TV Shop fined $123,000 for failure to disclose extended warranty information
Tuesday, 15 February 2022
The TV Shop has been fined $123,500 after a Commerce Commission investigation into its sale of extended warranties.
Brand Developers Limited, trading as The TV Shop, pleaded guilty after failing to comply with the extended warranty disclosure requirements of the Fair Trading Act between May 1,2020 and March 1, 2021.
During this time, it sold 18,190 extended warranties to customers for a total revenue of $1,974,723.
The TV Shop sells a wide range of products through direct response television advertising. It offered extended warranties for about 30 of its products.
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The Fair Trading Act requires businesses offering extended warranties to provide specific information to consumers in specific ways, including requiring that the information is provided in writing, is expressed in plain language, is legible and is presented clearly.
The commission’s investigation found The TV Shop failed to meet these requirements in the extended warranties it sold during the charge period.
Sentencing the company in the North Shore District Court, Judge Anna Fitzgibbon agreed with the commission that a considerable number of The TV Shop’s consumers had little to no prospect of understanding their rights and remedies under the Consumer Guarantees Act, how those compared with the protections offered by the extended warranty agreement, or their rights to cancel the agreement.
In considering an appropriate penalty, Judge Fitzgibbon said The TV Shop’s history of non-compliance with the Fair Trading Act “provides context to apparent systematic failures within [its] practices. It supports the notion that there is a need for specific denunciation”.
Commission chairwoman Anna Rawlings said the information retailers must provide to consumers when selling an extended warranty helps consumers to decide if an extended warranty offers them value over and above the rights they already have under the Consumer Guarantees Act, and whether it is worth the price.
“For this reason, it must be clearly disclosed in writing in a way that consumers can easily understand.”
After being notified of the commission’s investigation into its failure to disclose warranty information, The TV Shop updated its processes.
However, it continued to breach the act because the information it provided to consumers was set out in multiple documents, with cross-referencing between the documents needed to fully understand the terms of the warranty – meaning the extended warranties did not meet the requirements of being legible and presented clearly.
Rawlings said the case highlighted the importance of having the right extended warranty documents and processes in place.
“Businesses need to understand their obligations under the Fair Trading Act and consider the best ways to meet them.”
Extended warranties are sold at additional cost when buying goods, such as appliances, computers and mobile phones. Extended warranties are different to manufacturers’ warranties, which come free with goods. They are also different from guarantees provided automatically under the Consumer Guarantees Act.
Under amendments to the Fair Trading Act that came into force last year, where a customer buys an extended warranty over the phone, the business must supply a copy of the agreement within five working days.