Dixons defends PC deals after rivals' broadside

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Dixons, Britain's biggest electrical retailer, hit back against accusations of anti-competitive behaviour yesterday, saying its prices for personal computers offered the best value on the high street.

The defence came as the Office of Fair Trading held open the possibility of a fresh investigation into computer prices following complaints from rival retailers.

John Lewis claims Dixons' move to secure exclusive supply agreements with Compaq and Packard Bell could lead to reduced consumer choice and higher prices.

The OFT said: "We have told John Lewis that on the details they have supplied so far ... the agreements do not appear to infringe the new Competition Act. But we are seeking further information from John Lewis on their complaint."

It added that vertical integration between manufacturers and retailers were excluded from the new Competition Act which came into force last month. However, it said the director-general "can claw back this exclusion where he considers the agreement would be anti-competitive".

Dixons shares fell 5 per cent to 270.25p on the news. It said yesterday that the personal computer market had already been given a clean bill of health in the OFT inquiry into the personal computer market which was completed last October. John Clare, chief executive, said: "Dixons' prices are highly competitive - that's why we can continue to thrive in a highly price sensitive market."

He added: "By working with an exclusive distributor it is possible for suppliers to minimise overheads in the UK by using our infrastructure to complete with low prices."

The exclusive arrangements cover all Packard Bell computers and the Presario range of Compaq PCs, which will be sold only through the Dixons group, which includes the Currys and PC World chains.

Compaq stopped supplying John Lewis late last year. Packard Bell recently told the retailer that it would be ceasing supply by the end of June.

John Lewis dismissed reports that it is planning to sue Dixons over the deals. "What we are annoyed about is the Government stance," a spokeswoman said. "They say there are in favour of competition but they don't act. We want the OFT to reconsider its stance and publish the basis of its findings."

John Lewis argues that 70 per cent of PCs are sold on the high street and that Dixons accounts for 57 per cent of those.

Dixons said that with many manufacturers supplying direct to customers, and an enormous choice of product and brands, it was vital for suppliers to find the lowest cost route to market. "By working with an exclusive distributor it is possible for suppliers to minimise overheads in the UK by using our infrastructure to compete with low prices," the company said.

Packard Bell, part of the American group NEC, sells more than three-quarters of its PCs through Dixons. Nick Palmer, a Labour MP, will put down an early day motion to appear today and has tabled two parliamentary questions attacking the arrangements.