Last week, the competition commission outlined two packages to regulate the sale of extended product warranties, which provide repair/replacement for faulty goods beyond the manufacturers original guarantee. Whilst warranty sales are currently highly profitable, with some retailers attributing up to 34 of their profits to this income stream, they are also criticized for offering poor value for money due to obscure clauses, which restrict payment in many, but the most unlikely claim scenarios. The first package to ban retailers selling a full warranty on the day of purchase was condemned by all as draconian whilst the other, rather milder, option of forcing retailers to provide full information on warranty exclusions and an obligatory 60day cool-off period for customers, received a more balanced hearing.Because no one believes that the first option will ever be implemented, investors and analysts have focused more closely on the implication of the milder package. In a recent leaked research note, one analyst suggested that the implementation of the reform in the second package would place a staff-training burden on the retailer, which would lead to a significant increase in the cost of warranty sales, and a predicted 20% fall in actual sales.
Question: It is likely that neither package will be implemented.
Options:
A. true, B. false, C. uncertain
Answer: C