ACCC, Brydens Lawyers and Choice concerned by car makers’ use of gag orders

CAR makers may be breaking the law by gagging customers as a condition of a repair, replacement or refund. Find out if your manufacturer uses them.

EXCLUSIVE

CAR makers may be breaking the law by gagging customers as a condition of a repair, replacement or refund.

A Choice survey found confidentiality deeds were foist on 16 per cent of those who had problems with new cars under warranty, which two out of three owners do.

Three of the top four brands — Toyota, Mazda and Hyundai — admitted to using nondisclosure agreements (NDAs). The other member of the quartet, Holden, did not rule it out.

“It’s completely unacceptable that consumers are forced to sign NDAs when they are seeking to get access to their basic consumer rights,” said Choice spokesman Tom Godfrey.

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Choice spokesman Tom Godfrey wants nondisclosure agreements reviewed. Picture: Supplied

The Australian Competition and Consumer Commission expressed “concerns” about the use of NDAs.

A legal expert said it could be unlawful.

“There is no statutory or other legal obligation on the part of the consumer to execute an NDA, said Brydens Lawyers principal Lee Hagipantelis. “In fact the demand or requirement by the motor trader for the consumer to execute such a document may be unlawful.”

Brydens Lawyers principal Lee Hagipantelis. Picture: Supplied

Mr Hagipantelis said the Competition and Consumer Act prohibits a corporation from using undue harassment or coercion in connection with the supply of goods.

He also said common law permits a consumer to escape any contractual obligation imposed by the NDA where duress is established. Duress would be where “illegitimate pressure” was exerted to get the consumer to sign the agreement. That could be where “the dominant party threatens not to perform its contractual obligations pursuant to its current obligations unless a further agreement is entered into”.

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The Australian Consumer Law (ACL) is about to be officially reviewed and Choice’s Mr Godfrey said “we’ll be looking for options in the ACL review for explicitly dealing with NDAs”.

An ACCC spokesman said it “would have some concerns when a business seeks to impose confidentiality clauses as a condition of providing remedies a consumer is entitled to under the consumer guarantee provisions of the Australian Consumer Law”.

The federal minister responsible for consumer affairs, Kelly O’Dwyer, had no comment.

Hyundai said it uses NDAs on the rare occasion it buys back cars. Toyota said in “some instances” it employed NDAs for replacements and refunds.

Mazda said NDAs were “not uncommon”.

Holden said NDAs were not “standard practise”. A spokesman said the Choice survey showed “this is clearly an industry-wide area that requires attention”.

Melbourne’s Teg Sethi recently settled a dispute with Fiat Chrysler over a Grand Cherokee after signing an NDA.

Under the terms of an initial NDA put to Mr Sethi, his one-year-old son Jeevan was among those prohibited from disparaging the car maker.

The NDA was amended, Mr Sethi said, “which resulted in a mutual resolution”.

He said he could not say what the change was — due to the NDA.

Teg Sethi, his wife Rani and their son Jeevan, 1, with their new Mazda3. Picture: Jason Edwards

Mr Sethi made a rap song about his purchase which has been viewed 2.3 million times on YouTube.

He and wife Rani now drive a Mazda.

Fiat Chrysler declined to comment.

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