Ford’s $10 million penalty one of the largest handed down

On 26 April 2018, Ford Motor Company of Australia Ltd (Ford) has been ordered by the Federal Court of Australia to pay penalties totalling $10 million for unconscionable conduct.

In addition to the penalty, the ACCC accepted a court enforceable undertaking from Ford:

• to establish an independent complaints review program for customers who lodged requests for refunds or replacement vehicles
• to provide customers with information relating to known issues with their vehicles, as well as access to a complete history of the repairs of manufacturing defects performed on the consumer’s vehicle
• to implement a range of ACL compliance activities, including:
  • committing to a Customer Service Charter that will be available on Ford’s website to make customer information more easily accessible, including rights under the ACL
  • upgrading the Consumer Law Compliance Program and its Complaints Handling System
  • improving ACL compliance training for staff and dealers.

Ford’s $10 million penalty is one of the largest handed down for breach of the ACL. It serves as an important reminder to the motor vehicle industry that customer complaints review systems, and the processing of refund/replacement claims must be carried out in accordance with the ACL.

Businesses should be aware the Australian Parliament is currently  reviewing the penalties for breaches of the ACL to mirror the higher penalties available for contravention of competition law.

Background

Between 2011 and 2016, Ford supplied more than 70,000 Fiesta, Focus and EcoSport vehicles equipped with a 6-speed dry dual-clutch transmission system known as the “PowerShift Transmission” (PST). Ford and its motor dealers received customer complaints about the PST causing excessive shuddering and jerking when accelerating, loss of gear selection and sudden loss of power and/or excessive noise.

Despite being aware of the intermittent nature of the issues, customers were required to demonstrate the problems on demand in the presence of the dealer before being offered repairs. Ford also indicated the shuddering was caused by the customer’s driving style.

Refunds or replacement vehicles were refused for customers, even when the vehicles were repaired multiple times without fixing the issues. Replacement vehicles were provided in accordance with its “PowerShift Ownership Loyalty Program”, which required customers to pay additional costs despite being eligible for a refund or a no-cost replacement vehicle under the consumer guarantees.

The Federal Court of Australia declared that Ford engaged in unconscionable conduct in its complaints handling process for its PST-equipped vehicles.

Implications

The Ford case reiterates the ACCC’s continued pursuit in seeking ACL compliance for all participants in the motor vehicle industry. As detailed in the ACCC’s final report on the new car retailing industry in December 2017, consumer guarantees appear to be an area of particular focus by the ACCC.

In recent times, the ACCC has sought a number of undertakings from car manufacturers – with GM Holden and Hyundai Motor Company Australia made to comply with consumer guarantees under the ACL as part of upgrading their complaints handling processes.

Dealers should be reminded, as retailers of new cars, they also have a direct responsibility to provide remedies to consumers under the ACL. The costs incurred to remedy customers may be recovered, where the manufacturer is responsible for the failure.

Macpherson Kelley’s lawyers have extensive technical knowledge and the industry experience to advise on all facets of the ACL. Please contact us for more information.