Dick Smith trade practices blunder

How ironic.  After we finished a trade practices compliance seminar in Canberra on Monday, we dropped into Dick Smith’s in Civic to browse.  And there was a prime example of one of the key points we’d been talking about.

The computer department featured signs urging purchasers to invest in extended warranties, to spare themselves the heavy repair bills that apply if their equipment fails out of standard warranty.   

As ACCC has told traders and customers time and again, a retailer can’t impose an arbitrary time limit on its own obligation to repair goods that fail.  In fact, ACCC generally views extended warranties as a rip off.

It’s a great example of the need for business-wide, ongoing trade practices training.  These signs looked like they were printed at that store, rather than head office.  Our guess is that a local manager had the bright idea … not realising that they were sailing so close to the legal wind, and that ACCC has only recently dealt with electrical importer GAF for misrepresenting warranty rights.

The problem

We’ve explained this issue in detail before.  When you sell consumer goods, they come with a statutory warranty that they’ll be of reasonable quality.  If that implies that they should last (for instance) at least three years before starting to fall apart, then that’s how long the manufacturer needs to repair or replace them in case of failure … at its cost.

Leading consumers to believe otherwise is a breach of section 53(g) of the Trade Practices Act, and a criminal offence.

ACCC can’t be any clearer

ACCC has talked about this issue frequently.  It has even published a special booklet to clarify the law.  And it has said that extended warranties are a rip off where they don’t really add any value to the customer’s ordinary legal rights.  As ACCC Deputy Chair Peter Kell recently said:

“The ACCC holds increasing concerns that too many businesses are not well versed in their obligations to consumers and are too quick to equate consumer rights with those provided in express or voluntary warranties rather than the statutory protections afforded by the TPA. This appears to be a particular problem with high-end electrical products, an area in which consumer complaints are growing.”