The most common mistake businesses make

- October 31, 2019 3 MIN READ

Most business owners believe they can make their own rules, terms and policies for their business, customers and products. After all, it is your business, so why would you not be able to make your own refund terms, cancellation terms, dispute resolution, return and repair policies?

It may be ‘Your Business’ but you are limited by the Australian Consumer Law (‘ACL’) with respect to all your customer policies. There are a number of issues you, as a business owner, need to know when you are setting up your customer business practices but there is one policy that many business owners keep getting wrong. Even Big W and Target were recently pinged this month by the regulator for their mistaken business practices. 

What is the most common mistake business owners make?

The Answer: It’s sending customers back to the manufacturer or supplier in the event of an ‘issue’ the customer may have with the product. 

Believe it or not: You, as a business owner, are responsible for all products sold on or through your site, whether you have manufactured the product or not and including all issues with your suppliers and manufacturers, irrespective of whether you sent the product directly to your customers or via the supplier. If your supplier is taking too long to ship the products, ordered, or if the customer did not receive the product, or if the wrong item was sent by the supplier, it is still up to you to rectify the issue immediately with the supplier and provide a remedy to your customer. 

It also doesn’t really matter what particular fault your customer may find with the product: whether it is an error in delivery, or if the products are not matching the advertisement or description, or if the products are faulty or damaged. It’s still up to you to manage the return, repair or replacement with the supplier, and you must do so at your own expense and not pass this shipping cost on to your customer (and that’s a really good reason to ensure you have good supplier terms and agreement with your suppliers!).

Even the big guys got it wrong!

So who and what happened with Big W and Target: For at least two years, Big W’s customer service staff had been telling customers who complained about their faulty Dyson appliances, that they would need to go directly to Dyson if they had an issue more than 14 days after their purchase date.

Target was also guilty of misleading consumers about their right to a refund by sending customers with faulty Playstations back to the manufacturer to manage their issue. 

The Australian Competition and Consumer Commission has required them to address the past customer refund requests as well as issue a public statement.

Who decides if a repair, replacement or refund is provided?

First and importantly, it may sound like the consumers have all the strength in the buying/purchasing relationship when you read the ACL and understand their rights. However, they are not always entitled to a free repair, replacement or refund. For example, if they made an error with their purchase, changed their mind or found it cheaper elsewhere, you, as a business owner, can say ‘No’, to a refund request.

If there is a minor problem with the product, the business owner can decide if the customer is entitled to a free repair, replacement or refund. 

Where there is a major problem with a product, the customer can decide if they prefer a repair or replacement. Obviously any fault and repair/replacement requirement depends on the age, use and storage of the product but generally, business owners must honour the ACL 

As a business owner, it is up to you to manage this process with the supplier or manufacturer and you also have to cover any postage, delivery fee or shipping costs for both the return and re-sending to the customer.

While it’s really unacceptable that Big W ‘pretends’ not know about their consumer law obligations in Australia (they claim they ‘may’ have misled customers!), it seems to be a common occurrence with both small and medium business owners as well who have not familiarised themselves with their obligations as a business owner. 

Make sure you know what your obligations are and do not make the same mistake!

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  • Andrew Caska

    Caska IP Patent Attorneys

    'Flying Solo opened up so many doors for us - I honestly don't know where I'd be without it"