Govt 'to drive down car prices'

By THIS IS MONEY
Updated: 18:00 EST, 27 March 2000

Britain's Competition Commission has concluded British car buyers are being ripped off and the Government plans to respond by forcing manufacturers to cut UK prices.

Industry sources told Reuters there were indications an announcement was likely this week or next week.

Citing insiders, the newspaper said the antitrust body's report - which could result in price cuts of up to 35 percent - was particularly critical of the fact that private motorists subsidised lucrative discounts for business customers.

A Department of Trade and Industry spokeswoman said the newspaper report was 'speculation'. The Secretary of State is considering the findings at the moment and we will publish a report when he has reached a decision,' the spokeswoman said. Trade and Industry Secretary Stephen Byers received the Competition Commission report at the end of January.

Sheila McKechnie, director of the Consumers Association which is due to launch a website for cheap car imports (www.carbusters.com) later today, said Government action along the lines suggested would be great news for car buyers.

'It means that the Competition Commission and the minister are going to accept all the evidence we've put in to show that UK consumers were being ripped off to the tune of about £6bn a year,' she told BBC radio.

For car retailers an announcement could not come too soon amid evidence that the row over rip-off prices is keeping buyers away from UK showrooms.

A survey by mortgage bank Alliance & Leicester said that despite a fall in prices since last year, registrations by private car users were down by 10.6% in January with little indication that demand would have picked up in February.

'With the price differential where it is at the moment and the uncertainty over the investigation, it's leaving the way open for Internet and other operations to ship cars in from Europe where they are cheaper,' said a spokeswoman for the Retail Motor Industry Federation.

In February, the European Commission found that Britain remained by far the most expensive country in the EU to buy a new car, despite recent price cuts by some manufacturers.

It found that the average price gap between the cheapest and most expensive markets for all car models it examined was 19.5 percent in the six months to November 1 among the 11 euro zone countries. If Britain, which is not a member of the single currency, was taken into account, the average price differential across the EU rose to 35%, it said.

Consumer groups in Britain want an end to the car industry's exemption from EU competition rules and have called on consumers to hold off buying new cars until prices fall.

Under the so-called 'block exemption' from EU rules, cars may only be sold through designated dealers. Critics say this gives manufacturers considerable price control. Dealers wanting to sell more than one make must do so from separate premises.

The Daily Telegraph said Byers had not ruled out unilateral withdrawal from the EU block exemption, but was more likely to put pressure on the commission to change its rules.

Ministers aim for equal discounts for private and business motorists, and also want to remove the manufacturer's right to set the rate at which their vehicles must be sold, and allow dealers to decide how much to charge, the paper said.

McKechnie predicted resistance from car firms and said it could take a year or two to clean up the UK market. 'They are not going to change their spots over night...,' she said. © Reuters