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When do I have to give customers refunds for products they bought online shopping?

online shopping laws

The Australian Consumer Law is the law that you need to comply with when customers ask for a refund for online shopping. The law gives consumers rights or guarantees in relation to your products. These include that each product must be of an acceptable quality, that it matches the description you provide, and if you give any additional warranties they will be honoured, amongst other matters*. It’s important to know your obligations under the Australian Consumer Law, because the ACCC can issue fines for not complying.

Products of acceptable quality

The law tells us that the products you sell must be of acceptable quality, which means that the products do the things a customer would expect them to do. For example, if you sell women’s clothing online it must be wearable! And the garment must be free from faults (zippers and buttons must work), safe (not highly flammable) and durable (can’t fall apart after the first couple of wears). If there are potential issues that you see, make sure you inform the customer accordingly. Say you sell distressed jeans (ie purposefully ripped) you should make sure your description matches the garment, so it is clear that the rips, or any intentional fading are not a fault or defect in the garment. Customers are more vulnerable when online shopping because they cannot directly see, touch and feel the product, so they rely on you to make sure they are of acceptable quality.

Description match

It’s pretty simple to make sure the products you sell match the description you provide, but you do need to take some added precautions when selling online. For example, if the picture you give is of a blue shirt, you can’t deliver a pink one, and if you say with your baby carrier that “no insert is required”, then the product should be suitable for a baby without using an insert. If you try to be as accurate as you can in your descriptions, you should be able to comply with this easily. However, if your product does not match the description you provide when a customer is online shopping, you will need to give a refund. This is particularly important when you run an online shop, because customers cannot feel and touch the products, so they rely entirely on your product description to assess the product.

Suitable for the purpose a customer tells you

If a customer tells you that they need a product for a particular purpose and you say it is suitable for the purpose, then it must be suitable or they are entitled to a refund. For example, if a customer tells you they need a wheel for their pram, and you tell them that the wheel you sells works with that particular pram, they are entitled to a refund if it doesn’t work. When a customer is online shopping and purchases a product that is not suitable (provided they told you their requirements), then the customer is entitled to a refund.

Samples and demonstration match

The law requires that where you offer any samples or demonstrations of products to a customer, the actual product must match. So, if you give a potential customer a sample of makeup or lotions to use, the products you supply must be the same. Or if you show a potential customer what some cleaning cloths can do, the products you sell should be able to clean in the same way. Where you have a bricks and mortar store in addition to online, if a customer sees a product in store, and orders the same when online shopping, be extra careful to ensure you provide them with the matching product.

Extra guarantees

Sometimes you may offer express warranties, such as that some wellington boots are “guaranteed to be waterproof.” It really is common sense, but if they are not waterproof, then you will have to give the customer a refund. Be careful when giving extra guarantees. Guarantees like a “happiness guarantee” can be very vague, and you may end up giving more refunds for unhappy customers than you intended. It’s tempting to offer customers extra guarantees for online shopping, particularly where the trend for e-commerce is growing quickly, so offer them with care.

Terms and conditions

The best way to ensure compliance with the Australian Consumer Law for your online shop is to make sure you have terms and conditions of sale that include clauses that comply with the law. That way you can refer back to the terms whenever someone asks for a refund.

Just as it is important to know when you need to give a refund, it is just as important to know when you don’t need to give a refund, and your terms of sale will help define when you don’t give refunds. For example, where a customer changes their mind, then you do not have to give a refund. And if a customer sees a cheaper product elsewhere, you do not have to give a refund.

Where a customer damages the goods by using them in a way that was abnormal, where they have misused them, not followed instructions, or not taken reasonable care you also do not have to provide a refund. You can also require a proof of purchase before giving a refund, however you cannot demand that a customer return it in the original packaging.

Where all these matters are clearly set out in your terms and conditions you have a rulebook you can refer the customer to, and help with the smooth running of your business. Your customers can enjoy their online shopping experience knowing that you are compliant with the law.

If you need assistance in drafting your terms and conditions to ensure compliance with the Australian Consumer Law, please book a free 20min consult here.

*There are also some obvious guarantees relating to title – that you the business has the right to sell the goods, and that no one will try to repossess them, and there are no security interests in them. And some additional guarantees such as those for manufacturers who need to be able to guarantee the availability of repairs and spare parts.

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