FACTSHEET and Frequently Asked Questions (FAQs)

Subject:  Extended Warranties on Domestic Electrical Goods.

Relevant or Related Legislation:

The Extended Warranties on Domestic Electrical Goods Order 2005. Fair Trading Act.

Recent Relevant Campaigns or Consultation:

Consultations in July 2004 and November 2004.  In addition the Competition Commission consulted widely when developing their recommendations, which have been taken forward by the Order. 

Key Facts:

The Government's Order – The Supply of Extended Warranties on Domestic Electrical Goods Order 2005 - which implement the remedies recommended in the 2003 Competition Commission Report on the supply of extended warranties (EW) on domestic electrical goods - came into force on 6 April 2005.

Retailers now have to:

• show the price of the extended warranty alongside electrical goods, in store and in their printed advertising material;

• provide you with information about your statutory rights, cancellation rights and details of the warranty, including whether or not the warranty provides financial protection in the event of insolvency and terminates if a claim is made;

• give you 45 days to cancel your extended warranty, including giving you a written reminder of this right and the right to cancel at any time and receive a refund; and

• offer any consumers, who do not wish to purchase a warranty immediately, quotations stating that the extended warranty remains available on the same terms for 30 days if the consumer chooses not to buy it at that time. Any discounts tied to the purchase of the extended warranty would also be available for 30 days.

Background:

The Competition Commission's investigation into the sale of EWs concluded that there is a complex monopoly situation within the EW market which operates against the public interest. The Commission identified four key points:

• almost all EWs are bought at the point of sale. Few consumers consider EWs before their purchase, and have little opportunity to consider alternatives in the shop;

• EWs on offer at the point of sale are nearly always from one provider, usually the retailer;

• there is generally no information available on the reliability of electrical goods or the likely repair costs;

• there is generally no information available at the point of sale on the prices, terms or conditions of EWs from alternative providers.

As a result, the Competition Commission believed that profits earned by retailers on Extended Warranties were consistently and substantially above the amount that should have been expected.

The Government accepted the approach proposed by the majority of the Commission's members for remedying the situation.

FAQ

Q1. How will this Order help me?
Q2. Retailer [X] isn’t doing what the Order says they should (ie not providing information).  Who do I complain to?
Q3. Should I buy an EW?
Q4. Does the Order apply to free extended warranties?

Q1. How will this Order help me?

The new law gives consumers more information before they buy, and greater rights to cancel afterwards. We believe it will encourage consumers to be more pro-active and shop around. This should introduce competitive pressure on retailers. The Office of Fair Trading (OFT) will review the effectiveness of the Order in due course. Further action could be taken then if needed.

Q2. Retailer [X] isn’t doing what the Order says they should (ie not providing information).  Who do I complain to?

The OFT is responsible for enforcement of the Order. They can be contacted at Fleetbank House, 2-6 Salisbury Square, London, EC4Y 8JX, (Tel 08457 22 44 99, or email enquiries@oft.gsi.gov.uk).

Q3. Should I buy an EW?

This is your choice and we cannot give you advice on this.  But you should consider the price and coverage of any EW, as well as the likelihood that you might need to claim under it, before buying.

Q4. Does the Order apply to free extended warranties?

No, the Order only applies to paid warranties.

Q5. Where can I find guidance for business on the Order?

Guidance for business is available at: www.dti.gov.uk/ccp/topics2/extendwarrant.htm

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Last updated 12 July 2005

Department of Trade and Industry

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