Volvo's admission comes at a sensitive time for the UK motor industry. The Competition Commission is about to begin a major investigation into the pricing of new cars and the way that they are sold.

Volvo has gone out of its way to claim that this was an isolated incident. Gerry Kearney, the managing director of Volvo in the UK, said: "It has never been our policy to condone anti-competitive behaviour and we were horrified to learn that in an isolated area, for a short period, almost four years ago, a few of our staff got it wrong".

The Director General of fair trading, John Bridgeman, has been anxious not to prejudge the Competition Commission's findings.

But he did say: "UK consumers have wondered why they pay such high prices for their cars. In the case of Volvo cars, the answer is now much clearer: the dealers secretly and cynically agreed to fix prices with the support of Volvo."

Common practice

That statement lends credence to the widely held view that what Volvo did is common practice in the UK motor industry.

Figures from the European Commission show that there's a wide gap between prices in the UK and many other European countries. The Volvo S40 for example costs £12,330 in the UK, £2,000 more than in the cheapest European country - the Netherlands.

Next week the EC will publish a new set of figures.

Tough new laws

It will, though, become more difficult for carmakers like Volvo to get away with price fixing in the UK.

Under the law as it stands, the most that the Restrictive Practices Court can do is to order a company like Volvo not to do the same again.