Electrical retailers in ‘complex monopoly’ over warranties

The Competition Commission (CC) has published proposals that could lead to an overhaul in the way extended warranties (EW) are sold.

In a letter to high street electrical retailers the CC claims that retailers who sell EWs - worth an estimated £800m a year - at the same time as punters buy a toaster or PC, for example, are involved in a "complex monopoly".

The CC is still trying to figure out if this "complex monopoly" is against the public interest. In the meantime, though, it's published a series of possible actions it claims could be introduced to help consumers.

Among them are proposals to provide further information about warranties including those from rival providers. It's also contemplating whether to increase the window available for people to cancel their warranties.

Although there is a fistful of suggestions on the table, the CC is adamant about one thing: "Consumers deserve choice, information, value."

"The CC's current concerns are that consumers should have choice, and should have good information on the choices that are available; they should also have time and opportunity to consider what choice to make. The aim should be to encourage competition and empower consumers to get good value."

Sheila McKechnie, Director of Consumers' Association, welcomed today's move by the CC claiming that it "strikes a blow for consumers and makes grim reading for the electrical retailers, who have for too long been peddling extended warranties at over-inflated prices to unsuspecting consumers."

Last year the Office of Fair Trading called in the CC to examine the market in EW. Following a nine month investigation the OFT decided that "competition in the market did not appear to be working effectively and that consumers were not adequately informed or protected".

Earlier this year the CC set out the terms of reference of its investigation into EW. At the time it said that, based on the evidence it had received so far, the UK's biggest electrical and electronics retailer, Dixons, looked to have a "scale monopoly" with at least 25 per cent of EWs on domestic electrical goods.

In the letter today, though, the CC reports that following further analysis, Dixons; market share is "slightly below 25 per cent".

"Assuming that this information is confirmed, the CC expects to conclude that there is no scale monopoly. This view does not affect the inclusion of Dixons in the complex monopoly," it said.

The CC has been asked to publish its next report into EWs on July 1, although this could be delayed to give it further time to complete its investigation. ®

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