JB Hi-Fi faces class action over ‘worthless’ warranties sold for 12 years

JB Hi-Fi is facing a class action for selling extended warranties that allegedly had little or no value because customers already had those rights under Australian Consumer Law.

Law firm Maurice Blackburn lodged the class action in the Victorian Supreme Court on Friday, alleging the electronic retailer engaged in misleading, deceptive or unconscionable conduct by telling or implying to customers that the warranty plans were longer or more beneficial than existing consumer protections.

JB Hi-Fi has been hit with a class action lawsuit over allegedly selling worthless warranties.Credit: Justin McManus

The $5.4 billion company sold warranties on electronics, home appliances and entertainment products called Extended Care Plans or Extra Care Plans that expired three to six years after purchase. Consumer advocacy organisation Choice conducted a survey that found one in three customers had purchased the warranties sold using allegedly aggressive sales techniques.

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

“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 doesn’t appear to have alarmed shareholders, however, with investors sending the share price up 0.8 per cent in afternoon trading.

Maurice Blackburn is alleging JB Hi-Fi did not give customers information about their rights under the Australian Consumer Law before deciding whether to purchase the extended warranty, something companies must do.

“Businesses should explain what an extended warranty provides over and above the consumer’s automatic rights,” the ACCC website states.

“Businesses must not pressure consumers to buy an extended warranty, [or] mislead consumers into paying for rights in an extended warranty that they already have automatically under the consumer guarantees.”

In a statement to the Australian stock exchange, the electronics retailer said it intended to vigorously defend proceedings.

“JB Hi-Fi takes compliance with its legal obligations very seriously and considers that it has complied with relevant laws at all times,” the statement said.

“JB Hi-Fi will keep the market updated in accordance with its continuous disclosure obligations.”

Any customer who purchased an extended warranty from JB Hi-Fi between January 1, 2011, and December 8 this year will be automatically part of the class action.

It is the third legal action against a major Australian retailer in a week: last Tuesday, Woolworths was sued by the Retail and Fast Food Workers Union for allegedly changing thousands of rosters without proper consultation and threatening not to pay workers who didn’t comply.

Last Thursday, McDonald’s Australia was hit with a class action from SDA, the union for fast food workers, seeking $100 million in backpay for current and former employees who were allegedly asked to work one hour each shift for free.

In August, JB Hi-Fi surprised the market with better than expected financial year results despite a spending slowdown, though chief executive Terry Smart acknowledged challenges faced by consumers as they shy away from big purchases.

The retailer posted a 3.7 per cent dip in the 2023 fiscal year profit to $524.6 million, a figure that was ahead of consensus expectations. Annual sales landed at a record $9.6 billion.

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