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Editorial: Warranty wrangles

Editorial: Warranty wrangles

A letter from a frustrated and obviously confused shopowner from Beechworth landed in my inbox last week. It read:

“Dear Tamara,

We are wondering if you could advise us on a situation regarding warranties. Is it right that a warranty starts from when we — the store — purchase a product?

We have one company that has refused to honour warranties that fall outside of its 12 months from our purchase date [rule], regardless of the fact that the product may sit in our shop for a couple of months or more before it is sold. We, therefore, are out of pocket as the end-user is given the 12 months or more warranty, whichever applies.(Some products state 12 months on the outside packaging.)

For example: We purchased several power supplies at the beginning of September 2003, the warranty sticker on them was marked Aug 03 (as that is when it [the company] purchased them). It [the company] said that it would give 14 months warranty for them — from that date. But what happens if it takes us three months to sell the items and they then become faulty 12 months down the track? We are then out of pocket — because we cannot say to the customer, ‘Oh sorry, we had it in our shop for 2-3 months and it’s now out of warranty.’

We also purchased a TV Tuner card to sell in the retail section of the shop. It sat there for six to eight months before it was sold. By then we had dropped the price to next to nothing. The card became faulty in about eight months but when we sent it back, the claim was refused as it was outside 12 months of our purchase date. We lost again — and also had to purchase another one at full cost for the customer.

Is this a common policy or should we just avoid this company?”

Now, as any big-wig supply chain expert would advise, our reader here is stuck between a rock of efficient inventory management (never mind that they are a retail outfit that needs to keep stock based on projected demand), and a hard place of responsibility management that goes way beyond their own realm of responsibility.

But whose responsibility is it exactly? The reseller obviously thinks it is the product manufacturer or the distributor of the product who should be called to task. The manufacturer might have an agreement with the distributor that all warranty issues are to be taken care of at the wholesale level. In some other instances, it might be the vendor itself that a reseller would have to communicate with. The end-user certainly doesn’t care who is in charge as long as their 12-month warranty on the product is honoured. And in this incredibly intricate maze of supply relationships, there is one party that is particularly vulnerable — the reseller.

One could, of course, apply commonsense and say that in any other industry, the warranty for a product starts from the moment the end-user sends a receipt attached to a little warranty card back to the vendor. The reseller or a retailer of the product is therefore contract-bound (for a warranty is a legally binding contract) to help the customer exercise his rights under the warranty. But what happens if the reseller or the retailer hits the vendor/distributor wall trying to exercise its own rights as a buyer?

Is it a matter of definitions or a matter of dodgy commercial practice that the reseller of a product would, when it comes to warranties, be considered to also be the consumer of the product bought? The problem, of course, is whether the vendor or the distributor should consider that the product the reseller stocks until on-sold to the end user should be covered by a warranty. The reseller, in this case, doesn’t think so. But the issue is more complex than that.

For instance, if the reseller doesn’t sell a product they bought for a couple of years and a vendor’s warranty covers the product for 12 months only, whose responsibility is it to look after the end-user after the product finally makes it to its final dest­ination? Likewise, if the reseller itself realises that the product is faulty before it on-sells it then they would expect the vendor or the distributor to replace it. So, in a tiered supply chain, where do the boundaries between the supplier and the end-user begin when it comes to warranty issues? With the distributor? With the reseller? Or with the end-user?

The two entities that know for sure that they can’t help any of the parties involved is the Department of Fair Trading. According to the government body, the matter is of a legal nature. The Law Access officer I spoke to last week, however, said this was a case for the Department of Fair Trading to solve.

And our reader is no closer to getting an answer to his question. But the practice is surely as widespread as it is controversial, so I would love to hear your take on it.

Write to me at tamara_plakalo@idg.com.au.


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