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Extended warranties on domestic electrical goods

Launched: October 2001

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Purpose of the study

To address competition concerns and concerns regarding levels of consumer protection in the market.

(Study followed in-house work.)

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Findings

The findings of the study showed competition not working effectively and consumers not adequately informed or protected:

  1. Extended warranties frequently purchased as an afterthought. Consumers do not shop around for the best value policy and retailers' point of sale advantage makes it difficult for alternative suppliers to enter the market. 
  2. Consumers largely unaware that extended warranties can be bought from other sources, for example, manufacturers/insurers, as well as electrical retailers. 
  3. Sales tactics of some retailers appear to exploit limited consumer information. For example, there is evidence that sales staff may emphasize the risk of product failure and the difficulty of obtaining independent repair. 
  4. Costs of extended warranties do not reflect the considerable variation in different brands' reliability. Consumers have limited information on these issues and so limited opportunity to make informed choices. 
  5. Self-regulation has to work effectively. BRC Code of Practice, introduced 1995, not been followed widely and there is no comprehensive regulatory or legislative framework to safeguard consumers.

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Recommendations

None - see action below.

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Action following market study

OFT made a monopoly reference to the Competition Commission under the Fair Trading Act 1973

See Extended warranties on domestic electrical goods Market Investigation Reference page.

The Competition Commission report was published in December 2003. The Secretary of State from Trade and Industry launched a consultation in July 2004 proposing remedies such as clearer consumer information on the prices and conditions of extended warranties, and a cooling off period for extended warranties.

The consultation led to the Supply of Extended Warranties on Domestic Electrical Goods Order  which came into force in April 2005.

The OFT continues to monitor and enforce the Order and in 2008 commissioned research to evaluate the Order.


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Market study details and report

See Competition Commission's home page of the Extended Warranties for Domestic Electrical Goods Inquiry

Download the OFT Report Extended warranties on domestic electrical goods July 2002 (pdf 137kb)

See press release 'OFT orders investigation into extended warranties' 2 July 2002

See press release 'OFT advising shoppers to think before taking out extended warranties' 22 October 2002

Download Warranties advice 30 October 2003 (pdf file 153 kb)

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Background information

Download Report on the survey of independent repairers (pdf file 64 kb)

Download Report on the consumer survey about extended warranties (pdf file 143 kb)

Download Annexe A to the report on the consumer survey about extended warranties (pdf file 68 kb)




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