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






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4DU, or email:
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Office of Fair Trading, Fleetbank House, 2-6 Salisbury Square, London EC4Y
8JX, or email:

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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
.
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.
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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






3 THE REMEDY REVIEW
Background
3.1 The DEGs Order was made in 1998 following a Monopolies and Mergers
Commission (MMC) investigation of certain brown and white DEGs in the
United Kingdom - televisions, video cassette recorders, hi-fi systems,
video camcorders, washing machines, tumble driers, dishwashers and
cold food storage equipment (refrigerators/freezers). The investigation
found that suppliers refused to supply certain dealers
9
and, through the
recommendation of retail prices, influenced the resale prices of dealers.

The MMC concluded that these practices operated against the public
interest by leading to high prices, and reducing entry and innovation in
retailing of DEGs.
3.2 To address these concerns, the DEGs Order prohibits suppliers of the
above DEGs from setting recommended resale prices and from restricting
the ability of dealers to choose the prices at which they advertise or sell.
It also prohibits suppliers from refusing to supply dealers, unless for
specific, permitted reasons. A number of companies also gave
undertakings relating to DEGs.
10
The full text of the MMC's reports is
available on the Competition Commission's (CC) website.
11
Further
details of the DEGs Order and undertakings are available on the OFT
website.
12



9
A dealer is a person carrying on a business of selling DEGs whether by wholesale or retail.
10
Assurances relating to the prohibition in the DEGs Order on setting Recommended Resale
Prices were also given by a number of businesses. We will consider these assurances as part of
the Remedy Review.
11
At: www.competition-
commission.org.uk/rep_pub/reports/1997/402elec.htm#summary%0a%09%09%09%09%20%
and www.competition-commission.org.uk/rep_pub/reports/1997/403elec.htm#summary

.
12
At: www.oft.gov.uk/OFTwork/markets-work/register-orders-undertakings/monopoly This also
includes the identities of the parties which gave undertakings.
OFT1287 | 11






Focus of the Remedy Review
3.3 The Remedy Review will focus upon whether there has been a change of
circumstances since the MMC's 1997 reports which would mean that
the remedies are no longer appropriate and that the Order can be
revoked or varied and/or the undertakings can be superseded, varied or
parties released from them.
13
If the OFT considers that there is such a
change of circumstances, it would advise the Competition Commission
(CC). It would then be for the CC to make a decision regarding the
future of the Order and undertakings. If the OFT does not have sufficient
evidence of a change of circumstances, no such recommendation will be
provided to the CC and the DEGs Order and undertakings will remain in
place in their current form.
Change of circumstances
3.4 Although the OFT has conducted only a preliminary examination of the
market, it has noted the following apparent changes
14
in relation to the

supply of DEGs since the MMC reported in 1997:
15

• The entry of multiple grocery retailers into the retail market for DEGs.
• The expansion of online retailing and the increasing proportion of
DEGs sold over the internet.
• The coming into force of the Competition Act 1998, which, amongst
other things, addresses resale price maintenance.
16



13
Consistent with sections 88(4) and 88(5) of the Fair Trading Act 1973, preserved in 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 in those MMC reports.
OFT1287 | 12






• Technological developments in products covered by the DEGs Order.

3.5 These, or other changes, may impact on the continued appropriateness
of the DEGs Order and undertakings.
Invitation to Comment
3.6 The OFT would welcome any comments relevant to the Remedy Review,
with supporting evidence where possible. It would particularly welcome
comments and evidence about the following issues:
• What are the principal changes which you believe to have occurred in
the relevant product markets covered by the DEGs Order and
undertakings from 1997 to the present day? You may wish to
consider those changes referred to in paragraph 3.4 or any other that
you consider relevant.

• What impact, if any, have these changes had on the continued
appropriateness of the DEGs Order and undertakings?

• Your view on what should happen with the DEGs Order and
undertakings (whether they should be retained in place, varied,
removed or superseded).

Next steps for the Remedy Review
3.7 The OFT will carefully consider all comments received from interested
parties and, where appropriate, will reflect these in its analysis. It
expects to request more specific information on issues relevant to the
Remedy Review in the New Year and currently anticipates that the
Remedy Review will be completed by the end of summer of 2011. More
specific information on timing will be provided on the DEGs page 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 aftermarkets
17
for brown and white DEGs.
18
Recognising the
significance of these aftermarkets,
19
the OFT considers that it would be
appropriate to invite comments from interested parties to enable it to
make a fully informed decision as to whether to launch a market study.
4.2 Competition policy generally tends towards the conclusion that
aftermarkets should not give rise to competition concerns where:
20

• The primary market (the market for DEGs in this instance) is
competitive.
• Consumers are able to make an informed choice including whole life

costing (whole life costing occurs where consumers correctly


17
An aftermarket is a market for a secondary product, that is, a product which is purchased only
as a result of buying a primary product.
18
For the purposes of the potential market study, the OFT is considering aftermarkets for those
products listed at paragraph 1.1.
19
The market for extended warranties on brown and white DEGs had an estimated value of
£941 million in 2009 (Datamonitor, UK Extended Warranty Insurance 2010, page 22), although
that includes extended warranties on products outside the scope of this market review. ONS
data indicates that the market for repair and servicing of DEGs had a value of £600 million in
2009, although that also includes certain products which are outside the scope of this market
review. Segregated data in relation to the value of aftermarkets for specific DEGs is not publicly
available.
20
See, for example, the Decision of the Commission of the European Communities in COMP/C-
3/39.391 EFIM at paragraphs 12 to 30 (currently under appeal). A copy of this decision can be
found at: />.
OFT1287 | 14






anticipate the cost of future necessary purchases of the secondary
product when buying the primary product).

21


• Consumers are likely to make such an informed choice.
• In the case of apparent exploitation in the aftermarket, where a
sufficient number of customers would punish the firm in the primary
market within a reasonable time by switching to another primary
product.
4.3 The OFT would welcome any comments relevant to the functioning of
aftermarkets for brown and white DEGs, with supporting evidence where
possible. It would particularly welcome comments and evidence about
the following issues:
• The extent of the availability of information to consumers regarding
the reliability, lifespan and repair cost of DEGs, including the form
that any such information is available in.
• Whether consumers, in fact, make any assessment of the whole life
costing of DEGs products and take account of this information when
purchasing a DEG.
• Whether consumers, in fact, switch providers of DEGs in response to
issues arising in relation to aftermarkets.
Servicing and repair of DEGs
4.4 The OFT has received some preliminary evidence from independent
repairers that they have difficulties getting access to technical
information and spare parts from DEGs suppliers. In particular that
independent repair and servicing organisations:


21
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 information
22
which would allow them
to undertake servicing and/or repairs, and
• cannot get access to, or are charged high prices for, original spare
parts.
4.5 They have expressed concerns that this limits consumer choice and, by
restricting competition in the repairing and servicing of DEGs, ultimately
lead to higher prices for consumers. They believe that high prices for
repairs may also lead to inefficiencies by contributing to too much
replacement and not enough repairs of DEGs, therefore leading to
excessive wastage.
4.6 In order to assess whether there is any evidence of this, and evidence of
any resulting consumer detriment, the OFT would welcome any
comments relevant to the servicing and repair of brown and white DEGs,
with supporting evidence where possible. It would particularly welcome
comments and evidence about the following issues:
• The extent of the availability of technical information or spare parts
for brown and white DEGs to independent servicing and repair
organisations.

• The prices charged to independent servicing and repair organisations
for the provision of spare parts for brown and white DEGs.
• Whether the availability of technical information, or the availability or
cost of spare parts, differs between brown and white DEGs.
• The effect of any restrictions to the availability of technical
information or spare parts on independent servicing and repair
organisations and consumers.


22
Including technical manuals, technical diagrams and parts lists.
OFT1287 | 16






For suppliers of brown and white DEGs:
• The policy, and terms and conditions, used for making available
technical information or spare parts to independent servicing or repair
organisations.
• The policy and terms and conditions used in setting up and
maintaining an authorised repairer network.
• The costs and benefits to you and to consumers that may result from
these policies.
Extended warranties
4.7 In December 2003, the CC found that there was relatively little
competition on the pricing of extended warranties, noting that:
• Prices set by point-of-sale retailers appeared to be set at levels that

consumers would bear rather than in the light of competition from
readily available alternatives.
• Prices did not appear to reflect variations in underlying costs or risks.
• Larger retailers' return on capital on extended warranties persistently
and substantially exceeded their cost of capital, indicating that
extended warranty prices were generally higher than necessary to
cover costs and generate an adequate return.
4.8 The CC also found that providers of extended warranties at the point-of-
sale have a competitive advantage over those who do not have access
to consumers at the point-of-sale. In particular:
• Few consumers sought information on extended warranties prior to
their purchase.
• Consumers had little opportunity to consider alternatives to the
extended warranty on offer at the point-of-sale.
OFT1287 | 17






• Generally, no information was 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 report is available on the CC website.

23
Further
details about the Extended Warranties Order is available on the OFT
website.
24

4.11 The OFT commissioned an evaluation of the Extended Warranties Order
in October 2007. This evaluation reported in 2008 and found that,
although there was evidence that the extended warranties market was
more competitive, there was also evidence that some stores were still
not fully complying with the legislation. Following that evaluation the
OFT wrote to stores that did not appear to have complied with the
Extended Warranties Order and has subsequently worked closely with
retailer representatives to ensure that stores that sell DEGs are aware of
their obligations.
25

4.12 Given the potential linkages (considered at paragraph 4.14) between the
market for extended warranties for DEGs and the market for the repairs
and servicing of DEGs, the OFT considers it appropriate to look at both
sectors within this market review. The OFT will consider the evidence on
the functioning of the market for extended warranties at the same time


23
At: www.competition-commission.org.uk/rep_pub/reports/2003/485xwars.htm
24
At: www.oft.gov.uk/OFTwork/markets-work/register-orders-undertakings/monopoly. This also
includes details of the identities of the parties giving undertakings.
25

For further details see: www.oft.gov.uk/news-and-updates/press/2008/114-08
OFT1287 | 18






as it considers the evidence on repairs and servicing to determine
whether further work is merited in this area.
4.13 The OFT would welcome any comments and evidence relevant to the
functioning of the extended warranties market for DEGs, in particular
those that relate to the following issues:
• The extent to which you consider that competition in the market for
extended warranties on DEGs is now effective, including any
evidence regarding trends in the pricing and profitability of extended
warranties between 2005 and the current day.
• The extent to which the Extended Warranties Order has been
effective in improving competition in the market for Extended
Warranties on DEGs.
• The levels of compliance with the Extended Warranties Order.
4.14 The OFT would welcome any comments relevant to the linkages
between the market for extended warranties on DEGs and the market for
the supply of repairs and servicing on DEGs. For example, in a
competitive market for extended warranties, the price of the extended
warranty would be expected to signal the whole life cost of the product,
as higher costs of servicing and repairs over the product's life time
should be reflected as a higher price for an extended warranty on that
product. If this was the case, suppliers of the product would be
disinclined to overcharge in the price of the spare parts\servicing of their

product, as the consumer of the product would see the effect of this in
the high extended warranties price, which could also be seen as an
indication of the product being more unreliable than rival products. If the
prices of extended warranties does not reflect the underlying costs, this
signaling mechanism will not work.
4.15 The OFT would therefore particularly welcome any comments or
evidence on whether the price for extended warranties on DEGs reflects
the expected cost of servicing and repairs of those DEGs, and if not why
not.
OFT1287 | 19






Next Steps regarding the potential market study into aftermarkets
4.16 The OFT will carefully consider the views of interested parties before
determining whether to proceed with a market study and, if it decides to
do so, the scope of any such market study. The OFT intends to make an
announcement on this early in the New Year.
4.17 Should a market study be launched it could lead to a range of outcomes.
This may include one or more of the following:
• giving the market a clean bill of health

• improving the quality and accessibility of information for consumers
(including consumer education and consumer guidance)

• recommendations to business, for example to take voluntary action
(including recommending industry codes of practice or changes to

existing codes of practice)

• recommendations to Government

• investigation and enforcement action against businesses suspected of
breaching consumer or competition law or

• making a market investigation reference to the Competition
Commission.






OFT1287 | 20






ANNEXE: ISSUES WHERE COMMENTS ARE INVITED
A1. The OFT notes that interested parties may wish to provide comments on
some or all of the following issues.
The Remedy Review
A2. The OFT would welcome any comments relevant to the Remedy Review,
with supporting evidence where possible. It would particularly welcome
comments and evidence about the following issues:
• What are the principal changes which you believe to have occurred in

the relevant product markets covered by the DEGs Order and
undertakings from 1997 to the present day? You may wish to consider
those changes referred to in paragraph 3.4 or any other that you
consider relevant.

• What impact, if any, have these changes had on the continued
appropriateness of the DEGs Order and undertakings?

• Your view on what should happen with the DEGs Order and
undertakings (whether they should be retained in place, varied,
removed or superseded).

Aftermarkets

A3. The OFT would welcome any comments relevant to the functioning of
aftermarkets for brown and white DEGs, with supporting evidence where
possible. It would particularly welcome comments and evidence about the
following issues:

• The extent of the availability of information to consumers regarding
the reliability, lifespan and repair cost of DEGs, including the form that
any such information is available in.
OFT1287 | 21






• Whether consumers, in fact, make any assessment of the whole life

costing of DEGs products and take account of this information when
purchasing a DEG.
• Whether consumers, in fact, switch providers of DEGs in response to
issues arising in relation to aftermarkets.
Servicing and Repair of DEGs
A4. The OFT would welcome any comments relevant to the servicing and
repair of brown and white DEGs, with supporting evidence where
possible. It would particularly welcome comments and evidence about the
following issues:
• The extent of the availability of technical information or spare parts for
brown and white DEGs to independent servicing and repair
organisations.
• The prices charged to independent servicing and repair organisations
for the provision of spare parts for brown and white DEGs.
• Whether the availability of technical information, or the availability or
cost of spare parts, differs between brown and white DEGs.
• The effect of any restrictions to the availability of technical information
or spare parts on independent servicing and repair organisations and
consumers.
For suppliers of brown and white DEGs:
• The policy, and terms and conditions, used for making available
technical information or spare parts to independent servicing or repair
organisations.
• The policy and terms and conditions used in setting up and maintaining
an authorised repairer network.
OFT1287 | 22







• The costs and benefits to you and to consumers that may result from
these policies.
Extended Warranties
A5. The OFT would welcome any comments and evidence relevant to the
functioning of the extended warranties market for DEGs, in particular
those that relate to the following issues:
• The extent to which you consider that competition in the market for
extended warranties on DEGs is now effective, including any evidence
regarding trends in the pricing and profitability of extended warranties
between 2005 and the current day.
• The extent to which the Extended Warranties Order has been effective
in improving competition in the market for Extended Warranties on
DEGs.
• The levels of compliance with the Extended Warranties Order.
A6. The OFT would welcome any comments relevant to the linkages between
the market for extended warranties on DEGs and the market for the
supply of repairs and servicing on DEGs. For example, in a competitive
market for extended warranties, the price of the extended warranty would
be expected to signal the whole life cost of the product, as higher costs
of servicing and repairs over the product's life time should be reflected as
a higher price for an extended warranty on that product. If this was the
case, suppliers of the product would be disinclined to overcharge in the
price of the spare parts\servicing of their product, as the consumer of the
product would see the effect of this in the high extended warranties
price, which could also be seen as an indication of the product being more
unreliable than rival products. If the prices of extended warranties does
not reflect the underlying costs, this signaling mechanism will not work.
A7. The OFT would therefore particularly welcome any comments or evidence

on whether the price for extended warranties on DEGs reflects the
expected cost of servicing and repairs of those DEGs, and if not why not.
OFT1287 | 23