Monday, July 6, 1998 Published at 03:20 GMT 04:20 UK
BBC accuses car giants of car-price fixing
Volkswagen and Volvo are accused of being part of a price-fixing cartel
A BBC documentary has uncovered evidence suggesting that some makes of car cost more in Britain than in other European countries because of rigid price-fixing.
The BBC Panorama documentary to be screened on Monday claims that the cost of Mercedes, Volkswagen and Volvo vehicles appears to be set by the manufacturers.
It alleges these car manufacturers operate a price-fixing strategy which means consumers in the UK pay up to 10% more for their cars than Europeans.
The motor industry is exploiting Britain's right-hand drive market by building a "pure profit" of £1,000 into the sale of every average family car bought in the UK, according to the television investigation.
A secret understanding between three of the biggest names in car production and their dealers also means retailers cannot offer discounts even if they want to for fear of losing their franchise, it is claimed.
The claims made in the BBC Panorama documentary, have prompted calls from the government for Brussels to launch an investigation into the alleged cartel.
Manufacturers have long claimed that factors such as the exchange rate, differences in specification and discounts offered by dealers account for the variations in price between Britain and the rest of Europe.
But a study of car prices by top accountants KPMG, commissioned for the programme, claims that even when those factors are taken into account UK customers on average pay 6.6% more for a car than their Continental counterparts.
The price gap rises even further in comparison with France, Belgium and the Netherlands with small and medium-sized cars costing between and 9-10% more in the UK.
Consumers Affairs minister Nigel Griffiths tells the programme: "We want to know why consumers in Britain are paying high prices.
"Certainly there is evidence and allegations that there are mark-ups, that there's a failure to supply and that dealers may be discriminated against if they want to discount cars."
The Panorama expose alleges that Volkswagen, Mercedes-Benz and Volvo have agreements with their UK dealer networks not to sell below the manufacturer's recommended price.
Under European law, car dealers have the freedom to set their own prices but the programme claims the retailers are too scared of losing their franchises to offer significant discounts.
Secret footage shot by the programme at showrooms for each of the three companies claims to show dealers confirming the price-fixing strategy by admitting they have a policy of offering no discounts.
Karel Van Miert, the European competition commissioner who imposed a #67 million fine on Volkswagen in January for illegal pricing in Italy, vows to take similar tough action if the allegations are proven in Britain.
Each of the manufacturers has responded to the allegations, denying there is no collusion with dealers and pointing out that until recently Britain had been among the cheapest countries in Europe for cars.
Paul Buckett, of Volkswagen, said: "We categorically deny that we impose any penalties on dealers. We have a maximum list price which they can't exceed but they are free to discount to any level they wish.
"It is perfectly correct that Britain is currently more expensive for cars than the continent due to the currency rates. But until recently the opposite was the case and manufacturers were underwriting the losses."
A spokesman for Volvo said: "Our customers are paying for cars made to order. They are getting a specialist service and it is for that reason that dealers don't offer discounts, not because of any secret deal with Volvo."
Mercedes-Benz UK denied it was operating a price-fixing policy.
Company spokesman Doug Wallace said: "The main thrust of the argument is that Mercedes-Benz UK limits the amount of discount the dealers can give customers. That's complete rubbish.
"We have a recommended price list and it's entirely up to the dealers at which price they sell the car."