HL Deb 27 July 1998 vol 592 cc1187-90

2.56 p.m.

Lord Jacobs asked Her Majesty's Government:

What steps they propose to take to ensure that consumers in the United Kingdom do not have to pay as much as 20 per cent. more for new cars than consumers in Belgium.

The Minister of State, Department of Trade and Industry (Lord Simon of Highbury)

My Lords, the European Commission, which enforces EC competition law, decided in January to fine Volkswagen 102 million ecu (some £70 million) for prohibiting its dealers in Italy from selling cars to foreign buyers who wished to benefit from cheaper prices. Manufacturers therefore face serious risks if they break the law.

Officials are discussing with the Commission what the implications of this case are for UK consumers wishing to buy cars at the lowest possible prices here.

Lord Jacobs

My Lords, I thank the Minister for his helpful reply. Perhaps I may draw his attention to the EC's 11th survey of car prices which shows that in the UK we pay the highest car prices of anywhere in Europe, irrespective of where the cars are manufactured. As the survey shows that one UK manufacturer charges UK customers 30 per cent. more than in any other country in Europe, even though one of those countries is Ireland where they also drive on the left, does the Minister agree that such widespread overcharging is clear evidence of an informal cartel? Furthermore, rather than rely upon the lengthy investigations by European institutions, will the Government consider direct negotiations with individual manufacturers to seek to persuade them to lower their prices, at least to the average level of European prices? If one or two manufacturers were to agree, the others would follow.

Lord Simon of Highbury

My Lords, clearly comparing prices across Europe is a complex matter. There are the issues of taxes, exchange rates, quality and production specifications. If there is any evidence that cartels are operating, the correct place for that information is the Director-General of Fair Trading together with the appropriate complaints procedure. I would not want to comment further at this stage except to say that our Competition Bill, if it is successful through both Houses, will ensure that these matters are regarded with the utmost seriousness.

Lord Borrie

My Lords, does the Minister agree that wide discrepancies in prices across Europe for any considerable period of time make a mockery of the single market? Does my noble friend agree with me that a serious drawback is the persistence of a block exemption enabling a tightly knit car distributorship agreement to prevail contrary to the normal competition laws of the European Union?

Lord Simon of Highbury

My Lords, in general terms I would never wish to cross swords with my noble friend on matters of competition. However, he must know that extreme variances of prices are capable of being observed in one region of one country let alone across the European Union. Therefore, given the features of tax and exchange rates, disparity of prices does not necessarily mean that the European Union single market is not working effectively. However, at the informal ECOFIN meeting in May we asked the Commission to look at pricing across the European Union with a view to helping the completion of the single market.

Block exemptions are clearly a matter for the European Commission and its consideration will impact on our own law base.

Baroness Oppenheim-Barnes

My Lords, will my noble friend the Minister comment on whether the stockpiling of many thousands of new and nearly-new cars at RAF Upper Heyford is in breach of our restrictive practices legislation? Is it a form of cartel, the main purpose being to stop the price of second-hand cars from falling?

Lord Simon of Highbury

My Lords, I cannot comment on individual company's stockpiling policies. By and large holding large stocks of any product is usually a function of the order and resale process within any industry. Holding large stocks is not a crime, but it usually turns out to be expensive for the company which holds them.

Lord Stoddart of Swindon

My Lords, is my noble friend the Minister aware that there is a great deal of confusion about car prices, not only in relation to Europe but also in relation to the way that manufacturers and distributors handle the industry? Manufacturers are whining and moaning about a high pound, saying that they cannot export. But since many of the components and cars are imported, can my noble friend explain why the high pound does not result in much lower prices of cars in this country? Manufacturers cannot have one without the other.

Lord Simon of Highbury

My Lords, my noble friend raises an extremely acute point of analysis about how pricing should operate. My experience is that there are often swings and roundabouts in these matters, and the consumer often thinks that he is on the roundabout rather than the swings.

Lord Razzall

My Lords, does the Minister accept that the real issue—it has been demonstrated by the questions asked by noble Lords—is that for at least the past two to three years there has been a significant problem of differential pricing between UK purchased cars and cars purchased elsewhere? The Government must commit themselves to doing something about it. Will the Minister give that undertaking?

Lord Simon of Highbury

My Lords, I believe that I made clear in an earlier answer that in May the Financial Ministers' Council asked ECOFIN for pricing discrepancies in Europe to be studied by the Commission. I am sure cars fall within that study. As we prosecute the single market, we shall ensure that pricing disparities which are not for wholly acceptable and justifiable reasons will be pursued at whatever legal level is required.

Lord Bruce of Donington

My Lords, does the Minister agree that the Commission's interpretation and enforcement of competition laws are subject to many inexplicable differences? Will my noble friend give the House an undertaking that the Government will look into this aspect of the matter in view of the fact that under the treaty the Commission is the sole interpreter of their validity?

Lord Simon of Highbury

My Lords, without wishing to trivialise matters to my noble friend, I think that the decisions of the Court are often complex and sometimes incomprehensible to the layman. However, we shall ensure that within our powers the prosecution of the law is undertaken in a manner which is compatible with the treaty and our own regime and of benefit to the consumers for whom it is designed.

Lord Swinfen

My Lords, can the Minister tell the House how United Kingdom taxes on new cars compare with taxes in other countries within the EC?

Lord Simon of Highbury

My Lords, I would rather write to the noble Lord in response to that question. It is a detailed matter. I do not wish to waste the time of the House because it is different in each country.