NEW car prices are under fresh scrutiny by the Office of Fair Trading in a new investigation into the relationship between manufacturers and franchised dealers. The OFT believes a complex monopoly may be adversely affecting competition in the motor industry, unduly inflating new car prices.

An official OFT bulletin stated: 'Dealers and manufacturers are being asked about practices such as the use of recommended resale prices (RRPs) to squeeze dealers' profit margins, the use of bonus payments to encourage them to stick to RRPs, the gathering or inspection by manufacturers of information on dealers' selling prices, the provision of support such as advertising being dependent upon dealers advertising or selling at RRPs and threats to withhold supply.'

If the OFT finds evidence that 25% of all car manufacturers are acting in an anti-competitive manner, with or without dealer consent, then John Bridgeman, director general of the OFT, will refer the case to the Monopolies and Mergers Commission.