the most concern relate to warranties and refunds. The NSW Office of Fair Trading interprets The Act as providing consumers with the option of having faulty goods repaired, replaced or the cost refunded, but gives them the legal right to insist on a refund. In contrast, the ACT office of Fair Trading web site indicates consumers are entitled to an replacement, repair or refund, but doesn’t go as far as the NSW Office in this respect. This is somewhat confusing given the sections of the Trade Practices Act dealing with warranties are generally based on commonwealth legislation (although each state and territory also has its own Trade Practices Act). The ACCC is clearer on this matter on their web site, indicating that the purchaser of goods has a right to a refund.
In reality, this means if a trader supplies goods or services which are not of merchantable quality, don’t do the job the trader stated they would, are substantially different from a sample or are faulty, they can be left with no option but to refund the cost. This may apply even if replacing or repairing the item concerned presents a better solution.
In the case of a small business, it may be difficult to finance such a refund where expensive goods are involved, especially if the trader has incurred up-front costs to supply the product. Furthermore, many faulty goods can be easily repaired by the trader. In the case of computer equipment, a faulty component is usually a trivial matter to replace, and the trader should have the right to insist on this course of action. Traders enjoy the same legal protection as other purchasers of goods and services, so are legally entitled to seek a redress from the suppliers of faulty goods, but in practice, this process is time consuming and often unnecessary.
Beyond the right to a refund, The Act provides purchasers of with statutory conditions that are implied in any contract for the purchase of goods that the goods will be free of defects for a reasonable period of time. What’s reasonable isn’t defined, so it’s up to the trader and the purchaser to decide. In the interests of fairness, I believe the ambiguity around this should be removed with time limitations based upon the type of goods and/or services involved applied to the relevant segments of The Act. It seems reasonable to me that the periods should be linked to depreciation schedules for tax purposes. Most computer equipment is depreciated over a three or four year period, therefore, statutory rights shouldn’t extend beyond this.
So, it The Act fair? I say no. Burdensome and ill considered consumer protection legislation is something the Australian small business community could do without. It would be in the interests of all traders and consumers for our politicians to review this thorny piece of legislation, removing ambiguity and unfair provisions.
But what do you think? Is the trade Practices Act a reasonable piece of legislation that protects consumers and traders, or is it unfair and burdensome?
Canberra Small Business Blog 
John,
You may well be right but I’d check first whether it is ACTUALLY the case that you must provide a refund if requested. I suspect that the choice lies with the trader – not the consumer.
I view the TPA much like the unfair dismissal laws. It is there to protect those with little power from those with sigificant resources who may choose to mistreat them. Traders who behave appropriately shouldn’t have much to fear from the law.
That doesn’t mean you would be excempt from effort you would rather not expend.
The other issue is that the same rights should apply to suppliers. IE: if you are required to refund a faulty item then your supplier should be subject to the same rights.
I’d definitely start with a letter to Craig Emerson and to the Chief Minister as ACT Minister for Small Business. You WILL get a response – even if in their own time.
Jean Mc
From the ACCC website (http://www.accc.gov.au/content/index.phtml/itemId/815362):
“Under the Trade Practices Act, you may seek a refund if a statutory condition is breached. This means that you may be entitled a refund if the goods you purchased:
– are or become faulty through no fault of your own
– are not fit for a stated purpose or a purpose you made known to sales staff at the time of purchase
– do not match the description or sample shown to you
– have defects that were not obvious or not shown to you before you purchased”
While other remedies are available, such as repair or replacement, if a statutory condition is breached the consumer is entitled to a refund. In my experience where goods have been supplied which are faulty, Fair Trading NSW will lean on the trader to refund the cost rather than replace or repair.
Is a trader acting unfairly if they decide it would be better to repair an item rather than refund the cost? Probably not, but, at least as far as the ACCC is concerned, the trader can be compelled under law to refund the cost. I agree that consumers need protection from unscrupulous traders, but traders need to be given a fair go as well.
John, the OFT and CTTT have for the record, breached their own administrative acts and continue to do so. Neither authorities are Fair toward traders as any royal commission would clearly expose. Redress is difficult because the Home Building Act 1989 and Consumer Trading and Tenancy Tribunal Act 2001 are worded to protect consumer and government alike. For example: an arbitrator pissed or stoned or both, can make a ruling to the value of $25K and a trader is denied a right of appeal under section 68. In my time exposing such matters to Minister’s of the day and I say Minister’s because I have seen Wastons, Dela’bosca and Burney vacate the office to save official public reply to claims of commercial impropriety of the Office of Fair Trading including false advertising as the department name suggests. I find matters regarding the introduction of Home Owners Warranty Insurance circa 1997 for trade contract liabilities above $12K to be the most cunning attack on consumers and small business ever experience in the political history of this nation, a scam so extensive, a whistle blower should fear being assassinated by the government. The consequences of such poor reform, has unfairly set a legal platform for the department to act as a tyrant, aiding and abetting criminal consumers whom have intent and persecuting small business. It has generated a policy responsible for accelerating small business insolvencies and further driven market inflation for services to unprecedented highs. ‘Fair,’ the NSW State government has a nerve to retain the meaning.