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ACCC warns car-makers on capped-price servicing

Cap must fit: Kia was found to have slightly changed prices of scheduled services four times since 2012, despite stating that published capped prices would be the maximum owners would pay.

Consumer watchdog probe into Kia capped-price servicing serves as lesson to industry

Kia logo23 Feb 2015

By NEIL DOWLING

AUSTRALIA’S consumer watchdog has warned car companies to stringently adhere to their capped-price service agreements after finalising an investigation into Kia Motors Australia.

The Australian Competition and Consumer Commission (ACCC) today announced the findings of an investigation in relation to misleading and deceptive practices applied to Kia’s capped-price service program.

The watchdog has elected to take no action against Kia following the company’s voluntary compliance with ACCC requirements including the instigation of a new capped-price program.

Action against car-makers under the ACCC’s powers could result in fines of up to $1.1 million per contravention.

But the investigation by the ACCC has huge ramifications for the capped-price industry and could result in future action against other car manufacturers.

In its findings from the Kia investigation, the ACCC said it “now intends to review other capped-price service offers made to consumers by vehicle manufacturers to assess whether any similar issues arise”.

The ACCC was responding to a Kia owner’s complaint about a rise in the capped-price service charge. In the complaint, the owner said the price had risen between service intervals, contravening Kia’s website statement that “the capped price applicable for each service is the maximum you will pay for your scheduled service”.

The ACCC found that Kia’s terms and conditions “allowed scheduled service prices to be amended at any time and, in fact, these prices had been changed by Kia four times since 2012”.

The ACCC considered that Kia’s advertising of its capped-price servicing offer was likely to amount to a misleading representation to consumers that the price of having their vehicle serviced was capped at the maximum amount specified, in contravention of the Australian consumer law.

The watchdog said Kia Motors Australia (KMAu) had fully co-operated with the investigation.

KMAu general manager of media and corporate communications Kevin Hepworth told GoAuto that the company had instigated a new capped-price service program which is linked with each car’s vehicle identification number (VIN).

“The new vehicle’s VIN would be linked to the capped-price service agreement so from the date of the customer taking ownership of the vehicle, the service program schedule’s price would not alter,” he said.

“This would be for the seven-year life of the program.”

The change in the service price for the complainant’s car was believed to be from “a few cents” to “six dollars” and related to increases in the price of parts or labour costs, Mr Hepworth said.

“Now we will ensure that no Kia owner has been disadvantaged in the past,” he said. “We will now examine our service records and will refund affected customers.”

Kia believes the number of affected customers could run into the thousands.

ACCC commissioner Sarah Court, said: “Capped-price servicing offers can be attractive to consumers because they are a means for consumers to lock in the price of servicing their vehicle for a set period.

“Businesses that make capped-price offers of this type in their advertising campaigns or represent that consumers can fix the maximum charge for particular services must ensure that these offers are not eroded by later reliance on amendment provisions in their terms and conditions which permit price changes.”

The ACCC said misleading or deceptive conduct and making false or misleading representations about the price of goods or services are prohibited by Australian consumer law.

False or misleading representations attract a maximum penalty of up to $1.1 million per contravention.

KMAu introduced a five-year capped-price servicing scheme in August 2012 under a program known as ‘Kia Connect’. It extended this to an industry-leading seven years in October last year.

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