Need a lift? ACCC carpooling manufacturers to court (and there are plenty of spare seats)

What should I know?

• The ACCC is appealing Justice O'Callaghan's decision in ACCC v Mazda Australia Pty Ltd [2021] FCA 1493¹
• The Federal Court found Mazda Australia Pty Ltd (Mazda) engaged in misleading and deceptive conduct and made false or misleading representations to customers about their consumer guarantees under the Australian Consumer Law (ACL), but held Mazda's dealings fell short of unconscionable conduct
• The ACCC also commenced proceedings against Honda Australia Pty Ltd (Honda) in April,² alleging Honda made false or misleading representations to customers that two former Honda dealerships were no longer operational or servicing Honda vehicles
• The ACCC can add Mazda, and potentially Honda, to its growing list of successfully litigated proceedings against manufacturers, with the regulator previously receiving court-enforceable undertakings from Volkswagen, Holden, Hyundai, and Toyota to improve their ACL compliance frameworks
• The message is clear to car manufacturers and retailers generally: review your customer service and ACL compliance frameworks, or the ACCC may come knocking on your door.

What is the ACCC appealing?

In November 2021, the Federal Court found Mazda made 49 false or misleading representations to nine customers who had experienced significant faults with their recently purchased Mazda vehicles.

Instead of offering a refund or to replace the vehicle at no extra cost, Mazda informed customers their only remedy was another repair (including one customer whose engine had already been replaced three times).

Former ACCC Chair, Mr Rod Sims, commented: "Mazda's conduct towards these consumers was not just appalling customer service as noted by the judge, it was a serious breach of the law."³

Justice O'Callaghan made declarations regarding Mazda's contraventions of the ACL and will consider penalties at a later date. If the ACCC's other proceedings are anything to go by, Mazda may be required to give a court-enforceable undertaking to review its customer service and ACL compliance framework.

Unconscionable conduct

The ACCC claimed Mazda's conduct "was sufficiently divergent from community standards of acceptable business practices that it objectively answered the description of unconscionable conduct..."⁴

Despite Justice O'Callaghan's findings on misleading and deceptive conduct, His Honour held Mazda's conduct fell short of unconscionable conduct.

Justice O'Callaghan's reasoning for his conclusion was limited, and six months later the ACCC and Mazda are back in court on this issue.

The ACCC's case will centre around the argument Mazda's behaviour did sufficiently diverge from reasonable community standards of acceptable business practices and applicable norms of commercial behaviour.

Mazda has also appealed Justice O'Callaghan's findings on the grounds the company did not engage in misleading and deceptive conduct or made false or misleading representations.

What is the ACCC's claim against Honda?

Fresh off the Mazda decision, the ACCC lodged proceedings against Honda in April alleging the company made false or misleading representations about two former authorised Honda dealerships ─ Brighton Automotive Holdings Pty Ltd in Victoria and Tynan Motors Pty Ltd in NSW.

The ACCC claims Honda represented to customers between January and June 2021 the dealerships had closed, would close, or would no longer service Honda vehicles.

The regulator will rely on emails, text messages, and phone recordings to evidence Honda informed customers the dealerships had closed and to contact a Honda dealership or Honda Service Centre if they needed a service.

The ACCC claims Honda deprived customers of the opportunity to make an informed choice of where they could service their vehicles and caused harm to the dealerships by representing the businesses were closed, meaning customers took their vehicles to other dealerships.

Lessons for car manufacturers and retailers

In the words of Mr Sims: "The message to the new car industry is clear, consumer rights are not negotiable and must not be misrepresented to consumers."

The Mazda decision and appeal and now the Honda proceedings should put car manufacturers and retailers on notice to:

• review your customer service model. Consider which employees are discussing consumer guarantees and remedies with customers, both at point-of-sale (dealership) and call centre staff
• conduct training. Ensure employees in these roles are adequately trained and have the resources to correctly advise customers
• escalate enquiries. Ensure employees feel supported to elevate enquiries to senior staff if they cannot confidently advise customers. Changes to the definition of "major failure", which can now include multiple minor failures, make the assessment even more difficult for to advise customers and processes need to be in place to ensure consumer guarantees are complied with
• comply with the Motor Vehicle Service and Repair Information Sharing Scheme by 1 July 2022. The Scheme requires motor vehicle service and repair information to be made available for purchase by Australian repairers at a fair market price. The Scheme is designed to give customers options to use a repairer that offers the best price, service, and convenience.

¹ ACCC v Mazda Australia Pty Ltd [2021] FCA 1493

² Media release: Honda in court for allegedly misleading consumers about dealership closures.

³ Ibid.

⁴ ACCC v Mazda Australia Pty Ltd [2021] FCA 1493, 265.

Image by Lorenzo Hamers on Unsplash.