Same-day sales of extended warranties face ban

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The Independent Online

Electrical retailers could be barred from selling extended warranties on goods on the day the customer buys the product under tighter new regulations being considered by the Competition Commission.

Electrical retailers could be barred from selling extended warranties on goods on the day the customer buys the product under tighter new regulations being considered by the Competition Commission.

The suggestion came in a revised remedies statement issued by the commission yesterday following its original remedies letter on 20 May.

The commission issued two sets of proposals with one set banning the sale of a full warranty on the same day as the product sale and the other package of measures proposing less stringent changes including fuller disclosure of information to customers.

Nick Bubb, retail analyst at Evolution Beeson Gregory said: "It looks tougher than the original remedies. [The commission was] probably accused of being too soft." Philip Dorgan of WestLB Panmure, said: "If the suggestions were implemented, it would be devastating for the sale of extended warranties."

Dixons is said to earn around 40 per cent of its profits from the sale of extended warranties with Comet deriving up to 80 per cent of profits from the controversial insurance policies which cover accidental damage as well as the theft and technical breakdown.

But while Dixons shares fell only a penny to 132.75p on the news Kesa Electricals, which owns the Comet chain, rose 1.75p to 210.5p.

Analysts said the more penal remedy of banning the sale of the warranty and the product on the same day was unlikely to be introduced. "It makes the commission look tough though it will probably be watered down later," one said.

Critics say extended warranties are expensive and often pointless as their cover is often included in the manufacturer's warranty or by household insurance. But the retailers say the policies offer broader cover and are popular with consumers seeking peace of mind.

An AEG 1200 washing machine costing £349.95 at Currys, part of Dixons, can be insured for five years for £169.

Retailers have until 5 August to give their views on the latest proposals. The deadline for the investigation was extended last month until 30 September.

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