Domestic Electrical goods Market Review of white and brown Domestic Electrical goods: - Review of a monopoly Order and undertakings relating to Domestic Electrical goods - Potential market study on aftermarkets for Domestic Electrical goods Invitation to comment November 2010 OFT1287 © Crown copyright 2010 You may reuse this information (not including logos) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit www.nationalarchives.gov.uk/doc/open-government-licence/ or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gsi.gov.uk Any enquiries regarding this publication should be sent to us at: Marketing, Office of Fair Trading, Fleetbank House, 2-6 Salisbury Square, London EC4Y 8JX, or email: marketing@oft.gsi.gov.uk This publication is also available from our website at: www.oft.gov.uk Data use statement The OFT may choose to disclose information that it obtains during the course of this market review, including as a result of this invitation to comment. It may also publish it in any document it produces at the end of this market review. In deciding whether to do so the OFT will have regard, in accordance with its statutory duties under Part 9 of the Enterprise Act 2002, to the need for excluding, so far as that is practicable, any commercial information relating to a business or any information relating to the private affairs of an individual which, if published, the OFT thinks might significantly harm the legitimate business interests of that business or, as the case may be, the individual's interests (referred to individually and collectively as 'confidential information'). If you should consider that the information that you will provide contains such confidential information, you should identify each separate item (for example, individual data) or category of information (for example, a row or column of data in a spreadsheet) and explain in each case why you consider it is confidential by reference to the above test - blanket requests for confidential treatment will not be sufficient. In the event that the OFT proposes to include any sensitive commercial or personal information in a document that will be published it will, save in exceptional circumstances, contact the relevant persons prior to publication to give them the opportunity to explain why disclosure would cause significant harm and to request excision (or aggregation or generalisation) of any material that will still be sensitive at the time of publication. The OFT is also bound by the Freedom of Information Act 2000 (the FoIA). Where a person makes a request in accordance with the FoIA the OFT may have to disclose whether it holds the information sought and the information itself (including confidential information). The FoIA contains exemptions (including one which may exempt confidential information) and the OFT will not have to make those disclosures if an exemption applies. If you consider that any information you provide may be exempt from such disclosures you should say so and explain why. Similarly, to the extent that information you provide constitutes personal data under the Data Protection Act 1998, the OFT will process such data in accordance with that Act The OFT reserves the right to disclose any information it obtains (including confidential information) as may be permitted or required by the Enterprise Act 2002 or any other enactment. CONTENTS Chapter Page 1 Preface 5 2 Introduction 7 3 The remedy review 11 4 Aftermarkets 14 Annexe A Issues where comments are invited 21 1 PREFACE 1.1 The OFT is requesting comments from interested parties on a number of issues relating to the Domestic Electrical goods (DEGs) sector, specifically the following brown and white DEGs (brown and white DEGs) - explained in paragraphs 2.2 and 2.5 to 2.6): Brown goods • televisions • video and DVD players • hi-fi systems • video camcorders. White goods • washing machines • dishwashers • tumble driers • cold storage equipment (refrigerators and freezers) • electric cookers. Comments from interested parties 1.2 The OFT would appreciate it if parties could provide their comments by 12 January 2011 so that it has sufficient time to consider their OFT1287 | 5 responses. 1 Please respond in writing to the following address or by email to degs@oft.gsi.gov.uk . The DEGs Team Room 2C/52 Markets and Projects – goods Office of Fair Trading Fleetbank House 2-6 Salisbury Square London EC4Y 8JX 1.3 Please provide evidence to support your views wherever possible. Where appropriate, please identify where these views relate primarily to certain DEGs, a particular category of DEGs (for example, brown goods) or all of the brown and white DEGs included within this review (and listed at paragraph 1.1). 1.4 In addition to providing comments about the specific issues in chapters 3 and 4 of this document, the OFT would appreciate it if interested parties also provide the following information: • a brief overview of the current activities of the company/organisation • the company's total UK turnover in relation to DEGs/extended warranties/other aftermarket services for DEGs • relevant contact details. 1 The OFT notes that interested parties may wish to provide comments on all or only in relation to certain of the issues included in this document. OFT1287 | 6 2 INTRODUCTION Background 2.1 DEGs represents a highly significant sector of the UK economy, with consumers spending an estimated £23 billion on DEGs in 2009. 2 It is also directly relevant to virtually all consumers in the UK who will use at least some DEGs on a daily basis and for whom DEGs are an essential part of daily life. 2.2 DEGs include a wide range of products which can be segmented into the following categories: • white goods, including major household appliances such as washing machines, dishwashers and refrigerators • brown goods, including televisions and audio equipment • grey goods, including computers and mobile telephones • small domestic appliances, including kettles and toasters. 3 Scope of OFT's market review of DEGs 2.3 The OFT has launched a market review to look at the DEGs market comprising two distinct, yet closely linked, work strands: • A review of the Restriction on Agreements and Conduct (Specified Domestic Electrical goods Order) 1998 (DEGs Order), and 2 Verdict, Electrical Retailing 2010, page 57. This covers sales of all DEGs, including those white goods, brown goods, grey goods and small domestic appliances referred to at paragraph 2.2. 3 The precise definition of these categories is not consistent across all sources which use these categories for DEGs. OFT1287 | 7 associated undertakings (see chapter 3) (Remedy Review). 4 • A potential market study of the aftermarkets for brown and white DEGs (see chapter 4), focussing upon the market for the servicing and repair of those DEGs, and the market for extended warranties on those DEGs. 5 A final decision as to whether to launch a market study will be made following consideration of comments received in response to this document. 2.4 Conducting the Remedy Review and consideration of a potential market study of DEGs aftermarkets together should reduce some of the burden on interested parties to provide information and should also ensure a wider evidence base than may have been the case if these work strands were conducted separately. 2.5 The market review will focus upon those products covered in the DEGs Order and associated undertakings, that is: • brown goods: televisions, hi-fi systems, video cassette recorders and video camcorders • white goods: washing machines, tumble driers, dishwashers and cold storage equipment (refrigerators and freezers) • other white and brown goods, specifically DVD players and electric cookers will also be considered to provide context for the market review. The inclusion of these products enables the OFT to compare 4 Under section 88 of the Fair Trading Act 1973, preserved in place by schedule 24 of the Enterprise Act 2002, the OFT has a duty to keep under review the DEGs Order and undertakings. 5 Extended warranties are a contract which covers a consumer for the cost of repairs or replacement within a specified period after a manufacturer's or retailer's original guarantee has ended and may also cover additional risks during that period and during the life of such guarantee. OFT1287 | 8 the circumstances that exist for brown and white DEGs covered by the DEGs Order to other brown and white DEGs not covered by the DEGs Order. Exclusions from the scope of the market review 2.6 The OFT has decided to focus on brown and white DEGs, and not to include grey goods and small domestic appliances in this market review, for the following main reasons: • The relative significance of white and brown DEGs, which represents approximately 75 per cent of the wider DEGs sector (although the OFT notes that not all brown and white goods are included within the scope of the market review). 6 • The limited evidence of concerns from interested parties regarding repair and servicing of grey goods and small domestic appliances. • To ensure that the scope of the market review remains sufficiently narrow to facilitate its effective delivery. • To exploit the synergies between the Remedy Review, which focuses only on certain brown and white DEGs (as explained at paragraph 2.5), particularly the overlap between the products and market participants. 2.7 The OFT does not propose to include within this market review consumer complaints regarding defective DEGs and consumers' ability to get redress, except to the extent that they relate to aftermarkets for brown and white DEGs. This is because the inclusion of this issue would be likely to significantly widen the scope of the market review which may impact upon its effective delivery. Consumers who are concerned 6 Verdict, Electrical Retailing 2010, page 60. The OFT estimates, based upon information from Verdict, that the value of the products included in this review was approximately £9 billion in 2009. OFT1287 | 9 they have been unfairly treated by a company can contact Consumer Direct (tel: 08454 04 05 06, or visit the Consumer Direct website ). 7 Transparency 2.8 The OFT is committed to working constructively and transparently with interested parties during the market review. The OFT's website page on the market review 8 will be updated as the market review progresses and will include, amongst other things, further information on timing, contact details for key team members and any papers (for example, research papers) published by the OFT during the market review. 2.9 Anyone wishing to obtain further information on this market review should contact Susan Oxley (Project Director) on 0207 211 8265 or Dan Moore (Team Leader) on 0207 211 5828. 7 Further details regarding Consumer Direct can be found at: www.oft.gov.uk/consumer-advice 8 Available at: www.oft.gov.uk/OFTwork/markets-work/othermarketswork/electrical-goods OFT1287 | 10 [...]... place through schedule 24 of the Enterprise Act 2002 14 Some of these changes, as well as some others, are referred to in OFT 1024, Evaluating the Impact of the Supply of Extended Warranties on Domestic Electrical goods Order 2005, Prepared for the OFT by LECG, paragraphs 3.21 to 3.37 15 The details of the circumstances in the various product markets prevailing at the time of the MMC reports can be found... available at the point-of-sale on prices, or terms and conditions, of extended warranties available from alternative providers 4.9 To address these concerns, the Supply of Extended Warranties on Domestic Electrical goods Order 2005 (the Extended Warranties Order) was made This included requirements relating to better information for consumers and improved cancellation rights 4.10 The full text of the CC's... Further information on whole life costing can be found at chapter 6 of the OFT 403 (December 2004), Market Definition This is available at: www.oft.gov.uk/shared_oft/business_leaflets/ca98_guidelines/oft403 .pdf OFT1287 | 15 • cannot get access to technical information22 which would allow them to undertake servicing and/or repairs, and • cannot get access to, or are charged high prices for, original spare... of the OFT website in due course 16 OFT 401 (December 2004), Agreements and Concerted Practices, paragraph 3.8 This is available at: www.oft.gov.uk/shared_oft/business_leaflets/ca98_guidelines/oft401 .pdf OFT1287 | 13 4 AFTERMARKETS 4.1 The OFT has received some preliminary evidence from business and consumer organisations identifying concerns regarding the functioning of the aftermarkets17 for brown . Domestic Electrical goods Market Review of white and brown Domestic Electrical goods: - Review of a monopoly Order and undertakings relating to Domestic. undertakings relating to Domestic Electrical goods - Potential market study on aftermarkets for Domestic Electrical goods Invitation to comment November