The Irish motor industry has reacted with surprise to reports that several dealers are being investigated for price fixing by the Competition Authority.
Surprise was also expressed at the way the investigation has been handled.
As revealed by The Irish Times last week, 17 raids were carried out last November and December by the Competition Authority and the Garda Bureau of Fraud Investigation (GBFI). The home of a man who acts as secretary to a number of car dealers' associations was also raided. A file is being prepared for the Director of Public Prosecutions.
Cyril McHugh, of the Society of the Irish Motor Industry (SIMI), didn't wish to comment on this case, but said that in many other cases the authority had taken "a far more genteel approach when investigating and making recommendations if it found some anti-competitive practices".
Dermot Jewell of the Consumers Association of Ireland was less surprised by the investigation. "We have previously received complaints about car prices but at the time tended to accept the answers we received when we queried them. It will be interesting to see the outcome of this investigation and whether, if there is price fixing, it is just a small group of individuals or part of a concerted campaign."
Conor Faughnan of the Automobile Association, which regularly monitors pricing of motoring-related services, said that, while the AA had previously found evidence of uncompetitive practices in the insurance and petrol industries, it has never come across signs that dealers were trying to fix car prices.
"We regularly monitor motoring prices, including the cost of new cars and we've seen no signals of any anti-competitive practices. For example, with petrol prices, it quickly became apparent that outlets in some counties were systematically overcharging. With car prices, there have been no such indications from the surveys we've carried out."
Faughhnan also questions likely motivation. "It's not going to do a dealer a lot of good to fix the price of a particular brand, given that the car itself is essentially a commodity and few motorists will remain totally committed to one brand if they can get a better deal from another brand. Even if a group of dealers selling one brand were to agree a fixed price, the customer would then choose between the dealers in terms of the trade-in value."
McHugh of the SIMI says that "on the Continent, there is a far smaller divergence from recommended retail price, particularly in France and Germany. Ireland has a tradition of discounting and haggling that's not common in other EU states."
Within the list price published by manufacturers, dealers typically have a 10 per cent margin for haggling. The importance of this has even been recognised by the Government, in that Vehicle Registration Tax (VRT) is based on 90 per cent of the car's Open Market Selling Price (OMSP).
McHugh also questions claims of profiteering by Irish dealers. Industry estimates put margins here at about two per cent, compared with four or five per cent on the Continent.
However, there are few signs that the industry here is unprofitable. Last May's Irish Times listing of the top 1,000 companies in Ireland featured several motor firms. However, dealers tend to seek profits from servicing and financing rather than selling price. Customer finance has proved one of the most lucrative areas for car dealers in recent years, along with the traditional profits from the sale of trade-in vehicles.
New EU rules on competition in the car industry have meant that dealers have had to invest heavily in their businesses to retain their franchises. Some estimates put the total expenditure on infrastructure during the past four or five years at nearly €1 billion.
Speaking last week, Ford of Ireland chairman, Eddie Murphy, highlighted how cost bases have "ballooned" with tighter margins and a levelling in sales in recent years. "The break-even point for the motor industry has shifted upwards".
