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Thursday, March 18, 1999 Published at 15:37 GMT


Business: Your Money

Car makers 'distorting' prices

MMC will now investigate the UK's 24bn new car industry


BBC News' Rory Cellan-Jones meets British car buyers in Europe
The Office of Fair Trading (OFT) has found evidence car makers are inhibiting competition in the new car market.

The OFT says it has referred the matter to the Monopolies and Mergers Commission (MMC) for deeper investigation.


[ image:  ]
The consumer watchdog questioned 17 car makers and more than 400 dealers in the market worth 24bn a year in the UK.

The OFT's initial enquiries follow investigative reports aired on television last year which were said to show that carmakers were dictating the retail prices of their cars to dealers, preventing the retailers offering discounts.


Paul Lasok QC and car dealer Clive Sutton: Very difficult for dealers to introduce competition to British car market
Comparisons showed UK car prices higher than those on the Continent with little variations on price between British dealers.

John Bridgeman, director general of the OFT said: "It is clear that the market isn't working properly and that there is an imbalance of power between manufacturers and dealers, which is distorting competition.

The OFT says that most dealers "appear to be far from independent" and reported an uncooperative response from some manufacturers.


John Bridgeman, Office of Fair Trading: Market isn't working
"Overall, the distribution of new cars appears to be as inefficient now as it was eight years ago and there is a strong case for re-examination by the MMC," Mr Bridgeman said.

The OFT said that its seven-month inquiry found that manufacturers would not give volume discounts to dealers, which could have been passed on to the consumer.

In addition, the practice of setting 'recommended retail prices' by manufacturers appeared to give good profits to even inefficient delaerships.

'Nothing to hide'

The Society of Motor Manufacturers and Traders (SMMT) said in a statement it would co-operate fully with an inquiry, that it had "nothing to hide" and that the industry adhered to "the framework of rules defined by UK and European governments".

A 1992 MMC report found competition satisfactory in the industry. The European Commission is to inquire into retail distribution overall across Europe.



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