The Federal Court has
ordered Ford to pay a $10 million penalty after finding the way it
responded to consumer complaints about PowerShift transmission (PST)
cars was “unconscionable”.
It’s the equal highest penalty handed down under Australian Consumer Law, matched only by a $10 million penalty handed to Coles in 2014.
At
least 2000 consumers who made complaints about Ford vehicles with PST
between May 2015 and November 2016 will be able to have their complaints
independently assessed.
Photo: Daniel Acker
"Under the current law it's an excellent penalty," Australian Competition and Consumer Commission chairman Rod Sims said.
Ford
admitted that, between May 1, 2015 and February 29, 2016, it
mishandled responses to complaints from customers who had bought Fiesta,
Focus and EcoSport vehicles fitted with PST.
Customers
had complained to Ford and the company’s dealers about a number of
issues including excessive clutch shudder, noisy transmissions and
excessive shuddering and jerking when accelerating.
Of
those vehicles, 37 per cent had at least one clutch replacement, but Mr
Sims said the company told consumers the issues were not its fault.
“Despite
knowing that shuddering was a symptom of the quality issues with the
vehicles, Ford frequently told customers that shuddering was the result
of the customer’s driving style,” he said.
“Ford
knew that the symptoms of the quality issues with the vehicles were
experienced intermittently, but required customers to demonstrate them
on demand in the presence of a dealer in order for repairs to be
undertaken.
“In most cases, Ford refused to
provide a refund or no-cost replacement vehicle to consumers, even after
vehicles had undergone multiple repairs that had not resolved
consumers’ complaints.”
The court found Ford's
conduct was serious due to the length of time - 10 months - it engaged
in the "contravening conduct". It also found Ford caused its customers
economic and non-economic harm - including inconvenience, stress and
frustration.
Mr
Sims said the $10 million penalty reflected the seriousness of Ford’s
conduct, which caused “considerable distress and frustration to
thousands of consumers”.
“Ford knew that its
vehicles had three separate quality issues, but dealt with affected
customers in a way which the court has declared to be unconscionable,”
he said.
The court ruled that a "substantial penalty" was warranted to ensure the company did not repeat its conduct.
$10 million fine first step to make it right: Ford Australia head
President
and chief executive of Ford Australia Graeme Whickman has apologised to
customers, admitting the company "took too long to identify the
issues".
“We were overwhelmed with the volume of complaints and, while it was not intended,
over a 10-month period our processes were inadequate and information provided was
either inaccurate or incomplete," Mr Whickman said.
over a 10-month period our processes were inadequate and information provided was
either inaccurate or incomplete," Mr Whickman said.
"We let our customers down and for that we are sorry."
He
said the ACCC's proceedings, started in July, 2017, had shown the
company lacked appropriate processes to handle customer complaints.
“Of
particular concern was the owner loyalty program, which resulted in
customers paying an additional cost to buy new vehicles although they
may have been eligible for a refund or no-cost replacement vehicle," Mr
Whickman said.
"We now realise this program was flawed as it didn’t ensure an adequate assessment of customers’ rights under consumer law."
He said the program was discontinued in November 2016.
'Hoping others get the message': ACCC
The
ACCC chairman said that, while it was the equal highest penalty under
current consumer law, companies should be aware the fines are set to
become much larger.
"[Assistant Treasurer
Michael] Sukkar has introduced a bill into Parliament a month or two ago
that would see the maximum penalty increase from $1.1 million per
offence to $10 million, or 10 per cent of turnover," Mr Sims said.
"So
the penalties in future will be a lot higher, but under the current law
it's an excellent penalty and we're very pleased with it."
Mr
Sims said that, while Ford had been co-operative during the
investigation, its original behaviour was "appalling" and he hoped all
car manufacturers would change their behaviour following the ruling.
"If
they don't get the message, we'll be coming for them as well because
this has to stop, this has caused enormous distress to consumers," he
said.
As well as the $10 million penalty, Ford has also agreed to contribute $500,000 towards the ACCC's costs.
Ford
has also made a court-enforceable undertaking to start a program to
review the customer refund or replacement requests made between May 1,
2015 and November 1, 2016.
The 2000 affected customers can also apply for an independent arbiter to assess their complaints.