JB Hi-Fi denies wrongdoing over alleged ‘junk’ warranties

Under fire for allegedly selling its customers unnecessary warranties, JB Hi-Fi has announced its intentions to “vigorously defend” the claims.

Background

For 12 years, JB Hi-Fi “ripped off” its customers by selling unnecessary extended warranties, alleged Maurice Blackburn Lawyers. The warranties, they said, were of little to no value as customers were already entitled to those rights under existing consumer protection legislation.

“These warranties are in most cases little more than a junk add-on to consumers’ purchase of the household goods they actually want,” said Maurice Blackburn principal Miranda Nagy.

Often, consumers felt pressured to purchase the “junk” warranties due to aggressive sales techniques, alleged the lawyers. Survey data suggests that as many as 32 per cent of consumers have at one point purchased such a warranty, referred to as “extended care plans” or “extra care plans”.

“JB’s extended warranties expire just three to six years after purchase, but they add substantially to the cost. Our case alleges they add nothing meaningful to the strong rights for repair, replacement or refund under the Australian Consumer Law,” explained Ms Nagy.

With over 13,000 employees, a company value of $5.4 billion, and more than 300 physical storefronts, it’s not difficult to imagine a hefty settlement fee or court ruling should the claim be successful. The class action will seek refunds for consumers who bought the warranties.

In a recent company announcement, JB Hi-Fi said the company “intends to vigorously defend the proceedings”, adding: “JB Hi-Fi takes compliance with its legal obligations very seriously and considers that it has complied with relevant laws at all times.”

The legal context

The class action is being brought in the Supreme Court of Victoria. At the heart of the claim is the allegation that JB Hi-Fi used misleading or deceptive conduct or unconscionable conduct in selling the warranties, “including by telling customers either directly or by implying, that the extended warranties:

• Operated for longer than the rights under the Australian Consumer Law
• Provided benefits that the Australian consumer law did not; and
• Were of value to customers.”

The suit also alleges that the company was under a duty to inform its customers about the existing legal protections afforded them under the Australian Consumer Law. This information, said Maurice Blackburn, was needed for consumers to have made a properly informed decision about whether to purchase the warranty.

Though the amount class action members might receive if successful is unclear, Maurice Blackburn predicts that the amounts will likely vary between members according to the number and price of extended warranties they purchased.

The time frame is similarly unclear, though the law firm suggested that class actions usually take between two and four years. “They are very hard fought because the stakes are high,” read the firm’s website.

Moving forward

Interestingly, the announcement seems to have unshaken investor confidence as the share price has been steadily rising since at least late November.

Though it’s too early to say how big an impact the class action will have on the industry, survey data from CHOICE suggests many other retailers could be similarly falling short of their legal consumer obligations.

As many as 68 per cent of Australian shoppers wrongly believe buying an extended warranty provides extra protections, said CHOICE. The same national survey also found that of the 32 per cent of Australians who bought such a warranty in the past two years, only 12 per cent were informed about the similar protections afforded by existing legislation.

“In most cases, extended warranties aren’t worth purchasing,” said CHOICE head of policy and government relations Patrick Veyret. “If your product becomes faulty or does not work, you will likely be covered for a repair, replacement, or refund under the ACL.”

To protect your consumer rights, Choice recommends the following tips:

1. Know your rights.
2. Don’t pay for rights you already have.
3. Keep your receipts.
4. If something goes wrong, contact the company.