Supply of new cars: Competition Commission publishes report

United Kingdom

On 10th April 2000, the Competition Commission published its report on the supply of new cars. The report found that average UK new car prices have been 10-12% higher than in similar European Union markets. This is despite the fact that two-thirds of the cars sold in the UK are imported. The report also found that private car buyers are paying about 10% too much for the average car, after taking account of discounts, trade-ins and finance deals. It concluded consumers are being unfairly penalised and urged government backed reforms.

Also on 10th April, in response to the report, Stephen Byers announced new proposals to bring more competition to the supply of new cars and to help reduce prices.

He proposed a range of remedies under the Fair Trading Act including the following:

(a) requiring suppliers to offer the same discounts to ordinary retail dealers as are now offered to fleet purchasers;

(b) requiring suppliers to provide their dealers with regular statements of terms they are prepared to offer which reflect the terms given to fleet customers;

(c) prohibiting suppliers from discriminating in their dealings with contract hire companies by giving less attractive discounts if the end-user is not a fleet customer;

(d) prohibiting suppliers from imposing contract terms on dealers that prevent or inhibit dealers from advertising prices at which they are willing to sell;

(e) prohibiting suppliers from refusing to supply on the grounds of the price at which a dealer advertises it is willing to sell;

(f) requiring suppliers to publish information on a regular basis concerning the number of cars they have pre-registered. Manufacturers have been accused of pre-registering thousand of vehicles every month - in effect registering themselves as the end user in order to improve their sales figures.

Stephen Byers also mentioned that the Competition Commission is making a number of recommendations for more fundamental changes which relate to practices permitted by the EU Car Block Exemption. This exemption runs until September 2002, but the European Commission could bring about changes in the UK before then.

(OFT Press Release P/2000/265)