Office of Fair Trade to investigate extended warranties

14 April 2011

a man in his shopAre you sick of being hounded by pricks in shops trying to flog you an extended warranty, which you'll invariably end up paying over the odds for? All you wanted to do was buy a washing or some shit - not end up filling a million forms in that cost you your wages.

Well, the Office of Fair Trading (OFT from now on because it is easier to type) have launched an investigation into the market which is worth £750 million, following concerns that there's a lack of competition in the market.

This is bad news of Comet and Dixons and the like, because they make a tidy sum from these warranties and, with around one in four people taking out extended warranties, it has been suggested that consumers could be paying £366 million too much thanks to a lack of options elsewhere.

Claudia Berg, director in the OFT's consumer and goods group, said: "Consumers buy millions of extended warranties on domestic electrical goods each year and we want to make sure they are getting value for money."

"We plan a short and focused market study to find out quickly what, if any, action is needed to make this market more competitive, to the benefit of consumers and the wider UK economy."

TOPICS:   Banking   Investments   Consumer Advice

17 comments

  • Will
    This country is becoming communist. Since when has it been wrong to rip people off? We live in a supposedly capitalist society. Part of that is capitalising on peoples stupidity!
  • John B.
    Good News. These bastards who openly break the law and cheat public only to satisfy their own greed should be investigated and punished. During my career in one of the retail chains, I was threatened with a performance review action by two of my GMs because I did not believe in pushing exteded warranties down customers throat. I was asked to sell less merchandise with more warranties instead of selling more goods without any warranties in order to keep my job. I showed my GM a copy of Consumer Protection Law 2008 but my GM did not want to know. After a few months another GM arrived and had the same conversation with me regarding KPIs and pushing add-ons. At that point I gave up on being a sales advisor. The government really has to take strict action and make an example of such criminals. I've met several employees who've been through the same route with the management. Either push push warranties and add-ons or face losing your job. The only way to stop this is to investigate such incidents and impose strict financial and criminal penalties on fat cats who are knowingly breaking the law asking their employees to break the law or face the sack.
  • washing
    I've always wanted to buy a washing. Can someone tell me what shops sell them.
  • sits w.
    John...you're an idiot... Some people like extended warranties... Some people don't mind paying for the peace of mind they offer. Some people just want to know that if/when something goes wrong they make a call and it gets fixed... No thumbing through the yellow pages, getting quotes and pissing about like that - one call - man comes out and fixes it - job done.
  • John B.
    In reply to sits back and watches. Dear Sir, true that SOME people like extended warranties and would want to buy but the point I was trying to make was when the retailers set 60% -70% targets on such warranties to be sold by staff and threaten them if they don't achieve these targets, this is an UNLAWFUL practise and must be investigated by the authorities. Operating within the law and working with honesty and integrity is what the customers need and you've somehow missed the point. What is wrong with staying on the right side of the law and give customers right information to make an informed decision. I believe you are a speaking on behalf of these fat cats who are going to be affected by this ruling and you are calling me an idiot for telling others my experience. You just need to read and understand Consumer Protection Law against unfair Trading Practices before you judge me. Reatilers have been taking advantage of public naivety for a long time and if this was allowed in law then there would have been no public uproar and ruling against it. But this is not the case. If you've been operating lawfully and with honesty then why should you worry about this investigation, I ask. Are you worried that it will reveal something something you do not want public to know and your profit will suffer. Again, some people like extended warranties but 100% of cusomers would like to be GIVEN the choice to make an INFORMED DECISION when purchasing extended warranties. Thats what the law says my friend, whether you like it or not. If you are a retailer and do not know the law or just want to ignore it then you are a criminal.
  • blagga
    I'm with John (not literally - I've never met him). I was once offered a £25 warranty on a £10 toaster. Moreover, they take advantage of sectors of society who scare more easily, such as older people. I constantly hear from my parents, who do know better, of friends who have been scared and bullied into taking warranties out on things that simply don't need them. Often, they amount to a significant amount of the total purchase. The other sector is the fucking thick, which in my experience represents around 98% of the walking British public. Actually, fuck em. Them them take out a warranty on their Union Jack clad mini beer fridge for under the bed. So, if these things were all fine, why would the OFT be investigating. Hmm? Hmm?
  • charitynjw
    The shit - do they gift-wrap it?
  • Vincent J.
    Its a HUUUUGE con, the lot of it! OK, say you got a dildo for £50. You got offered a three year warranty for £30.. You pay £80 for dildo and three years warranty... fine, so? Do you just realise you have been done??!?! Most things come with a year manufacturers warranty anyway, so you were only sold two years extra, not three! so you were lied to by the deceitful little smarmy cunt on the floor, who actually KNOW this fact. I have caught many a little stain out this way. Most people don’t realise you actually should have gotten FOUR years warranty with that extra THREE that you bought with your hard earned cash! BASTARDS!!!
  • singhster
    It's all a big con. Good job the OFT are on the case though, they'll sort them out good and proper. Or will find everything is fine. Again. And do fuck all. Again.
  • commy
    JOHN F**KING LEWIS' SHOULD HAVE THEIR ADVERT FOR A 5 YEAR WARRANTY ON TV'S INVESTIGATED!!! ITS A F**KING FOUR YEAR WARRANTY!!!!!!!!! you get a year free everywhere.
  • Fact F.
    A little known fact is that the City journalist Jeff Randall reported on Sir Stanley Kalms retirement that he had spoken with the Chairman of the electricals giant at lunch some years before about the roll-out of warranties in his retail chain - Currys and Dixons. The City sage advised Sir Stanley that it was an unwise move. It would appear that years later he has been proved correct. It may be that Mr Randall saw that service would become secondary to warranty sales and saw the dangers of concentrating efforts in that direction. Warranty sales led to a decline in customer service. Sales advisors were given targets for warranty sales which seemed to take precedence over the sale of an appliance. The selling strategy - "sell em whatever they want, even if it's not suitable, but don't let them walk out of the store without a warranty". I've been to many a store and talked with sales managers, and assistants. They all lived in fear of the daily warranty targets, and the daily rollicking for not selling enough of this high margin product. Wow, every sale carried the sentance of a warranty sales pitch! No wonder customer service centered staff became less than enthusiastic. Okay, their commission payments were good. And some sales staff saw customers as walk in suckers willing to part with good cash for questionable warranties. But imagine having to badger every customer who decided to purchase with the warranty sales spiel, then report back to their manager when the customer didn't buy, re-offer the warranty with a freebie thrown in, then go back to their manager, and after two or three 'pressured' attempts, admit defeat, and leave the beleagured customer alone, only to be grilled by their manager after the customer had left. No wonder that sales were lost as customers simply got up, told the salesman where to shove the goods, and walked out. The concentration on warranty sales above customer service led to Dixons decline and that of other electrical retailers hell bent on following their lead. No surprise then that when pressure sales were outlawed these retailers turned to rekindling their customer relationship with roll-outs of customer care initiatives. Suddenly customer service was top of the agenda. Shutting the barn door after the horse has bolted comes to mind. Savvy customers had migrated to the Internet where it's pretty near impossible to badger customers about extended warranties. And, surprise surprise, when offered them on-screen those who traditionally bought bought them, and those who never touched them didn't. Consumer power to the front! No wonder then that John Lewis have captured the market from the formerly dominant retailers. And that RicherSounds, with its simple 10% of cost price warranty extension, captured peoples attentions. (Some years ago, in a crowded staff meeting, a Dixons executive admitted that they had just realized that RicherSounds were capturing market share, something even the lowest warehouse worker could have told him over a year before! Out of touch, or what?) Some buy warranties willingly. Others simply don't want them thrust at them. And the obvious question any customer should ask when being offered a warranty is this - "Well, you can't be very confident about the quality and durability of that [TV, DVD, etc] if that's how much you're going to charge to warranty it. I'd much prefer something that will last a few years. Have you got an item that has 'built in durability'? Perhaps a Dyson with a 5 year guarantee." Salesman silenced. Sorted! And the comeback sales pitch, "What about the unexpected?" Meet that directly - "Are you accusing me of being careless with my appliances? Do I look like an idiot? And anyway, if I need extra cover I'll add it to my home contents." Salesman's mouth now zippered! The real dilema is the offering of manufacturers warranties that cover 5 years - Dyson comes to mind. That's the real killer of warranty sales. Confident manufacturers who believe in the quality and durability of their own goods. Sony also come to mind with its long warranty on flat screen TV sets. Who needs the extended warranty when the manufacturer covers their own goods. And as for 'accidental damage'. Just look to your home contents insurance. It's far far cheaper to cover a number of items than purchase individual warranties. Wise consumers buy one multiple appliance policy, or add cover onto their home contents. I'm afraid the warranty dilemma boils down to two concerns. Should they be so expensive? And should people be more informed on the alternatives? Do you really see retailers mentioning at the point of sale that the warranty is rather expensive and that the customer might save a considerable amount of money by increasing the cover on their home insurance? I doubt it! Conclusion - the status quo will continue unabated. Wake up consumers! If you walk into a store with the label 'loser' you're a direct target for slick salesmen. Stand up. Ask questions. And be prepared to walk if you don't like the attitude of the salesperson. The walkers will dictate the change in retailers attitudes. Retailers are too used to Brits not complaining. And they exploit the walking 'retail' wounded who enter their doors every day. Retail profit cannon fodder!
  • T
    It never ceases to amaze me how many people get 'FORCED' into buying extended warranties, Don't you people have free will to say no sorry I don't want an extended warranty. Nobody is forcing you to buy it just say no. And to those people who wonder why big companies try and get you to sell extended warranties consider this. A laptop for example makes very little profit for a company as every man and his dog sell them nowadays and the prices are so competitive there is no margin on them. Of course you are going to have targets on how many you sell the same as you will be targeted on attaching high value items to sales, it doesn't mean you force them on people it just means you give people the option and show them these things are available. If a company makes no profit the company will go bust and everyone will be out of a job. All big companies have to look at ways of making more money and if people want extended warranties then as long as they are not sold them under false pretences then where's the harm?
  • Ten B.
    [...] Office of Fair Trade to investigate extended warranties [...]
  • Retail T.
    Erm.. You get a free warranty everywhere? Try again. Trading standards will tell you that a company doesn't have to offer you fook all warranty for goods they sell. A guarantee is company policy only. As long as said company doesn't break the Sales of Goods Act when selling products then it's all gravy. You lot Getting this?
  • Somebody
    In fairness, a 3 year warranty generally (from Dixons/Comet anyway) does more than a standard warranty, think accidental damage, technical support etc. So the 3 years is of their warranty not of the "If the hardware goes wrong, lol" 1 year warranty.
  • gazbar
    So John B, 'but the point I was trying to make was when the retailers set 60% -70% targets on such warranties to be sold by staff and threaten them if they don’t achieve these targets' What facts do you base such wild estimates on exactly?
  • ex e.
    You are covered for 5 yrs under eu law on electrical items if you can prove it was a fault with the machine and not the users fault. For accidents home insurance or other insurance companies you can easily find on the net. As for the other benefits like annual tune ups, x amount of f know how services etc it can be a good service but yes its over priced. For fact finder sorry mate you don't have a clue what its like working in retail or run a business. Most customers complain and talk to the staff like they are crap. I am not saying the company has no need to improve but most of you guys rant without knowing anything about costs margin ect. After a years trading and you ideas of dixons rubbing their hand from ripping you off they only made just shy of 80 mi. 50 mil came from cut backs job loss ect. So after all you ranting and dixons being greedy they only made 30 mil which lets face it for a ftse 250 is crap. With out the services which have (I have witnessed lots of situations) benefited a lot of customers the company makes a loss and goes bust. Anyone that wishes that to thousands of workers need to grow up. I dont work for the company anymore but please dont wish on to others and talk about things you have no fucking idea about you plebs.

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