25th May, 2015 · Fixed Operations

Capped Price Servicing Under The
Spotlight

2 minutes to read

ACCC to review car makers’ capped price servicing offers after Kia overcharges customers.
Kia Motors Australia will refund affected owners after the ACCC made their ruling on the manufacturer’s misleading advertising.

In a capped price servicing offer to customers starting in 2012, thousands of drivers were promised fixed maximum charges when their vehicles were serviced.

The offer appeared on Kia’s website and in other promotional material.

In particular, Kia promoted on its website that ‘the capped price applicable for each service is the maximum you will pay for your scheduled service.’

However, Kia’s terms and conditions allowed scheduled servicing prices to change at any time – the investigation found that Kia had in fact changed these prices four times since 2012.

The ACCC stated 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 Australian Consumer Law (ACL).’

Kia Motors Australia fully cooperated with the investigation and in response agreed to:

  • amend its terms and conditions to ensure that service prices are genuinely capped;
  • write to affected customers confirming the applicable capped price for their vehicle;
  • offer refunds to customers for amounts paid over the applicable capped service price;
  • introduce systems preventing customers from being charged above the capped service price; and
  • implement a consumer law compliance program.

‘Kia is committed to service and takes its obligations under the ACL very seriously,’ a statement from the company read.

‘In consultation with the ACCC we have agreed to make changes to our capped price servicing program.’

As a result of the steps taken by Kia, the ACCC has decided not to take any enforcement action against the car maker.

‘Capped price servicing offers can be attractive to consumers because they are a means to lock in the price of servicing their vehicles for a set period,’ ACCC Commissioner Sarah Court said.

‘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.’

As a result of these recent occurrences, the ACCC now intends to review other capped price service offers made to consumers to see whether similar issues arise.

Whilst Kia got off relatively lightly in this instance, a similar error could potentially cost manufacturers millions of dollars in fines on top of refunds made to affected customers.

With increased awareness about the pitfalls of capped price offers as a result of the Kia case, the next offender could well face harsher penalties.

Warranty and servicing promises made at a Dealer level are equally scrutinised and so it’s important to ensure your offers are above board.

If you’re unsure about your obligations or whether your servicing/warranty offers are legally compliant, seek professional assistance.