Plug pulled on electrical goods 'price-fixing'

Tough new measures to stop the alleged fixing of the prices of domestic electrical appliances are likely to be recommended by the Monopolies and Mergers Commission this spring.

The MMC is expected to urge the Government to prohibit manufacturers from recommending prices to retailers and is also considering whether to require them to sign a formal undertaking that they will not refuse to supply discount retailers or try to control prices, The Economist reports today.

While manufacturers and retailers strenuously deny price-fixing, sources close to the MMC said that the commission thinks that the consumer has been getting a raw deal when it comes to buying "white goods" such as washing machines, fridges and dishwashers.

The MMC has twice delayed the publication of its inquiry into allegations of price-fixing, but is finally expected to report back this April.

The 1976 Resale Prices Act made price-fixing illegal and also prohibits suppliers from withholding or threatening to withhold goods or from offering less favourable terms to discount retailers.

Two years ago the Consumers' Association surveyed high-street stores and found that many top-brand electrical goods were being priced identically across the country. When the association telephoned a range of stores, several said that they would lose their dealership if they offered a discount on the recommended retail price. A leading chain store in Slough, Berkshire, said: "The prices you see in the stores are set by the manufacturer". Another said: "It's difficult to do discounts as manufacturers exert pressure on shops not to".

A recent survey carried out for the BBC's Panorama programme found that identical video recorders were priced at pounds 479.99 in 17 out of 22 stores, refrigerators at pounds 249.99 in 16 out of 19 stores, and washing machines at pounds 429.99 at ten out of eleven stores.

In 1994 the combined market share of five retail chains selling domestic electrical appliances was 42 per cent. It is alleged that retailers who step out of line are punished by exclusion. Jim Murphy, the managing director of Price Costco, a warehouse membership club which charges at least 20 per cent less than high-street outlets, told The Economist that excuses given to him by manufacturers for refusing to trade with him ranged from the environment being wrong to his staff not being trained in how the product works. "The current system does not encourage ... efficient distribution to the consumer," he said.

Richard Hyman, of the retail analysts Verdict, said that claims of conspiracy between retailers and manufacturers should be treated with caution: "It is not quite as it seems. It is not meeting in smoke-filled rooms ... it isn't that overt."

But he added that the argument that customer service would not be good enough in warehouse outlets was not correct: "If the consumer thinks it's okay to buy from there, then it should be."