The Government is also targeting any discrimination between retail and corporate end-users in the discounts available to contract hire companies supplying them with cars and is proposing a crack-down on pre-registration of cars to sell as 'nearly new'.
Trade and Industry Secretary Stephen Byers released a draft order of legislation which the Government expects will lead to reduced new car prices for retail buyers and bring more competition to the supply of new cars.
The draft order will require suppliers to offer dealers who buy cars outright similar volume discounts to those offered to fleet buyers; stop suppliers differentiating on price between fleet and private buyers and also make it easier for dealers to buy cars cheaply from abroad.
The draft order proposes to make a number of practices in the relationship between car makers and dealers 'unlawful'
- discriminate between fleet customers and dealers which buy stocks of cars outright, in respect of the price paid for equivalent volumes of new cars
- discriminate in respect of the price charged for the supply of a new car to a contract hire company according to whether that car is supplied to a fleet customer or not
- withhold or to agree or threaten to withhold supplies of new cars from a dealer on grounds relating to the price at which the dealer has advertised or is likely to advertise a car for
- restrict the prices a dealer sets for new cars or to give any preference to a dealer on the basis of the price at which they advertise a car
- offer bonuses or incentives to the dealer based on the sale of pre-registered cars
- prevent the dealer from importing new cars from authorised dealers in other European member states.
Manufacturers must also notify dealers at specified intervals of the terms and conditions on which they are prepared to supply new cars, in particular the prices and volume discounts available. They must also make available to the Office of Fair Trading the terms, conditions and prices offered to fleet customers and details of pre-registered cars must also be published at 'specific intervals'.
The publication of the orders will be followed by a consultation period until July 14, after which Byers proposes to make an order under the Fair Trading Act 1973 to implement the changes.
The remedies are in response to the Competition Commission's monopoly report into the supply of new cars which found that new car prices in the UK were around 10% higher than in Europe. The report also found that private car buyers were paying about 10% too much - or £1,100 - for the average car, after taking account of discounts, trade-ins and finance deals.
The leasing industry welcomed the proposed orders - claiming they would make personal contract hire schemes more attractive and impose a more orderly used market.
A BVRLA spokesman said: 'We are delighted that the Government is acting to remove the distinction between a corporate and retail end user. We also believe tightening up the pre-registration situation will be beneficial to our members - particularly in the daily rental sector.
The Retail Motor Industry Federation also welcomed Mr Byers proposals, saying: 'We have campaigned long and hard for transparency of prices and are extremely happy with today's outcome. This should inspire consumer confidence and encourage the public back into the showroom, knowing they are going to get the best deal available.'
But the Society of Motor Manufacturers and Traders was less enthusiastic. A spokesman said new car prices had already fallen by more than 10% and neither car-makers or dealers could afford to cut margins further: 'There is no possible opportunity for car prices to fall by the significant levels being rumoured in the media. Car manufacturers do not have the margins to reduce prices by 30 or 40 per cent.
'Claims that consumers will be able to buy cars at a 30 or 40 per cent discount when dealers are given access to fleet incentives do not bear scrutiny. Fleet discounts have become a thing of legend and the figures have been over exaggerated. There is no such thing as a fleet discount 'table' with discounted values written down, and the Competition Commission did not report any concerns about the operation of the fleet market. Fleet cars are business vehicles used in the course of daily commerce, any increased costs will be passed on to UK business as there is no other way of reducing costs.'
Representations on the remedies statement from Byers should be sent to John Lambert, Competition Policy Directorate 3a, Department of Trade and Industry, Room 616, 1 Victoria Street, London SW1H 0ET. Your letter must say what your interest in the matter is and the grounds on which you wish to make representations.
For further comment and analysis - see tomorrow's Fleet News.
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