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Rip off or value for money?

The extended warranties debate continues

In what marks the next stage of the ongoing debate into the value of extended warranties, the Competition Commission (CC) today sent a letter to electrical retailers asking for comment on its list of hypothetical remedies.

The CC must decide by July whether the conduct of retailers selling extended warranties is against the public interest — in other words, whether consumers would get more choice and better value if competition was improved.

Its list of possible remedies includes providing information on alternative warranty providers as well as providing customers with a table comparing pertinent warranty information such as price.

But in a public hearing held in London's Institute of Electrical Engineers back in April, Rectra (The Radio, Electrical and Television Retailers Association) and high street retailers Dixons and Comet were adamantly against this.

"Retailers have to earn an income. Why they should have to offer information on competitor's warranties which would result in a loss of business to themselves?" asked a Retra spokesman. "How could they possibly know about all the options available anyway? The idea is lunacy."

Rectra went on to add that collating the mass of information required to keep comparison charts up to date would be both time consuming and costly.

Dixons, whose coverplans account for around a quarter of all extended warranties sold (for electrical goods), offered a simple statement after today's announcement.

"We now intend to review carefully the individual potential remedies and look forward to meeting with the Commission to comment in detail on its statement," said CEO John Clare.

Another remedy put forward is the idea of more tailormade warranties allowing users to take out cover on specific parts of a machine, and most importantly, enabling them to renew their insurance on an annual basis rather than requiring them to pay for many years of cover from the date of purchase.

Other possible regulations up for debate include longer cancellation periods, written quotations, written confirmation of the right to cancel and the option to extend an existing warranty with one retailer through another retailer.

The CC is also considering imposing a benchmarking system, which would provide consumers with piece of mind that their warranty would fulfil certain criteria and, presumably, offer a route for recourse if a retailer did not fulfil those promises.

The CC has been asked to report its final decision by 1 July.

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