Motor vehicle manufacturers and dealers should review capped price servicing arrangements to avoid issues with ACCC

The ACCC has taken action after completing an investigation into Kia Motors’ capped price servicing advertisements. Since 2012, Kia has been advertising that the price for scheduled services on Kia vehicles would not exceed a maximum capped price for a set period of time, or for a set number of services, after purchase.

Offering capped price servicing has become a widespread practice in the automotive industry. The practice allows consumers to ‘lock in’ the price of servicing their vehicle over a set period and consumers often choose to buy particular manufacturer’s car over others if capped price servicing is offered for a longer period of time.

Kia’s terms and conditions allowed the price of scheduled services to change from time to time. Kia changed its ‘capped prices’ four times between 2012 and 2015.

Kia’s terms and conditions allowing the change in price were not found to contravene the Competition and Consumer Act as an unfair contract term or otherwise.

However, the ACCC considered that Kia’s advertising of its capped price servicing offer was likely to mislead a consumer, as the website specifically stated that ‘the capped price applicable for each service is the maximum you will pay for your scheduled service’. The ACCC determined that this misrepresentation, among others, amounted to a contravention of the Australian Consumer Law (ACL).

As a result of the ACCC’s findings, Kia has agreed to:

• amend its terms and conditions to genuinely cap its service prices;
• write to consumers to confirm their current capped service prices;
• offer a refund to consumers who have paid service prices above the price that applied when they purchased their vehicle;
• introduce systems to ensure that consumers are not charged higher maximum prices; and
• implement a consumer law compliance program.

The ACCC has indicated it will be reviewing the practices of other vehicle manufacturers to assess if there are similar issues in other capped price service offers.

This ACCC action is part of a wider crackdown on anti-competitive behaviour following the release of the Harper Competition Review Draft Report on 22 September 2014. The final report is expected to be handed down in the next couple of months.

The clear message from the ACCC for suppliers is to ensure that the terms on which goods and services are provided to consumers are fairly and accurately represented in marketing material.

Making false or misleading representations or engaging in misleading or deceptive conduct about the price of goods or services is prohibited by the ACL. This conduct can attract a maximum penalty of up to $1.1 million per contravention for a company and $220,000 for an individual.

Having accurate marketing material is a vital step in ensuring your organisation is compliant with the ACL. If you have any questions about your organisation’s obligations under the ACL and ensuring marketing material is compliant, please contact us.