The customer is the boss
Sam Walton knew about building a successful business servicing customers. He founded the American retail giant Walmart. Sam said “There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”
Misleading conduct- accidental or deliberate; its all the same
Looking after consumers begins at the marketing and selling stages. It might seem obvious to say that no one likes to feel that they were misled when choosing products or services, but it happens. Often!
In an ideal world, if all businesses consciously followed the philosophy that the customer is boss there shouldn’t be any need for consumer protection laws. But, it’s amazing how many businesses either deliberately use misleading tactics to get sales, or don’t care if their customers understand the truth about the products on offer or about the consumer rights.
Maybe even more surprising is the fact that it’s not just small businesses operating with a few, overstretched staff who mistakenly do or say the wrong thing. Large, sophisticated, well- resourced companies with in- house legal and compliance teams also get caught out for failing to comply with consumer protection laws and misleading consumers. For example, Coles is being sued by the ACCC for alleging that its bread was freshly baked when it was made overseas and finished off here. Remember the overseas grown fruit and vegies that Coles displayed under signs saying “Helping Australia Grow”?
Protecting the consumer with laws
In Australia, the Australian Consumer Law is the law that protects consumers from companies deliberately, mistakenly or unintentionally behaving in ways that may mislead or deceive consumers or misrepresent the truth of the goods or services they offer. It is one of several laws and standards that regulate product safety.
Australia is not alone in seeing a need to pass consumer protection laws. It was recently reported that Walmart, along with several other multinational companies, has been accused of rushing products to market in China without complying with the relevant Chinese product safety and consumer protection legislation. (http://www.huffingtonpost.com/2014/01/29/walmart-china-compliance_n_4684517.html).
Complying with consumer protection laws can be a headache
Compliance is challenging for a company the size of Walmart, because of:
- the vast product range;
- the large number of suppliers and manufacturers of the products it retails;
- the large number of stores;
- the number of countries in which it operates and the different legal requirements of each.
Many large retailers also franchise their businesses, making compliance less certain. Late last year five Harvey Norman franchisees were ordered to pay between $28,000 and $32,000 each for making false or misleading representations about consumers’ rights in relation to faulty products failing to comply with the Australian Consumer Law.
Compliance programs ease the pain
The answer is not more headache pills, but in implementing good compliance programs and systems.
Walmart has implemented compliance systems that are common to all the countries in which it operates and compliance programs that are specific to the laws of each country. It has appointed senior compliance officers to oversee compliance, conducts regular risk assessments, increased its compliance training and is working from the top down to ingrain compliance in the organisation’s culture.
To help manage its compliance risks and make verification of claims easier in China, Walmart has developed a computer based documentation process that retains and records over 1 million documents including:
- Product labels that accurately reflects the product ingredients to allow verification;
- Test reports;
- Compulsory Certificates;
- Product samples or pictures from the manufacturers;
- Relevant permits and licences held by manufacturers;
- Verification of product claims including “organic,” “world-famous,” and health benefits;
- Official bar codes applied for by manufacturers; and
- Intellectual property documents.
Suppliers can access and upload relevant documents and the system will flag any missing reports and other documents.
All organisations dealing with consumers can benefit from implementing a compliance program relevant to its size and business. Most compliance programs won’t be as complex as the ones that Walmart has in place, but good compliance programs can ensure that things don’t get missed, such as foreign fruit ending up under a sign indicating it is Australian. One of the remedies that the ACCC often imposes for companies that have engaged in misleading conduct or other breaches of the consumer protection laws is the implementation of a compliance program.