WIREDGOV

The OFT today launched a review of competition regulation for the sale of Domestic Electrical goods and sought views on a possible market study into warranties and repairs in the sector.

It plans to focus its work on 'white' goods such as washing machines and fridges, and 'brown' goods like TVs, but not 'grey' goods such as computers.

Following an investigation by the Monopolies and Mergers Commission (MMC) in 1997, an Order for the sector was introduced and undertakings were obtained to prevent suppliers of certain brown and white goods from recommending resale prices and to limit their ability to refuse to supply dealers.

Since the MMC investigation, new high street and online traders have entered the market and there has been significant product innovation. The OFT review will consider whether specific competition regulation, set by the Order and undertakings, remains appropriate in the light of these and other changes.

At the same time the OFT is seeking comments on competition in the 'aftermarkets' for Domestic Electrical Goods which include extended warranties and out of warranty servicing and repairs. This follows claims that independent repairers have problems getting access to the technical information and original spare parts they need to compete. The OFT is asking for evidence of this and any resulting loss to consumers, to decide whether it should examine these issues further.

Claudia Berg, Director in the OFT Goods Group, said:

'Domestic electrical goods are an important part of the UK economy and have become an essential part of our everyday lives.

'Our review of the Order and undertakings will examine whether they are still necessary to promote competition in the market or if they can be removed, reducing red tape for UK businesses.

'While we are conducting this review and talking to interested parties it is sensible to also consider the competition issues surrounding warranties and repairs of these goods to decide whether there is evidence to suggest that we should examine these issues further'

NOTES

1. The OFT has a duty to review Orders and undertakings made following MMC reports and to identify to the Competition Commission (CC) any changes of circumstances which mean they should be varied, removed or superseded. The review of the Domestic Electrical Goods (DEGs) Order and undertakings is undertaken under section 88 of the Fair Trading Act 1973 which remains in force by virtue of Schedule 24 of the Enterprise Act 2002.
2. The OFT has today invited comments from interested parties on matters relevant to the market review, including comments on both the review of competition regulation in the DEGs market and the potential market study into DEGs warranties and repairs. A copy of the Invitation to Comment, which includes further information on the market review, can be downloaded from the Domestic Electrical Goods market review page. Responses to the Invitation to comment are due by 12 January 2011.
3. The market review is focused on the products about which the MMC raised concerns in 1997, namely televisions, video cassette recorders, video camcorders, hi-fi, washing machines, tumble driers, refrigerators, freezers and dishwashers. It will consider DVD players and electric cookers to provide comparator products. 
4. The OFT intends to complete its review of the DEGs Order and undertakings by the end of Summer 2011. It will provide an update on its work into aftermarkets for DEGs in early 2011. 
5. Following an OFT market study in 2001, the CC conducted an investigation of the market for extended warranties on DEGs. It found that there was a lack of competition between extended warranty providers which resulted in high prices for consumers. To address these concerns the then Secretary of State for Trade and Industry introduced the Supply of Extended Warranties Order 2005 to improve information to consumers and improve their rights to cancel an extended warranty. The OFT published an evaluation of this Order in 2008, which found that although there was evidence of increased competition, some stores were not complying with the legislation. Since then the OFT has been working with retailers to ensure that they are fully aware of their obligations. See press release Electrical goods warranties more competitive, but rules not fully obeyed (3 October 2008).
6. The OFT is unable to provide advice or resolve individual complaints for consumers. Consumers can seek advice from Consumer Direct www.consumerdirect.gov.uk.