Office of Fair Trading
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Electrical goods warranties more competitive, but rules not fully obeyed - OFT

Electrical goods warranties more competitive, but rules not fully obeyed - OFT

OFFICE OF FAIR TRADING News Release (114/08) issued by COI News Distribution Service. 3 October 2008

Action to make the supply of extended warranties on domestic electrical goods more competitive has saved consumers money, but there is evidence that some stores are still not fully complying with legislation, according to an OFT report published today.

Extended warranties are policies which provide additional cover over and above the manufacturer's warranty on goods such as televisions and refrigerators. A market study carried out by the OFT in 2001 led to a Competition Commission inquiry, following which the Government made the Supply of Extended Warranties on Domestic Electrical Goods Order 2005.
This obliges retailers to provide clear information about extended warranties which they provide, as well as requiring certain cancellation and termination rights.

In this first evaluation of the Order, today's report concludes that although there have been a number of benefits for consumers, some outlets are still not complying with the rules.

The report found that:
* 15 per cent of consumers now shop around for extended warranties compared to four per cent in 2002,
* fewer consumers are purchasing extended warranties at the point of sale, and this has fallen from 82 per cent in 2002 to 68 per cent in 2008, and
* since the introduction of the Order, consumers have benefited by around £51 million.
However, the report also highlighted that:
* leaflets were not always 'prominently displayed' as required in shops,
* five out of 13 leaflets examined had pieces of required information missing,
* in around 45 per cent of the stores visited by mystery shoppers, retailers had not provided required relevant information about extended warranties, and
* there was also evidence that up to one third of sales staff failed to provide to consumers the correct information concerning consumer rights as specified in the Order.

As a result of these findings, the OFT has written to stores that do not comply with the Order, and is working closely with the Radio, Electrical, and Television Retailers' Association (RETRA) and the British Retail Consortium (BRC), to ensure that stores that sell domestic electrical goods are aware of their obligations. The OFT will also continue to monitor the market, and consider further 'mystery shopper' exercises which may include testing sales staff on consumers' rights when purchasing extended warranties.

Tony Donaldson, OFT Director of Economics said:
'This is an important market for UK consumers, who spend around £24.3 billion a year on domestic electrical goods such as fridges, TVs, and washing machines, and we are concerned that there is a lack of compliance by a number of sellers.

'The OFT continues to monitor the sector to ensure that consumers know their rights and are given the correct information when buying extended warranties.'

NOTES
1. For more details on the OFT's work on Domestic Electrical Goods Extended Warranties click go to the OFT website : http://www.oft.gov.uk.

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