Where there has been little warning about a new model release, both customer trust and consumer law come into play.
Surprise new models – a breach of consumer law or a breach of trust?
Emotions run high if consumers buy a product just before a significantly upgraded model is released, unannounced.
This article discusses the consumer law issues for manufacturers, sellers and consumers where there has been little warning about a new model release. Even if a manufacturer or seller has not broken the consumer law, an unheralded release of a new model can significantly affect consumer trust in that brand.
Current controversy
Thermomix, a well-known European multifunction kitchen appliance, is sold via in-home demonstrations across Australia. It is a comparatively high-priced appliance, coveted by many.
On Saturday the company announced that a new model was available for pre-order. The current model was released in 2004 and the new model has significant technological upgrades. Customers who recently bought the older version are furious.
The predecessor retailed for approximately $2000; the new product is being offered at a slightly lower price. This has sparked outrage at the company’s lack of transparency. Consumers say that if they had been informed, they would have waited to purchase the new model.
Many specifically enquired whether a new model was coming when deciding to purchase the current model. They allege that the current model is now significantly devalued.
Many allege that they specifically enquired whether a new model was coming, and relied on representations that there was no new model due, when deciding to purchase the current model. They allege that the current model is now significantly devalued.
Misleading & deceptive conduct
Has a manufacturer, supplier, or seller misled purchasers into believing they were getting their hands on the newest model available, by not telling them about the impending new model?
Under section 18 of the Australian Consumer Law, a person is not allowed to make misleading representations about a product or service if it could lead you into error. This includes representations about the standard, quality, value or newness of a product.
If a business or person has contravened the prohibition on misleading and deceptive conduct, remedies include injunctions, damages and orders for compensation. Complaints for misleading and deceptive conduct need to be lodged with the Australian Competition and Consumer Commission.
Is silence misleading & deceptive conduct?
Generally, being silent is not misleading conduct under our consumer law. However silence can be misleading when other circumstances are taken into account.
There have been many cases about whether silence is misleading or deceptive, under the previous consumer law. These suggest that silence is misleading or deceptive if there is a deliberate decision to withhold information, and if the silence is clearly linked to someone forming an incorrect impression.
In the Thermomix dispute, considerable research and development went into building the new model. Was there a deliberate decision to withhold information about the new model and the introductory price, so that purchasers would purchase the current model for the full price?
Who is potentially liable?
1. Are local sales representatives liable to purchasers?
It depends whether the sales rep had knowledge that a new model is coming. If not, then it is difficult to establish that the seller was misleading or deceptive. If a consumer asks about the newness of a product, or the availability of other models, they are entitled to accurate information. A problem arises when the seller is passing on information from a local distributor or overseas manufacturer, and does not have full information.
2. Is a distributor liable to Australian sales reps or to purchasers?
Again it depends on what the distributor knew. If the manufacturer did not tell the distributor about the impending new product, then there are few grounds to claim that the distributor committed misleading or deceptive conduct. Sales reps may have rights under their contract with the distributor. It depends on the obligations on the distributor in the contract.
3. Is an overseas manufacturer liable to Australian sales reps or to purchasers?
Under Australian consumer law, the local importer is treated as the manufacturer of products imported from overseas. It is the importer’s duty to comply with Australian law. Consumers have recourse against the sales reps and importer. The importer has to make their own claims against the overseas manufacturer.
Conclusion
If the local distributor and the sales reps had no knowledge of a new product, then it is difficult to show that they deliberately withheld information and engaged in misleading and deceptive conduct.
The Thermomix issue has lessons for all manufacturers, particularly those producing high-end products. Compare for example Apple, which announces new products in advance, which provides information and generates considerable publicity. Transparency, accurate information and choice are central to brand image and integrity.
Ursula Hogben, Co-founder, managing director, Legal Vision ILP
