JB Hi-Fi faces class action over allegedly "worthless" warranties

Maurice Blackburn Lawyers is seeking refunds for consumers who purchased extended warranties from electronics retailer JB Hi-Fi (ASX: JBH), alleging in a class action that these add-ons sold over more than a decade were of 'little or no value'.

The class action lodged with the Victorian Supreme Court last Friday is the first of its kind, with the law firm alleging consumers who purchased the warranties already had the same rights for free under the Australian Consumer Law. 

Consumer advocate Choice has long warned that extended warranties are worthless, but in a 2023 survey found 32 per cent of consumers had bought them at one time or another, often after being pressured by aggressive sales techniques.

The class action concerns extended warranties offered with consumer electronics, home appliances and home entertainment products, which have been called Extended Care Plans or Extra Care Plans at different times. 

"These warranties are in most cases little more than a junk add-on to consumers’ purchase of the household goods they actually want," says Maurice Blackburn Lawyers principal Miranda Nagy.

"JB’s extended warranties expire just three to six years after purchase, but they add substantially to the cost. Our case alleges they added nothing meaningful to the strong rights for repair, replacement or refund under the Australian Consumer Law rights that consumers already enjoy."

The class action alleges that JB Hi-Fi used misleading or deceptive conduct or unconscionable conduct in selling the extended warranties, including by telling customers either directly or by implying, that the extended warranties:

• operated for longer than the rights under the Australian Consumer Law;
• provided benefits that the Australian Consumer Law did not; and
• were of value to customers.

The filing also alleges that JB Hi-Fi also failed to give customers important information about their rights under the Australian Consumer Law, which they needed to make a properly informed decision about whether to buy an extended warranty.

The class action also alleges that JB Hi-Fi’s customers bought the extended warranties on the basis of a mistake about their value.

Compensation is claimed for everyone who bought an extended warranty from JB Hi-Fi between 1 January 2011 and 8 December 2023.

Consumers do not need to sign up to the class action as they are automatically part of the group if they purchased an extended warranty in that time.

In a response published on the ASX, the retailer says it takes compliance with its obligations very seriously, and considers that it has complied with relevant laws at all times.

"JB Hi-Fi intends to vigorously defend the proceedings," the company says.

JBH shares rose 0.53 per cent this morning to $49.32, which is just shy of their 12-month high of $49.72. The retailer's sales rose 4.3 per cent to $9.63 billion in FY23 although net profit after tax (NPAT) was down slightly at $524.6 million - a level that is double its profits in the pre-pandemic year of FY19.

In the September quarter, JB Hi-Fi sales in Australia were down 0.1 per cent but comparable sales growth was down further at minus 1.4 per cent, while sales were down 12.2 per cent for The Good Guys.