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