Volvo price-fixing cartel a disgrace, says watchdog

Steve Boggan
Friday 09 July 1999 23:02 BST

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VOLVO, THE Swedish company that became a byword for reliability, yesterday admitted involvement in an illegal price-fixing cartel in the UK.

In spite of an Office of Fair Trading investigation that found "disgraceful" exploitation of British customers, the company was let off with a slap on the wrist and will face no fines or court orders.

Had the breach occurred next year, when tough new competition laws come into force, Volvo Car UK could have been fined up to 10 per cent of its turnover, some pounds 70m.

This is thought to be the first time the OFT has acted against a motor company for price fixing. It marks a new determination by the Government to clamp down on anti-competitive activities and marks a new, more pro- active culture within the OFT. In a 12-month inquiry into Volvo Car UK Ltd, the OFT's Cartels Task Force found the company's dealers "secretly and cynically agreed to fix prices with the support of Volvo".

Under competition law, it is illegal for manufacturers to impose a retail sale price on their products, yet Volvo had meetings with dealers and left them to "discuss future business strategy", in effect agreeing on discounts. "This is a disgraceful case," said John Bridgeman, the Director General of Fair Trading.

"A major - and well- respected - car manufacturer colluded with dealers who were fixing prices ... This demonstrates a blatant disregard for UK law and an indifference to the exploitation of customers. UK customers wondered why they pay such high prices for cars. In Volvo's case, the answer is now much clearer: the dealers secretly and cynically agreed to fix prices."

But the most Mr Bridgeman could do under current legislation is apply to the Restrictive Practices Court for an order ensuring Volvo prevents future price-fixing. The company has already agreed to do this, saying the offences happened during a brief period four years ago, so there is no more serious punishment he can impose.

His team was stung into action by former dealers in a BBC Panorama documentary revealing the price-fixing cartel. Panorama found 17 out of 20 dealers quoted exactly the same price. One claimed: "We're tied by Volvo."

OFT officials said three middle-managers in the south of England had indirectly regulated the way dealers discounted. They held back bonuses from dealers who discounted too heavily. The managers have been retrained. The Consumers' Association, which has long accused the motor industry of "ripping off" customers, used Volvo's admission to ask the Government to support removal of industry's "block exemption" system. Under that, manufacturers are not covered by European competition law and choose their own retail outlets.

"Price-fixing will exist until the EC removes exemption," said Phil Evans, of the association. "It allows car makers to choose who can sell a new car, how they do it and effectively at what price." In Britain, the new Competition Commission is to investigate UK car-pricing. A recent What Car? magazine article said a Volvo V70 2.5 20-valve vehicle cost pounds 1,700 less in Belgium than in the UK. Gerry Keaney, managing director of Volvo Car UK, at Marlow in Buckinghamshire, said: "It has never been our policy to condone anti-competitive behaviour and we were horrified to learn ... a few of our staff got it wrong."

Yesterday, at London dealerships, The Independent was offered discounts from pounds 2,000 to as little as the promise of a metallic paint job on Volvo V40s book-priced between pounds 18,500 and pounds 16,000.

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