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Wednesday, 15 November, 2000, 16:41 GMT
Carmakers face dealership probe
Mario Monti, EU Competition Commissioner
Mario Monti: has voiced concerns over car prices in the UK
European trade watchdogs who have condemned huge gaps in car prices throughout Europe are to probe the link between manufacturers and dealers.

The news follows pressure from the UK competition authorities to lower the prices of cars in Britain.


Consumers do not seem to derive... the fair share of the benefits of the creation of a European single market

European Commission

The European Commission has announced a fresh round of consultation, and will examine expert witnesses in February, after adopting a report revealing large discrepancies in car prices between different EU states.

The move heralds reform in 2002 of an EC agreement which has allowed motor manufacturers to retain exclusive dealership networks.

"Consumers in particular do not seem to derive from this distribution system the fair share of the benefits of the creation of a European single market," the EC said in a statement on Wednesday.

The commission will next year publish proposals for reforming the sales deal, which has "not achieved its aims", the statement said.

Tough talks

Motor manufacturers, which believe the link between factory and dealer is needed to promote technical and sales excellence, were on Wednesday preparing for tough negotiations with the EC.


We will be strongly putting our case

Society of Motor Manufacturers and Traders

"What today's announcement really marks is the beginning of the next round of talks," a spokesman for the UK's Society of Motor Manufacturers and Traders told BBC News Online.

"We are still a way off the publication of the proposals. We will be strongly putting our case."

The companies argue that the dealer networks are essential to provide after-sales customer service.

Price gap

In the report, first presented in July, EC investigators found differences of up to one third in the prices charged for the same car in different EU states.

Britons were, in euro terms, paying more than a quarter more for cars such as the Volkswagen Golf, Ford Mondeo and Opel (Vauxhall) Astra than motorists in the state where the model was cheapest.

Yet the pound's appreciation against the euro should have cut costs of imported cars and parts, Mario Monti, the Competition Commissioner, said.

"Mario Monti is wondering why the competitive pressure on this market... has not been sufficient so far to promote substantial price cuts in response to the currency development," the commission said in July.

Mr Monti stressed his conviction to investigating "possible restrictive practices" hindering UK motorists from buying cars elsewhere in the EU at Continental rates.

Discounts

But manufacturers, also under pressure from the UK government and consumer groups, have over the last two months slashed hundreds of pounds from the prices of many new cars.

Ford has cut 13% off the recommended UK retail price of new models, with discounts announced by Vauxhall last month reducing the price of an Astra 1.6 by about 1,500.

Mercedes in August cut UK prices by up to 20%.

And new services have sprung up to help UK consumers buy cars in Europe.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Justin Webb in Brussels
"As lobbying begins it does look as if the car makers are on the defensive"
See also:

05 Oct 00 | Business
02 Oct 00 | Business
01 Sep 00 | Business
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