Consumer warns about Dick Smith closing-down sales

See also: A potential Dick Smith buyer talks about distressed assets

After the receivers stiffed gift card holders, extended warranty holders and deposit payers, it's unlikely anyone holds any hope for for Dick Smith's closing down sale to set any new benchmark for after-sales service.

Nevertheless, Consumer has issued a warning to those who shop at the chain over its final eight weeks.

“Consumers buying from Dick Smith won’t be able to rely on their normal rights under the Consumer Guarantees Act to take back faulty goods to the retailer," Consumer research writer Jessica Wilson tells NBR.

"They may still be able to make a claim against the manufacturer if a product fails. However, the remedies consumers can be entitled to from a manufacturer aren’t quite as good as what they can expect from a retailer.

"If a product is faulty, the retailer must repair it, replace it or provide a refund. In contrast, claims against a manufacturer are limited to compensation for loss in value of the product plus any consequential losses.“

While Dick Smith will shortly be no more, its receivers having failed to find a buyer, issues raised by its collapse will live on in an Australian government inquiry led by Senator Nick Xenophon.

Mr Xenophon says  Senate Economics References Committee has yet to collectively decide who to appear, but it is expected it will want to question receivers Ferrier Hodgson, former Dick Smith executives, and Anchorage Capital on events around the Dick Smith IPO.

Senator Xenophon told Australian media the committee will be investigating the following points:

• Why did Anchorage praise the value of the Dick Smith brand in the prospectus when it didn’t recognise an asset for that brand at acquisition date?​

• Why would Woolworths sell the Dick Smith business for $A115 million if Anchorage and its auditors, Deloitte, reckoned the fair value was $261 million?​

• Why did Woolworths earn another $A118 million for “administration” costs in the Dick Smith changeover?​

• Whether corporate watchdog ASIC [the Aussie equivalent to our FMA] needs additional oversight powers; and​

• Whether consumer watchdog the ACCC [the equivalent to our Commerce Commission] has adequate powers to protect consumers in the event of a corporate collapse.​

• Was there a conflict of interest when Deloitte, the auditor of Woolworths, was also appointed as Anchorage’s auditor and investigating accountant for the prospectus? (Eyebrows have also been raised over how Deloitte could have given Dick Smith's books a clean bill of health as recently as August).​

"There are questions about the level of oversight and accounting standards. I'm not being critical but there are a lot of questions that need to be asked, including: How do you protect gift card holders?," Mr Xenophon says.

Separately, in December Prime Minister Malcolm Turnbull announced a range of policies aimed at supporting innovation and entrepreneurship, including changes that would ban the use of “ipso facto” clauses on business contracts, which allow parties to terminate a contract if administrators or receivers are appointed (read more about that development in Tim Hunter's piece here).

POSTSCRIPT: NBR visited Dick Smith's downtown Auckland branch this morning. Staff seemed in good spirits. In fact, maybe a little too good with music thumping loud. Not everything was on special. In fact, a house-brand HDMI cable was deep in "are you having a laugh?" territory at $64.98. In case you're wondering: no, a gold-plated connector won't deliver a better television picture that the $1 (yes $1) HDMI cables the chain was selling pre-administration in an attempt to resolve its inventory glut.

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