Harvey Norman in hot water again! Second lawsuit slams retailer’s warranty cover

Harvey Norman, one of Australia’s leading retailers, is facing a second class action lawsuit in a week, sparking major concerns over its alleged misuse of extended warranty sales. The lawsuit claims that Harvey Norman tricked customers into buying warranties that were unnecessary, providing no additional protection beyond what consumers already receive under Australian law.

This latest lawsuit, filed in the Federal Court by Maurice Blackburn Lawyers, alleges that from September 2018 to 2024, Harvey Norman sold its Product Care warranties with deceptive claims. Consumers were made to believe that purchasing these extended warranties would offer extra coverage on electronics and whitegoods, but the warranties, in reality, duplicated existing consumer rights under the Australian Consumer Law.

Shares climb despite legal challenges

Despite these growing legal challenges, Harvey Norman’s shares showed surprising resilience, rising by 1.23% by 11:15 a.m. Sydney time, reflecting a market that appears unfazed by the potential financial impact. The stock, which has performed robustly over 2024, seems to be weathering the storm of legal scrutiny. Some market analysts suggest that investors are confident that the lawsuits will not significantly impact the retailer’s long-term financial performance.

Allegations of consumer deception

The class action lawsuit claims that Harvey Norman engaged in misleading or deceptive conduct by convincing customers that the extended warranties would offer benefits beyond their rights under the Australian Consumer Law. Customers reportedly paid an extra 10% to 40% of the product price for these warranties, leading to millions of dollars in revenue for the company.

Maurice Blackburn Lawyers, who is spearheading this legal battle, argued that Harvey Norman’s conduct was unlawful. They claim that customers were misled into believing they were securing protection they would otherwise lack, thus engaging in “deceptive and unconscionable” sales tactics. These actions are seen as violations of consumer protection regulations that could result in substantial compensation for affected customers.

In an earlier lawsuit filed by Echo Law, Harvey Norman and its subsidiaries, including Domayne and Joyce Mayne, were accused of similar deceptive practices. Echo Law argued that the extended warranty schemes generated “hundreds of millions” in revenue, with the retailer pushing these warranties onto unsuspecting consumers without disclosing the redundancy of the protection being sold.

Expert opinion: The growing legal scrutiny

Industry experts have weighed in on the situation, noting that this legal action underscores a broader issue within Australia’s retail industry. Many retailers are being called out for selling extended warranties that provide little to no benefit beyond what consumers are already entitled to under law.

Consumer law experts explained that class actions like these are crucial for holding companies accountable for their business practices. They said that while Harvey Norman’s business model thrives on high-margin products like extended warranties, the retailer now faces a serious reputational and financial risk if these lawsuits succeed.

If Harvey Norman is found guilty of breaching consumer law, it could open the floodgates for further lawsuits against other retailers engaged in similar practices. Companies must ensure that their sales tactics are not only legal but transparent and fair to consumers.

The future of consumer protection

As litigation unfolds, it may signal a shift in how Australian consumers are protected from questionable business practices. The Australian Competition and Consumer Commission (ACCC) had already raised concerns over extended warranty sales in the past, and these lawsuits could encourage further regulatory oversight and reforms.