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Tuesday, July 20, 1999 Published at 13:22 GMT 14:22 UK

Business: The Economy

Car makers 'fixing prices'

Many British-made cars can be bought much cheaper on the continent

Car buyers in the UK have no real ability to negotiate prices when they buy a new vehicle, the Consumers' Association (CA) told a Competition Commission hearing on Tuesday.

"You can't get a bargain because dealers are in no position to offer you one," said the CA's senior policy researcher Phil Evans.

Karen Bowerman reports: "Most of the car manufacturers refused to attend"
He was speaking at the Competition Commission's first ever public session - an all-day hearing which is part of a nine month investigation into the price and selling of new cars in the UK.

The inquiry was sparked by concern about the cost of new cars in the UK being so much higher than the same models sold elsewhere in Europe.

Before the hearing began Mr Evans said the CA was convinced that the motor industry was "operating as a monopoly and deliberately fixing new car prices, resulting in a £6bn a year rip-off of the UK consumer."

Alan Pulham, franchise dealer director of the Retail Motor Industry Federation, told the hearing that car dealerships had seen their margins halved since the early 1990s.

"Manufacturers have limited the ability of dealers to compete in the market place and the company car market has distorted the used car market," he said.

Refused to appear

The inquiry chairman Denise Kingsmill said it was "a great pity" that very few car companies had turned up at today's hearing despite their all being invited.

Phillip Evans of the Consumers' Association: "We don't want manufacturers dictating prices across Europe"
She added that the Commission would not draw any adverse inferences from absences.

Three of the UK's biggest manufacturers, Ford, Vauxhall and Nissan, have refused to appear at the hearing because of fears about revealing confidential information.

Companies said last week that they were happy to be represented at the hearing by their umbrella body, the Society of Motor Manufacturers and Traders. They will also be giving evidence in private to the inquiry team.

The hearing comes only a week after Volvo (UK) admitted supporting secret arrangements to keep its British car prices artificially high.

Volvo avoids fine

The company escaped a fine, with the Office of Fair Trading (OFT) accepting a promise of good behaviour in the future.

Car manufacturers claim the higher prices in the UK are a result of higher production costs - partly as a result of producing solely right-hand drive vehicles.

[ image:  ]
But consumer organisations say this does not explain why right-hand drive cars can be bought on the continent for several thousand pounds less than identical models in the UK.

One survey showed British consumers pay the highest price for 60 out of the 74 best-selling new models in Europe.

A Rover 414 costs about £11,000 in Britain, where it is made, compared with less than £8,000 in Portugal.

Manufacturers say the list price is irrelevant and point to the actual transaction price.

They say this can sometimes be higher in countries where list prices are lower than in the UK.

The Competition Commission, formerly the Monopolies and Mergers Commission, is looking into the workings of the franchise dealer network and the price of new cars, as well as dealer discounts and bonuses.

The franchise dealer system is excluded from normal European competition regulations but the commission could call for this exemption to be lifted.

Car companies will also be giving evidence in private.

The commission has been asked to make its report to Trade and Industry Secretary Stephen Byers by 16 December.

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