One of the benefits of living in a globalised economy is that manufacturers are able to sell their products to distant markets around the world. Australian suppliers will often engage with product manufacturers to enable them to distribute products that are manufactured overseas.
The Australian Consumer Law (‘ACL’) provides consumer protection in the supply of goods and services. Under this law, manufacturers can be liable for defective goods they sell. But did you know, there are also instances in which an Australian supplier may be deemed to be a ‘manufacturer’?
Tips for Suppliers:
Who is classed as a ‘Manufacturer’?
Under the ACL a ‘manufacturer’ may be a person, company or partnership who:
- extracts, grows, produces, processes or assembles goods;
- holds themselves out to the public as the manufacturer of goods;
- allows their name to be applied to goods;
- allows another person to hold them out to the public as a manufacturer; and
- imports goods where the actual manufacturer does not have a place of business in Australia at the time of importation
Who is Liable?
The ACL guidelines do not draw a clear line between the definition of a ‘manufacturer’ and a ‘supplier’. This means that a supplier of goods may also be held liable. The real manufacturer of the goods will also be liable as they are a ‘deemed manufacturer’ under this law. As a result, a consumer buys a product that is not of merchantable quality, they could take legal action against both manufacturer and supplier. Further problems arise if the real manufacturer of the goods cannot be found – the supplier can be deemed to be the manufacturer. This can mean serious consequences for suppliers!
How to Avoid Liability?
Suppliers should take specific steps to ensure protection from being unfairly burdened with liability:
- Know the manufacturer of the goods you are supplying; and
- Have a contract in place and insurance cover.
Know the manufacturer
You must have a record of the identity of the manufacturers, contact details, location, and reputation. In the event that the manufacturer is unknown to the consumer, they can entitle to approach the supplier to obtain this information. There is a waiting period of 30 days – if after the 30 days the consumer still does not have the answer, the supplier will now be considered the manufacturer. To avoid this problem, suppliers should have clear processes in place so that they can relay this information to consumer within 30 days if requested. Suppliers should be very careful not make representations that could suggest they are manufacturer of the goods. Check your displays and marketing materials.
Possibility of reimbursement
Where goods are not of acceptable quality, manufacturers are by law required to compensate suppliers for any payment made to the consumer. This could include any compensation for reasonably foreseeable consequential losses. However, there are limitation to this. Often the result is merely reimbursing the supplier for the cost of repair or replacement of the product. Suppliers should make sure their contracts include clauses that cover appropriate warranties and indemnities. Suppliers should also ensure their insurance covers the instance in which they could be deemed to be a ‘manufacturer’ under the ACL.
What Should I Do Next?
* This blog is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.