Court hears claims Harvey Norman franchisees misled customers over refund rights

The Federal Court has heard claims that Harvey Norman franchisees misled customers over refunds and warranties at a preliminary hearing in the proceedings brought by the Australian Consumer and Competition Commission yesterday.

The consumer watchdog commenced proceedings against 11 franchisees last month, claiming they engaged in misleading and deceptive conduct.

According to a report in The Australian Financial Review, the ACCC is alleging some consumers were told that Harvey Norman did not give refunds, or only exchanged products worth less than $300, while others were told they would only receive refunds if Harvey Norman received the money from the manufacturer first.

Sally Scott, partner at law firm Hall and Wilcox, told SmartCompany if these claims can be proven they show misleading conduct by the franchisees.

Scott says Australian consumer law provides consumers with refund and exchange rights in certain circumstances, for example, where products are faulty, do not match the description given, or do not last as long as would be expected.

“The obligations exist regardless of whether a retailer says it doesn’t give refunds or puts a minimum dollar amount condition for an exchange,” she says.

The ACCC claims one woman who bought a faulty Panasonic digital camera worth $159 was told she had to pay $88 to cover postage and handling.

Scott says retailers can’t impose such conditions and there is no obligation for customers to pay postage and handling fees.

“Although the Australian Consumer Law says that it is generally the consumer’s responsibility to return items to a store, there is an exception where there would be significant cost for the consumers in doing so. In these cases, the retailer must bear the cost,” she says.

The consumer watchdog is also claiming one customer was told a faulty DeLonghi coffee machine would only be repaired or replaced after it was sent to DeLonghi for assessment.

Scott says it is less clear whether this statement is misleading.

“Retailers are entitled to determine whether an item is in fact faulty. If it is obvious, for example, it does not work, then it should not need to be assessed as a condition to providing a repair or replacement,” she says.

Scott says the case brought by the ACCC shows the risk presented by sales staff, as many are not aware of the intricacies of Australian Consumer Law.

“Therefore, the onus is on management to provide proper training and guidelines to sales staff,” she says.

The Harvey Norman franchisees are resisting an application to have their cases heard jointly and want the cases to be heard in their local jurisdictions: Queensland, Sydney, Tasmania, Western Australia and Victoria.

Scott says the court will consider where the case can be conducted most ‘suitably’, taking into account factors such as the interests of the parties and the efficient administration of the court.

“In this case it is appropriate for the court to take into account the location of the likely witnesses, the location of the franchisees and whether there would be unnecessary multiplicity if the cases were not heard together,” she says.

Scott says while it is difficult to predict the court’s decision, the judge’s comment that “I am concerned, very concerned, that we are talking about totally unrelated respondents” gives an indication as to which way the judge may go.

“Given that each case will involve different franchisees, different consumers and different alleged statements and that the franchisees and consumers are located in different States, it is quite possible that the judge will order that the cases are to be held separately,” she says.

John Slack-Smith, chief operating officer of Harvey Norman, told SmartCompany each of the allegations the ACCC has made relates to a single purchase of goods by a single consumer within the franchise businesses.

“We continue to both support and respond to the process and everything is being investigated,” he says.