The electrical goods industry was caught by surprise yesterday when the Office of Fair Trading launched a monopoly inquiry into the supply of domestic electrical products to retailers.
The inquiry centres on whether the big manufacturers have a monopoly and use it to dictate prices to retailers at the public's expense. The implication is that customers may have been paying too much for their electrical goods in a market dominated by a few powerful manufacturers. The inquiry includes televisions, video recorders, hi-fis, camcorders, washing machines, tumble dryers and refrigerators. The Monopolies and Mergers Commission has until next April to report its findings to the DTI.
Sir Bryan Carsberg, the director-general of fair trading, said: "Our information indicates that some manufacturers, accounting for well over 25 per cent of the supply of specified goods in the UK, have been engaged in practices designed to sustain retail price levels. These include refusing to supply to retailers who sold goods below the manufacturers' recommended retail price and outlets such as discount warehouse clubs, which typically sought to sell at 15-20 per cent below MRRP."
The storm first broke last year when Cargo Club, the failed warehouse scheme that was launched in 1993 by Nurdin & Peacock, complained to the OFT. It claimed firms such as Sony, Panasonic and JVC were refusing to supply it because it was intending to sell goods at low prices. CostCo, its rival, also said it was denied supplies.
Sony admits that it has declined to supply both the chains but claims the decision was taken because the discounts could not satisfy its stipulations on after-sales service.
Sony disputes any strong-arm tactics. "We're surprised by the OFT's decision. The UK is a highly competitive market and the consumers have a wide choice. In terms of price we believe the consumer is getting a value for money." Dixons, whose shares slumped, were also caught off-guard by the decision. "We are mystified by this but it's not our battle."
However, the OFT investigation was not triggered by the warehouse clubs as, according to the OFT, it received an earlier complaint in the summer of 1993. There was speculation yesterday that it was Dixons which had complained, though the company denied it yesterday.
If the complaint is upheld by the MMC it could help to reduce the price of electrical goods on the high street. This would help consumers but spell disaster for retailers who are already operating on wafer-thin margins.
Comment, page 33.