In an unprecedented move, manufacturers, dealers and consumer groups are to be invited to give evidence at the hearings, which will be open to the press and public.
The Competition Commission, which replaces the old Monopolies and Mergers Commission, has decided not to hold public hearings as part of its examination of supermarket prices. However, Whitehall sources said that if the experiment with the car prices inquiry succeeds, the Commission is likely to extend public hearings to other future investigations.
Attendance will not be compulsory at the public hearings, and car makers and dealers will not be required to disclose information deemed confidential. Nevertheless, the initiative was being seen yesterday as a move towards greater transparency in the area of competition policy and consumer protection.
The Government is expected to publish a White Paper next week setting out its consumer strategy. This will include plans to tighten up on the enforcement of consumer protection laws and give consumers better information on their rights.
The White Paper is likely to be accompanied by the first "name and shame" list highlighting different prices charged for a range of goods in Britain compared with other countries.
The director-general of Fair Trading, John Bridgeman, ordered a nine- month inquiry into new car sales in March after evidence that dealers and manufacturers were distorting the market and driving up prices.
According to a recent Commons Trade and Industry Select Committee report, UK car prices are up to 60 per cent higher than those charged on the Continent for some models.
The OFT found that manufacturers were refusing to give volume discounts to dealers and using recommended resale prices to mask true selling prices of cars. It also said that dealer bonus systems were being used to deter dealers from selling outside their areas and bringing in parallel imports.
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