Dixons rebuffs claims of warranty 'rip-off' on electrical goods

Dixons yesterday rejected claims that extended warranties were a "rip-off" and said the debate about the controversial products had become "stuck in a time warp".

Addressing an open hearing as part of the Competition Commission's investigation into extended warranties, Dixons' chief executive, John Clare, said: "The concept of the simple 'repair it if it breaks down extended warranty' as defined by the inquiry's terms of reference has become outmoded over time." He said other aspects such as accidental damage cover, theft insurance and telephone helplines were now just as important.

He said warranties were "surrounded by myths" and that he would "give my eye teeth" to make some of the gross margins enjoyed by the major supermarkets on some fresh food ranges.

Dixons shares rose 11 per cent to 111p as analysts took the view that electrical retailers would escape a major shake-up of the market. Nick Bubb, a retail analyst at Evolution Beeson Gregory, said: "There was lots of reassurance for investors and the overwhelming probability is that there will not be dramatic changes [to the market]."

The Office of Fair Trading referred the £800m market for extended warranties to the Competition Commission last July after its own study found that competition in the market did not appear to be working effectively and that consumers were not adequately informed or protected. It is also investigating whether Dixons has a scale monopoly in the market. The Competition Commission is due to report at the beginning of July, though it has admitted it may need an extension.

The major retailers got a rough ride from the Consumers' Association at yesterday's four-hour hearing as the consumer watchdog resumed its anti-extended warranty campaign. Allan Asher, the association's director of campaigns, said: "What the consumers often get is biased and sometimes misleading information. We feel the information on performance and reliability is quite often mistated and exaggerated. There are examples of fear selling, particularly in the later stage of the sale."

Saying that action was needed to reform market failures, he added that what consumers wanted was appliances that were more reliable. What they get, he said, was a policy "they rarely want, need or use".

The watchdog produced figures showing that in 1984 only 48 per cent of dishwashers up to four years old had not needed repair. Now this figure is up to 83 per cent. But when challenged by Dixons, the association admitted that its figures did not include call-outs for accidental damage or other "non-technical" problems which account for half of all claims. Dixons denied "pressure selling" saying this would damage brand loyalty.