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Jewellers are advised to review their extended warranties and "care plans"
Warning for jewellers over ‘care plans’
 3.1 k views | Posted May 27, 2014 | By Stephanie Chan • Staff Journalist
The Australian jewellery industry has received a warning about misleading customers with extended warranties.
The Australian Competition and Consumer Commission (ACCC) recently advised the Jewellers Association of Australia’s Code of Conduct committee that it had received complaints regarding extended warranties – or “care plans”, as some retailers refer to them – being sold to consumers in the retail jewellery sector.
The ACCC believed that certain jewellery businesses were representing extended warranties as additional benefits, when in fact, the consumer was already entitled to these benefits under Australian Consumer Law (ACL) consumer guarantees.
ACCC deputy chair Dr Michael Schaper told Jeweller that in the past, the words “warranty” and “guarantee” were used interchangeably, but this changed when the ACL was introduced in 2011.
Schaper explained that the ACL, a national system of automatic consumer guarantees, replaced a series of “old, ad hoc, state-by-state arrangements”, standardising them and defining clearer legislative concepts.
As part of this legislative clarification, the term “guarantee” was defined as specifically referring to a consumer’s rights under the ACL, whilst “warranty” was defined as referring to the set of promises and commitments a business offered to its customers that were over and above their automatic legislative entitlements.
“Businesses run into problems when they promise warranties that aren’t really anything more than what you’re [the consumer] already entitled to under the law,” Schaper explained.
The ACL, however, did not specify a set timeframe for its consumer guarantees due to the wide variety of industries and products to which they would apply, and Schaper said that “a degree of common sense” was expected from both retailer and consumer in determining an appropriate duration, depending on the services offered.
“While you won’t find an exhaustive list of timeframes for the jewellery industry – or any other industry – the legislation is built around the assumption that if you buy a $100 piece of jewellery, it will last for a while, but not necessarily as long as, for example, a $10,000 ring,” he added.
JAA Code of Conduct chair Colin Pocklington said it was “reasonable” to assume that an expensive piece of jewellery would last many years. However, he explained that he had seen care plans that offered extended warranty on these kinds of pieces for basic repair and adjustments from the second and third year of ownership – a period which is already covered by the ACL and which the consumer should not be charged for.
“The couple [of care plans] that I have looked at are a bit grey, and retailers would be wise to review them,” Pocklington said.
Extending beyond jewellery
While Pocklington explained that the ACCC had made it clear to the JAA that it was concerned with jewellery only, he added that these issues could potentially extend to watches as well.
All watches generally have a 12-month warranty, but some premium international watch brands decided to increase this to three years as standard. Depending on the watch brand, Pocklington said that those only offering one year of warranty could arguably be moving into this grey area, as even a fashion watch could reasonably be expected to last for more than a year.
Pocklington noted that while retailers that offered extended warranties pertaining to the repair of expensive jewellery were probably “taking a big risk”, care plans that offered regular checks and cleaning for a period of the product’s life could still be appropriate as these services are not already covered under the ACL.
Schaper agreed, stating that the ACCC did not have any issues with businesses offering extended warranties to their customers, but he encouraged retailers to consider whether what they were providing was a genuine extended warranty that offered services over and above a consumer’s automatic entitlements, or whether it was simply replicating what already existed in law.
He also advised retailers to be careful when promoting a “lifetime” care plan or warranty, and to ensure that this period was clearly defined.
Other industries have already learned the hard way to take care with their warranty terms. As early as last year, the Federal Court ordered Hewlett-Packard Australia to pay a $3 million civil pecuniary penalty after the ACCC made a case against it for making false or misleading representations to customers and retailers regarding their consumer guarantee rights.
The ACCC also took legal action against Fisher & Paykel for similar reasons in November last year, a matter that is still before the court.
In light of the ACCC’s warning to the jewellery industry, the JAA Code of Conduct committee released an official statement strongly recommending that any jewellery businesses that were offering extended warranties or care plans conduct an immediate review to ensure that their products would not risk misleading consumers.
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