Consumers still get raw deal with extended warranties says OFT

Consumers are still getting a raw deal when buying extended warranties from electrical retailers, the Office of Fair Trading (OFT) has said.

Following a new study, the Government's consumer watchdog said that despite "some improvements" being made over the years, a number of "credible" concerns remained. So it has welcomed proposals by retailers to make improvements, including setting up a price comparison website.

The extended warranty market has been on the OFT's radar for more than 11 years. Following a 2001 market study by the agency, the matter was referred to the Competition Commission.

This resulted in the Supply of Extended Warranties on Domestic Electrical Goods Order 2005, which brought in some improvements, including better rights for consumers to cancel.

However, there have been continuing problems, including some retailers failing to stick to the new rules, so the OFT began another study into the £1bn extended warranty market in April last year.

It found there was still limited competition caused by retailers pushing warranties at the point of sale, and shoppers were not getting the relevant information that would let them know if they were getting value for money or not.

Ann Pope, director in the OFT's Goods and Consumer Group, said: "Millions of extended warranties are sold in the UK each year and we remain concerned that, despite recent improvements, this market does not work as well as it could for consumers."

The OFT said that retailers Dixons, Comet and Argos had been very co-operative during the latest study and had proposed some legally binding concessions.

These include establishing and maintaining a price comparison site for extended warranties and conducting regular mystery shopping exercises; the results of which will be reported back to the OFT.

A representative for the Dixons Group said: "The OFT believes that the undertakings we have proposed will resolve any remaining competition concerns. We support any initiative that provides customers with greater choice.

The OFT agreed and told Computeractive that "it is minded to accept these proposals", but will need to carry out a consultation. This will allow members of the public and other organisations to put forward their views on whether these go far enough to protect consumers.

If the proposals are rejected, the mater would again be put to the Competition Commission.

People who want to comment on the proposed undertakings should do so by 7pm on Wednesday 7 March 2012.

They can either email their response to degs@oft.gsi.gov.uk or by post to: The Extended Warranties Team, Goods and Consumer Group, Office of Fair Trading, Fleetbank House, 2-6 Salisbury Square, London EC4Y 8JX.