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21st July 2017
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OFT's market study into extended warranties is now underway
The OFT's short market study into extended warranties for domestic electrical goods, which will focus on whether competition for warranties is sufficiently effective to ensure consumers get value for money in a market worth well over £750million, is now underway. The results will be published later this Summer.
The study follows an OFT review of aftermarkets for domestic electrical goods which was launched in November 2010. During this review, some parties raised credible concerns that competition is limited by retailers' advantage in being able to sell warranties at the same time as they sell domestic electrical goods. There were also more general concerns that warranties are not good value for money.
This is consistent with an OFT evaluation in 2008 which showed that the Supply of Extended Warranties on Domestic Electrical Goods Order 2005, introduced to improve competition, was by that time only addressing around £19million per year of an estimated annual consumer detriment of £366million.
Possible outcomes of market studies include: enforcement action by the OFT, a market investigation reference to the Competition Commission; recommendations for changes in laws and regulations, recommendations to regulators, self-regulatory bodies and others to consider changes to their rules, campaigns to promote consumer education and awareness or a clean bill of health.
The OFT has decided against launching a market study into repairs of domestic electrical goods. This is because it did not receive sufficient evidence to support initial concerns that manufacturers may be restricting competition for repairs by limiting independent repairers' access to technical information and spare parts.
"Consumers buy millions of extended warranties on domestic electrical goods each year and we want to make sure they are getting value for money," warns Claudia Berg, Director in the OFT's Consumer and Goods Group.
"Our short and focused market study will find out quickly, what, if any, action is needed to make this market more competitive, to the benefit of consumers and the wider UK economy."
The OFT will be contacting key parties directly during the course of the market study. Other interested parties can submit views to:
28th April 2011