Watchdog backs concern over 'rip-off' warranties

Published on Sunday 2 March 2003 00:00

GO IN to any electrical shop and buy anything from a personal CD player to a washing machine and the eager sales assistant is certain to offer you the chance to take out an extended warranty.

They’re promoted as giving ‘peace of mind’ on your purchase for a longer period than the standard warranty provided by the manufacturer.

But consumer groups and financial experts have long been telling buyers to beware of entering into such deals, and last week their concerns were backed by the competition watchdog.

Evidence appeared to show there was a lack of choice for shoppers, the Competition Commission said in a report.

It found there was "very little, if any" information provided by retailers about alternative warranties and that policies might contain unfair terms or conditions.

The watchdog said it also found evidence that some retailers were providing "misleading or incomplete information" when trying to sell extended warranties.

The 800m market for warranties on household electrical goods was referred to the commission after an investigation by the Office of Fair Trading raised "serious questions".

At least 25% of all extended warranties were supplied by the Dixons Stores Group - which includes major high street names Dixons, Currys and PC World - the commission said.

Together with rivals Comet, Powerhouse, Argos, Littlewoods and MFI, they control around 50% of the retail market for warranties in the UK.

The commission, while careful to stress it had no evidence to prove they were acting against the interests of consumers, added there might be cause for concern. "This could arise from practices that act to prevent, restrict or distort competition," it said.

An "issues letter" published by the commission last week, set out the main areas of concern raised since last July and need addressing as part of the investigation.

A series of meetings with the main parties is due to be held shortly, followed by a public hearing in London on April 25.

Sheila McKechnie, director of the Consumers’ Association, said: "The issues letter from the Competition Commission is prima facie evidence that this market is rigged against the consumer.

"The breadth of potential problems raised is breathtaking and covers every element of the market.

"If even half of these are upheld, then the market will be seen to be the rip-off consumers know it is. If, as we believe will happen, all are upheld, radical surgery will be needed."