Auction business Grays deceived used car buyers over two-year period, causing $3 million in consumer losses

by Admin
July 18, 2024

Auction business Grays deceived used car buyers over two-year period, causing million in consumer losses

In short:

Nationwide auction business Grays Australia has been ordered to pay a $10 million federal court penalty over its contraventions of consumer law.

The ACCC brought the lawsuit against the company after it admitted to selling 750 cars with wrong descriptions to customers between 2020 and 2022.

What’s next?

Grays is undertaking a redress program for impacted consumers, will have to pay legal fees, and maintain certain compliance protocol.

Online auction business Grays will pay a $10 million fine and compensate hundreds of car buyers it deceived through dishonest advertisements, causing more than $3 million in losses.

The Australian Competition and Consumer Commission (ACCC) took Grays eCommerce Group Limited to court in February after it admitted having made false or misleading descriptions of at least 750 vehicles listed for sale on its website between July 2020 and June 2022.

Information including the make, model, and features of cars was wrongly represented, and “obvious faults” were not disclosed, the consumer watchdog said, with some buyers having to bear heavy out-of-pocket repair costs and others having to re-sell their purchases at a loss.

The Federal Court on Thursday ordered the company to pay $10 million in penalties, maintain an Australian Consumer Law compliance program, and compensate a portion of the ACCC’s legal costs.

Grays will also provide redress to buyers affected by its conduct, with customer contact already having been initiated.

“Hundreds of consumers may have bought a car they would not otherwise have purchased, or may have paid more than they would have, if they had known the correct details,” ACCC Commissioner Liza Carver said.

“Affected consumers often had to invest significant time and energy to convince Grays to provide a remedy, and were made to wait months for a resolution.”

Ms Carver said the incorrect car listings had induced an estimated $3.86 million in losses to consumers.

“Grays’ undertaking to pay compensation to consumers is an important part of the resolution of this matter, and provides a meaningful outcome for affected consumers,” she said.

Under the redress program, the company will compensate customers who made a complaint about misdescribed cars nationwide, depending on the extent to which the incorrect description impacted the car’s functionality.

Remediation options available to each eligible consumer include returning the vehicle to Grays for a full refund, retaining the vehicle and receiving a refund of 30 per cent or 20 per cent, or a refund of $300.

“Grays is committed to remediating affected customers and is complying with the ACCC’s directions,” Grays CEO Gary Allen said.

“Overall and proportionally, the issue affected a very small number of competitive automotive auctions we facilitated.

“Grays is well progressed in the proactive remediation of impacted customers and continues to facilitate competitive auctions for its buyers and sellers, providing an excellent service that is easy, fair and transparent.”

The retail and auction platform sells products across a range of categories including construction, manufacturing, large automotives, electronics, commercial items, caravans, and catering equipment.

What’s the law?

All used motor vehicle dealers have a legal obligation under Australian Consumer Law but regulating the policy area is complex.(AAP: James Ross)

Consumer protections in the used car industry remain an area of loose regulation, with buyers often finding themselves stranded when problems arise with new purchases.

Legally speaking, a warranty applies for purchases from second-hand car dealerships in the same way as new cars, meaning customers have a claim to be compensated for manufacturing faults encountered within that period.

The Australian Automotive Dealer Association (AADA) says customers buying used vehicles from a licensed motor car trader have an added level of protection with statutory warranties given the strict government mandates they are subject to.

“In the case of an authorised franchised car dealer, there is an added incentive to comply with the law and to operate ethically because failure to do so risks having your dealer agreement terminated by the manufacturer,” AADA CEO James Voortman told the ABC.

The ACCC enforces Australian Consumer Law (ACL) which holds motor vehicle businesses accountable if they break certain rules, but this oversight doesn’t account for any certification processes relating to the listings a dealership makes.

There are consumer guarantees set out under the ACL which suppliers and manufactures are required to honour, ensuring goods and services are of acceptable quality, and these apply to all purchases from a trader or a dealer.

Disputes between consumers and licensed dealers are dealt with on the state and territory level, with each jurisdiction having its own set of guidelines when it comes to used car sales, but the process is often complex.

“Any entity advertising new or used vehicles for sale has an obligation to comply with the misleading and deceptive conduct provisions of the Australian Consumer Law,” Mr Voortman said.

“The ACL is working well and the ACCC has been very active in the motor vehicle space for a number of years.

“The number of disputes involving motor vehicles before state tribunals is low, and this is because many dealers will attempt to settle a consumer law dispute, because frankly they live and die on return business and do not relish being in dispute with their customers.”

The ACCC has been calling for penalties to be imposed on companies that do not fix or replace faulty goods, including motor vehicles, for a number of years, and continues to advocate for law reform in the area.

Posted 16 hours agoThu 18 Jul 2024 at 5:45am, updated 15 hours agoThu 18 Jul 2024 at 6:41am