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Last Updated:  Friday, 28 February, 2003, 08:06 GMT
Competition inquiry into warranties
The UK's Competition Commission has published its initial findings into extended warranties on domestic electrical goods.

The Commission said on evidence received so far, a "scale monopoly" situation may exist within the market, as Dixons Group - the UK's biggest electrical retailer - appears to supply at least 25% of the market both by number and value.

However, this did not imply any adverse findings in relation to the company, it stressed.

The Commission also revealed it was looking at warranty sales at Argos, Littlewoods, and insurance companies Cornhill, Landmark, Pinnacle and London General, among other companies.

The inquiry into extended warranties follows a damning report by the Office of Fair Trading (OFT), published in July 2002, which concluded self-regulation of the annual £800m market had failed.

Monopoly suspicions

The Commission said it also believed that one or more complex monopoly situations may exist within the sector, in favour of electrical goods retailers who offer extended warranties at the point of sale.

Under investigation*
Dixons, Comet, Powerhouse, Argos, Littlewoods, MFI, Cornhill, Landmark, Pinnacle, London General
*Announced so far

The commission stressed it had not yet reached any conclusions, but was investigating whether the sale of warranties was against the public interest.

A Dixons spokesman criticised the inquiry.

"What they've done is they've drawn a market that is too small, and that's distortion," she said.

Consumer groups, most notably the Consumers' Association have been campaigning for a full investigation into the market.

What are your experiences of extended warranties? Are they good value or a rip-off?

Your comments:

Extended warranties are an absolute rip-off. A 5-year warranty costs almost as much as the original product - WHY?
Nick, England

If a product breaks down outside its manufacturing warranty but could be reasonable expected to have lasted for a longer period than it has, then the customer has grounds for taking this up with the supplier.
Gary Henderson, UK

I think it's fair to say that all warranties are a waste of time. If an electrical item is going to die it will tend to die in the first few weeks after the purchase. There is always an issue of fitness for purpose and general rights for a buyer of electrical goods. If you buy a PC and it dies within 6 months of buying it and you don't have a warranty you will still be covered by trading standards and the "fitness for purpose" of said goods. The other issue is that once you've paid for your warranty you've probably spent about 20 quid less than the cost of replacing the item.
Bug, UK

I find the whole situation ridiculous. The retailer sells you a product, then suggests you take out insurance in case the product fails. In other words, they are giving the impression that they have no faith in the product they are selling. I never take the extended warranty which has saved me hundreds of pounds over the years, more than enough to cover the cost of a replacement washing machine, or any minor repairs. I'm in profit!
Nigel Jarvis, UK

Extended warranties on electrical goods are unnecessary and just another way of parting the customer from his cash. Electrical goods are so reliable these days that the manufacturer's initial 12 month guarantee is more than sufficient. If something is going to fail, it will happen within a few months of purchase, otherwise it will continue working for ages. A good example is my old television, I can't remember when it was bought: it is at least 25 years old - probably older, it doesn¿t even have teletext or a remote control. It is still working and showing no sign of breaking down. I am waiting for it to fail (at my wife's insistence - if it's working why replace it?) so that I can buy one which a DVD player can plug into. It seems like I will have to put my boot through the screen.....
Alan Jones, England

I recently refused one for a washing machine that would have cost almost a third of the cost of the washing machine itself! I decided that IF it broke down I would pay to get it repaired or buy a new one.
Chris, UK

They may well be a small rip-off. But, what's the problem? Dont buy them, I dont. The Government should focus on the HUGE rip-offs that we can not avoid - like almost everything to do with pensions.
Graeme, UK

The 'big name' manufacturers cannot afford to produce goods which fail within a few months of purchase. Think of the damage to their brand. Don't buy warranties on products from the big name manufacturers; but complain like fury if they do go wrong.
Simon Hughes, UK

When you are offered the extended warranty can i suggest you ask the retailer how many of the product you are purchasing the company has sold and also how many faults they have had with the product. This will then let you know either to purchase the item without the warranty or simply not to purchase the item. This information should be provided by law to any company selling warranties as this would let the consumer make an informed decision.
Brian, England

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The BBC's John Moylan
"Are we paying over the odds for peace of mind?"

OFT appeal to consumers
26 Oct 02 |  Moneybox
Q&A: Extended warranties
22 Oct 02 |  Business
Warranty buyers 'losing out'
15 Oct 02 |  Business

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