Keywords
Extended Warranties and Services Contracts, Planned Obsolence, Consumer Goods
Abstract
This Article analyzes the billion-dollar market, mostly unregulated, for Extended Warranties and Service Contracts (EWSCs). EWSCs are ubiquitous in the modern marketplace, offered at every automobile dealership, electronics and appliance store either by a salesperson or the cashier. Incredibly, there is little legal scholarship in this important area where manufacturer-sellers often overreach by preying on consumer vulnerabilities. It will be argued that most sales of EWSCs result in price gouging due to informational asymmetry and behavioral manipulation. This Article looks at two core concepts that are inexorably interconnected- one in the legal world and the other in the world of business and technology. The former relates to the regulation of EWSCs. The latter addresses the idea of "planned obsolescence" in which manufacturers determine the life or durability of their products. Products are engineered to fail such that they will need to be repaired or replaced for the purpose of generating future revenues for manufacturers and sellers. This inside information also allows manufacturers and third-party insurers to predict the low costs and risks of selling EWSCs. This Article reviews the marketplace and the practices of the high-pressure selling of EWSCs for products ranging from automobiles to electronics and less expensive goods. It then provides a comparative analysis of the state of the law in the United States, the European Union, and individual European countries. This comparative metric is important due to the fact that different countries have moved faster to regulate this industry (the United States is not one of them). It concludes that sellers of EWSCs often overreach and that a stronger regulatory framework is needed. Recommendations are offered on how best to frame new rules to ensure a fair and efficient market in the sale of consumer goods.
Recommended Citation
DiMatteo, Larry A. and Wrbka, Stefan
(2019)
"Planned Obsolescence and Consumer Protection: The Unregulated Extended Warranty and Service Contract Industry,"
Cornell Journal of Law and Public Policy: Vol. 28:
Iss.
3, Article 4.
Available at:
https://scholarship.law.cornell.edu/cjlpp/vol28/iss3/4