Competition Commission details warranties probe
Retailers face monopoly investigation
February 28 2003
The UK Competition Commission has set out the scope of its probe into the sale of extended warranties by electricals retailers. This will include investigation of a potential monopoly by market leader Dixons, along with other retailers.
The commission has written to retailers, insurers and manufacturers of domestic electrical goods involved in the extended warranties market, setting out the scope of its inquiry under the Fair Trading Act.
The commssion has indicated that it consider “a scale monopoly situation may exist” because Dixons appears to supply at least 25 per cent of extend warranties through its retail chains including Dixon, Currys, PC World, and The Link. A statement issued by the commission stressed “this does not imply any adverse findings in relation to Dixons Group.”
Other retailers included in the investigation are Comet, Powerhouse, Argos, Littlewoods and MFI, along with insurance companies Cornhill, Landmark, Pinnacle and London General. “It is possible that others involved in providing extended warranties may also be part of a complex monopoly,” said the comssision.
The investigation will look at whether one or more companies is involved in a monopoly situation, on any steps being taken to exploit or maintain such a situation, and on whether this operates against the public interest.
The issues letter is sent to the main parties in an inquiry to set out the matters identified for investigation, giving them a chance to respond. The commission will also hold hearings with a number of the main parties individually, as well as a public hearing in London on April 25.
The Commission said its has not reached any conclusions, but that possible uncompetive practices may include restricting choice by only offering one choice of warranty at the point of sale; requiring consumers to contract and pay in advance for services; setting prices above competitive levels; restricting information about alternatives; misleading or pressure selling; unfair terms or conditions; and uninsured service agreements.
The probe follows a long campaign by the Consumers Association, which has claimed extended warranties are unfair and often unnecessary.
An NOP survey on consumers’ experience of extended warranties has also been carried out for the commission. This found that around one in three consumers had taken up an extended warranty in the past year, and that in 82 per cent of cases the warranty was taken out with the retailer which sold the product.
