Outlook: Rip-off cars

JOHN BRIDGEMAN'S announcement that he is packing the thorny issue of car prices off to the Monopolies and Mergers Commission is full of little gems, like the fact that the referral will cover all motor cars "having three or more road wheels". It is bad enough owning a Reliant Robin in the first place, but to discover that you were ripped off as well is too much to bear.

This is the second time within a decade that the new car market has found itself heading in the direction of the MMC at the behest of the Office of Fair Trading. It is easy to see why. According to the car industry, the selective and exclusive system of distribution it operates is in the consumer's interest because it keeps standards up and unsafe cars off the road.

Unfortunately it also keeps prices up. The system, which is self-evidently anti-competitive, is only supposed to enjoy its current block exemption under EU rules provided prices do not vary by more than 18 per cent. The last price comparison from the EU, showing a whopping 58 per cent discrepancy between the cost of a Ford Mondeo in Britain and Spain, is powerful evidence of the coach and horses manufacturers have been driving through the rules all these years.

Mr Bridgeman has unearthed more. He reckons that the use of recommended resale prices also prevents consumers getting a good deal, as does the refusal of manufacturers to give volume discounts to dealers. Another favourite wheeze is to penalise dealers who sell cars outside their allotted territories by reducing their bonus payments.

But while the charge sheet is long and familiar, the remedy has proved more elusive. The manufacturers have shown themselves adept at swerving past any roadblocks the competition authorities erect. The best that can be hoped of this latest inquiry is that it prevents the block exemption from being renewed in Brussels when it comes up for review next year.

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