Competition Commission plans crackdown on extended warranties
Remedies include limits on sales incentives
May 20 2003
Limits on sales incentives for extended warranties, alleged to have encouraged retail sales staff to indulge in high pressure sales tactics, are among the remedies being proposed by the UK Competition Commission.
The commission has written to UK electrical goods retailers including Dixons, Comet Argos, and department stores John Lewis and Allders, setting out its view, following its investigation into the market, that retailers who sell extended warranties at the point of sale of the electrical goods are doing so in a way which creates a ‘complex monopoly’ situation. However, leading UK electrical retailer Dixons is not seen as having a monopoly in its own right.
The retailers, notably Dixons, have argued that warranties represent good consumer value for money and rejected any suggestion of pressure selling.
The commission is consulting on a range of possible remedies, including:
* requirements on retailers to display the price of their own extended warranty, as well as those of rivals and manufacturers, as well as information on the reliability of the type of appliance;
* extended periods during which consumers may cancel their extended warranty without cost;
* requirements that suppliers should offer annually renewable extended warranties;
* limits on incentives given to sales assistants and tighter controls on sales and discounting techniques;
* establishing a standard benchmark extended warranty.
The commission said some of these suggested remedies are alternatives, while others complement each other, and it will make a decision on which to recommend once it has considered any responses.
