A drop in standards

Shortly before October 1st 2002, three of the five major storage manufacturers announced that they were slashing the standard hard drive warranty from three years to just twelve months. The astonishing "coincidence" that Maxtor, Seagate and Western Digital should all make this major change to a decade-long practice within days of one another strongly suggests that there was some behind the scenes collusion. In Australia this would almost certainly be illegal. There are regular prosecutions here for collusive price fixing and collusive market sharing (secretly agreeing to quote high with each other's customers, for example). Consider this statement by the Australian Competition and Consumer Commission:

The mere agreement with your competitor to fix prices is illegal, regardless of how long the agreement lasts, unless it is authorised on the grounds that the benefit(s) to the public are such that the conduct should be allowed to occur. There need be no agreement on a specific price. An understanding that two competitors would not sell at a price lower than, say, 90 per cent of a third competitor's price would be enough to constitute price fixing. Bear in mind also that there need be no formality about the agreement ... a 'nod and wink' is sufficient for the ACCC and the courts to infer the requisite meeting of minds.

It is also illegal to take joint action with another company in relation to the conditions of dealing with a particular customer. For example, it would be illegal for competitors to decide jointly that they will change a customer's repayment terms to COD only. Like the other TPA breaches we have examined, no formality is required for an exclusionary agreement to exist. The best way to avoid falling foul of this part of the TPA is to ensure that all your company's decisions are made independently. That doesn't mean you have to turn a blind eye to what your competitors are doing — merely that it is not just bad business practice, but also illegal, to make arrangements of this kind with them. (Source.)

Despite the clarity of the law and a flair for fancy rhetoric, however, the ACCC is generally regarded as a toothless tiger, much better known for securing headlines than successful prosecutions. In any case, it is probably impracticable to prosecute the Australian subsidiaries of giant overseas corporations for actions which took place offshore. But make no mistake, with or without an avenue for legal redress, the slashing of hard drive warranties is a major blow to both retailers and consumers .

Western Digital is adopting a new product warranty policy in which all standard Western Digital hard drives will be covered for a one-year period. This aligns our customer protection practices with the desktop PC-industry standard — most major PC manufacturers offer a standard one-year warranty on their PCs. (Source, Western Digital, as reported by The Inquirer.)

We all know that marketing departments are famous for bending the truth as far as possible, but that statement is just plain ridiculous, dishonest three different ways:

First, at the time that statement was issued, the industry standard for hard drive warranties was unquestionably three years. The fact that WD, Maxtor and Seagate apparently colluded to reduce it, all at the exact same time, does not alter that. (And if they didn't collude, then it is the biggest coincidence I have ever, ever heard of. In fact, I'm going to race out and buy myself a lottery ticket right now. Unless I get hit by a meteorite first, of course.)

Second, the industry standard for major component warranties is either three years or two years. Motherboards are almost always covered by a three year warranty (some are two), and monitors are universally covered by a three year term. (Hard drives, main boards, and monitors are the three "big-ticket" items that system builders must be covered on: the minor components, being cheap to replace, do not matter so much.) Video cards tend to be either one year (cheap generics) or five years (quality brands). CPUs tend to be twelve months (tray) or three years (boxed product) — and note that the in-service failure rate of CPUs is vastly lower than that of hard drives, so once the DOA period is past, CPU warranties are a non-issue anyway. Floppy drives are mostly two years, optical drives are still often only one year but the trend is overwhelmingly toward two year warranties for optical drives as well. In short, twelve months is not an "industry standard", it's not even close to being an industry standard.

Third, if WD intend us to take the cheapskate warranties of the major OEMs as the "industry standard" - which is pretty clearly what their statement reads like to me — what the hell has that got to do with the "white box" market? And let us remember, the warranty that Dell or IBM or Hewlett-Packard provide with their supermarket vomit boxes has nothing to do with the issue: major OEM's don't buy their drives with the normal warranty terms in the first place, they buy direct and negotiate the individual terms with the manufacturer. WD's retail and white-box OEM drive sales have nothing to do with their sales to Dell or Acer. And in the white-box market, the industry standard warranty is unquestionably two years. This has been true since the days when the 486DX/2 was king. If you don't offer a two year warranty, your competitors will kill you in the marketplace. WD compound the untruth with this claim: "Most major PC manufacturers offer a standard one-year warranty on their PCs. Most HDDs are integrated into PCs that are protected with one-year warranties." In fact, major PC manufacturers don't buy standard drives through the normal wholesale channel, but most channel-purchased drives (i.e., the ones that Western Digital, Seagate and Maxtor reduced the warranties on) are integrated into PCs that are protected with two year warranties.


July 2005. Shortly after this was written Hitachi/IBM, the fourth of the big five manufacturers, cut its standard warranty too. Only Samsung held on firmly to the traditional three-year warranty. For us, this made things simple: our RMA figures already clearly demonstrated that Samsung drives had the lowest failure rate of any brand we have ever sold, so we just kept on buying Samsung drives. The only difference is that we now no longer even consider any of the other brands. If Samsung are out of stock, we wait until they are back in stock.

We understand that Seagate has recently resurrected a proper warranty policy. Frankly, we no longer care. Like WD and Maxtor, Seagate lost our trust by adopting a shonky policy back in October 2002, and now it's up to them to start earning it back again. This will be difficult, as the Seagate drives we bought in the couple of years leading up to the warranty cut did not perform well. In any case, the Samsung drives we use are so consistently good that we never feel the need to try another brand. Perhaps one day Samsung will bring out a dud model. Then we will try Hitachi, or Seagate or WD or Maxtor again.