As Apple warned, Consumer proposes solution to the extended warranty blues

LATEST: Aussie court slaps Apple with $A9m in penalties

The Commerce Commission sent Apple a warning letter for what the regulator says is misleading its New Zealand customers over consumer rights.

It got a brief flair of media coverage earlier this week but will anything change?

Or the next time you step up to the counter to buy a gadget or piece of whiteware, will the sales rep attempt to upsell you to an extended warranty, which can cost hundreds of dollars but which, in Consumer’s view, is near-worthless?

Consumer head of research Jessica Wilson says many companies regard a warning letter or Fair Trading Act breach notice from the commission as “just another day at the office.”

And the act’s maximum fine of $600,000 is chump change for multinationals.

Ms Wilson’s organisation would like to see stiffer fines.

And, more, it would like the commission to get extra powers – ones that don’t rely on going before a judge.

“For example, to issue companies with infringement notices where there is a financial penalty they have to pay and not have to go to the expense of taking a company to court if there’s a clear-cut breach of consumer legislation,” she says.

The allegations against Apple
On Wednesday, the commission said it had sent Apple a warning, which included two key allegations.

One says its products could only be fixed for free during a two-year warranty window, when, in fact, the Consumer Guarantees Act (CGA) says they good last for a reasonable amount of time, or be fixed or replaced.

And, the commission's second allegation was that Apple was representing a replacement product as new.

Ms Wilson says the act is deliberately open-ended about the lifetime of a product, as it can depend on whether it’s a top-shelf or bargain buy good. In either case, it must be fit-for-purpose and “reasonable” for the context.

She also says that replacing a faulty product with a second-hand product is a breach of the act, in Consumer’s view. And that the offence is compounded when a second-hand product is presented in new packaging, implying it is new (as is allegedly the case with Apple).

Many companies use the term “re-manufactured” for a replacement part or product.

“Remanufactured is just a nice way of saying it’s second-hand,” Ms Wilson says of Apple’s case.

“They’re phones that have been previously returned because they’ve got a fault. They’ve been repaired then zhooshed up for resale.  The Consumer Guarantees Act says if a good is faulty, take it back to the retailer. If the retailer replaces it, they need to replace it with a good of the same type. That’s not a second-hand product, in our view. You should be given a new product as a replacement.”

Apple: nothing to say
Does Apple agree on that interpretation of the CGA?

The company declined to comment, bar acknowledging that it had received a communication from the commission.

NBR asked, among other things, if Apple planned to challenge the commission’s warning, and if it had or planned to change its procedures in New Zealand. Each question was met with a no-comment response.

Has Apple got off lightly with a warning letter over its alleged offences in New Zealand?

After all, across the Tasman, the ACCC recently took Apple to federal court for similar alleged offences under Australia’s equivalent of the Consumer Guarantees Act.

And, here, the commission recently filed charges against Noel Leeming (owned by The Warehouse Group), for allegedly misrepresenting customers’ rights under the act.

Both the Apple case in Australia and the Noel Leeming case in New Zealand are pending; the ACCC and the Commerce Commission will each have a close eye on each other’s proceedings; ACCC Commissioners Sarah Court and Roger Featherston are also Associate Commissioners at the Commerce Commission.

Ms Wilson says both cases follow a series of warnings. In Apple’s case, it signed a series of undertakings with the ACCC in 2013 which, in the Aussie regulator’s view, have now been breached.

With its warning letter, Apple’s New Zealand operation is only at the start of a long road toward a possible court case.

Are extended warranties worth it?
Is there any situation where it’s worth giving in to the hard sell?

“Very rarely is it worth buying an extended warranty. They can cost several hundred dollars. In most cases, the CGA is going to have you covered,” Ms Wilson says.

“The only instance where you might want to consider it is if you’re buying goods for your business or home office. The CGA doesn’t cover goods bought for business purposes. So in that case, you might want to consider it.”

Where to start
If you think you have a claim under the CGA, always start with the retailer you bought the product from, Ms Wilson says.

If that fails, you could try the importer or the manufacturer, but the research head says you have fewer rights if you go down either of those avenues.

She advises going straight to the low-cost Disputes Tribunal if a retailer messes you around with a CGA claim.

NBR has asked Consumer Affairs Minister Kris Faafoi for comment on Consumer's suggestions.

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