Thousands of Argos customers are to share more than £500,000 of e-gift card payments, after the firm failed to remind people they could shop around when taking out an extended warranty.
Argos has also agreed to fix the way it sells extended warranties to customers and provide a goodwill gesture to those who may have missed out on a better deal.
Its breach of a legally-binding commitment affected sales of more than 400,000 extended warranties and 114,000 of those customers may have found a cheaper deal by comparing prices, had they been prompted to shop around.
Some cases involved extended warranties for breakdown care for larger electrical items.
Argos will now contact all customers who may have missed out on a lower price and make them aware of the error.
Customers will have the option to cancel their Argos extended warranty and all will receive a “goodwill gesture”, amounting to £570,010 of e-gift cards in total.
Extended warranties enable people to take out increased protection when buying products, over and above any standard guarantee.
In 2012, Argos signed an agreement which promised to provide a link to a price comparison website every time it offered an extended warranty for domestic electrical products online, so that customers could compare the price of the warranty.
As part of routine monitoring, the Competition and Markets Authority (CMA) found Argos was not displaying this link.
Argos admitted it had not been doing so for more than a year.
The CMA said Argos has reinstated the link to the website and agreed to carry out regular internal checks to avoid breaching the undertakings again.
Adam Land, CMA senior director of remedies, business and financial analysis, said: “We welcome Argos’s promise to provide a goodwill gesture of over half a million pounds to customers who may have missed out on a cheaper extended warranty deal, after it failed to remind shoppers of their options.
“It’s only right that Argos is now taking steps to fix its error and make sure that something similar doesn’t happen in the future. Any breaches of this kind must be put right immediately, or we will take action.”
The CMA has also written publicly to Argos, outlining the steps the retailer has agreed to take.
It will now monitor Argos’s compliance and consider formal enforcement action should it fail to do as agreed. The issue has been logged on the CMA’s register of breaches, which records all significant breaches of market and merger remedies and is updated quarterly.
The CMA can take companies to court if they refuse to put right any breaches. It cannot currently impose financial penalties on businesses for breaches of this kind but it wants the power to do so.
The CMA said imposing fines would allow it to take quicker action against companies that break the law and would increase the deterrent effect of its enforcement action, benefiting UK consumers.
The watchdog said if people think they have been incorrectly sold an extended warranty, they should first ask the business to look into the complaint. They could also contact organisations such as Citizens Advice to get further help.
Here are the CMA’s tips when buying extended warranties:
1. Remember they are optional. Products often have a manufacturer’s guarantee, which may be enough.
2. Do not feel pressurised to buy an extended warranty immediately.
3. You may be covered elsewhere – through home contents insurance or insurance included with a bank account, for example.
4. There may be other options which suit your needs better. For example, if you have lots of gadgets, you could buy a multiple item policy to cover all of them together.