Actually, the article says the law says A or B. From the article:

> In a simplified form, retailers are responsible for warranty claims and must replace or refund the defective item

The choice is at the retailer’s discretion and the refund is obviously of the purchase price.

This is a non story. The retailer is acting lawfully. The only curiosity is that normally it is in a retailer’s best interests to replace goods, but in these circumstances they are better off refunding them.