‘Lemon Laws’: an inquiry into consumer protections and remedies for buyers of new motor vehicles

1. Under the Terms of Reference for the Committee’s Inquiry, ‘lemons’ are defined as ‘new motor vehicles with numerous, severe defects that re-occur despite multiple repair attempts or where defects have caused a new motor vehicle to be out of service for a prolonged period of time’. Consumers are currently protected in relation to lemon purchases by the Australian Consumer Law (ACL) located in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (CCA). The ACL applies as a law of Queensland pursuant to the Fair Trading Act 1989 (Qld). The voluntary recall and consumer guarantees law took effect on 1 January 2011. 2. In 2006, the Government of Victoria made a commitment to introduce a lemon law into the provisions of the then Fair Trading Act 1999 (Vic). The public consultation process on the proposal to introduce a lemon law for motor vehicle purchases in Victoria was conducted by Ms Janice Munt MP, with the assistance of Consumer Affairs Victoria (CAV). CAV released an Issues Paper to canvas with industry and the community options for the development and introduction of a motor vehicle lemon law.(Consumer Affairs Victoria, Introducing Victorian motor vehicle lemon laws, Issues Paper, (September, 2007). 3. A CAV report prepared by Janice Munt MP was released in July, 2008 (Consumer Affairs Victoria, Motor Cars: A report on the motor vehicle lemon law consultations (July 2008) (Victorian Lemon Law Report). However, the Victorian proposal was overtaken by events leading to the adoption of a uniform consumer protection law in all Australian jurisdictions, the ACL. 4. The structure of this submission is to consider first the three different bases upon which consumers can obtain relief for economic loss arising from defects in motor vehicles. The second part of the submission considers the difficulties encountered by consumers in litigating motor vehicle disputes in the courts and tribunals. The third part of the submission examines the approach taken in other jurisdictions to resolving motor vehicle disputes. The final part of the submission considers a number of possible reforms that could be made to the existing law and its enforcement to reduce consumer detriment arising from the purchase of ‘lemon’ motor vehicles. 5. There are three principal bases upon which a consumer can obtain redress for defects in new motor vehicles under the ACL. The first is where the manufacturer admits liability and initiates the voluntary recall procedure provided for in s 128 of the ACL. Under this basis the manufacturer generally repairs or replaces the part subject to the recall free of charge. The second basis is where the manufacturer or dealer denies liability and the consumer is initiates proceedings in the court or tribunal seeking a statutory remedy under the ACL, the nature of which will depend on whether the failure to comply with the consumer guarantee was major or not. The third basis upon which a consumer can obtain redress is pursuant to public enforcement by the ACCC. Each basis will be considered in this part. What all three bases have in common is the need to conduct an investigation to identify the nature of the defect and how it arose.