Consumer law and extended warranties

Salespeople at Australia’s major electronics retailers have a lot to learn about consumer law.
 
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02.Warranty breakdown

The ACCC has repeatedly raised concerns that consumers are paying for extended warranties that don’t give them any extra protection. At best, they may offer a more convenient alternative to exercising your ACL rights, and cover wear and tear, which is not included under the ACL. We heard a variety of explanations from salespeople about how their extended warranties work, so we asked their corporate HQs for clarification. 

Harvey Norman

Australia's biggest electronics retailer is making a big deal of the fact that it’s no longer in the business of offering extended warranties. Instead, the retailer has moved to a three-year or five-year “product care” plan, which entitles customers to a replacement with the latest model available. However, the product care plan only covers minor faults (also covered by the ACL for “a reasonable period”) and normal wear and tear. 

Harvey Norman’s offer of automatic replacement for these faults outdoes the ACL requirements, which give the retailer the option of repairing minor fault, as long as it's done within a reasonable time frame. However, should your $2500 TV stop working altogether – a major fault – Harvey Norman's product care plan won’t do anything for you. According to the company's compliance officer, Michael Mecham, the solution would then be to exercise your ACL rights to a replacement or a refund. Yet of the 27 salespeople we talked to, 24 spruiked the product care plan on the basis that we wouldn’t otherwise be able to bring the TV back to the store (a key ACL right). 

The cost of the plan depends on the type of product and its cost but is not a percentage of the purchase price, Mecham said, adding that salespeople “are not offered incentives to sell product care over and above the standard incentives they receive within their remuneration”. During our shadow shop, however, many salespeople pushed the five-year plan without mentioning the three-year option. 

JB Hi-Fi

JB’s “extended care agreement” adds two, three or four years to the manufacturer’s warranty – so a TV that came with a one-year warranty would be “protected” for up to five years. The agreement arguably doesn’t provide much above the ACL rights. It promises access to a loan product if it looks like your repair will take longer than 10 working days; however, the consumer law states that any repair must be done within a reasonable time, otherwise you’re entitled to a new product or refund. Marketing director Scott Browning told us the five-year agreements “usually attract between a 15% and 20% premium to the original purchase price of goods. JB Hi-Fi staff are incentivised on the total value of all sales and as such benefit from the inclusion of an extended care agreement”. 

The Good Guys

During our shadow shop, The Good Guys’ salespeople told us that two-, three- or four-year extensions of a one-year manufacturer’s warranty for a TV are available, but corporate headquarters refused to confirm this or comment on whether salespeople are incentivised to sell extended warranties.

 

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