Cartel spied on dealers with ‘mystery’ purchasers
It emerged yesterday that people pretending to be customers bought cars around the country to see if any dealer was undercutting the cartel minimum, under a scheme operated by the IFDA called the “mystery shopping survey”.
If dealers were found to have sold cars at prices breaching the association’s guidelines, fines were imposed.
For example, the association wrote to particular dealers and said their so-called “mystery shopping survey” disclosed that a car had been sold, for instance, at €430 below the guideline minimum.
The association instructed the dealer to pay a fine of, for example, €635 for breaching the guidelines.
In this way, the cartel policed and enforced its price agreements.
Denis Manning, secretary of the IFDA, was sentenced yesterday after he pleaded guilty to aiding or abetting in the illegal fixing of prices of Ford cars in Ireland — an offence under cartel legislation.
Prosecution senior counsel George Bermingham said the euphemism used by the IFDA for the price-fixing was “a profitability programme”. It was also claimed that local and national advertising by dealers was used to monitor the programme and that this was directly administered by Manning.
Defence witness, Myles O’Reilly, former chairman of the Fair Trade Commission, said that in 2002, the Ford manufacturers recommended a price that would leave dealers with a 9.2% margin and that the IFDA recommended 4.2%, a margin which would have provided a dealer with a €696 profit on a Ford Focus.
Mr Bermingham SC said nobody buying a car imagines they will pay the price set out in the forecourt of the garage. He said the IFDA price-fixing set a limit below which dealers would not go when haggling with customers.
Ray Leonard of the Competition Authority said they launched a three-year investigation into the price-fixing scheme following numerous complaints.
“The investigation consumed the entire resources of the division for two-and-a-half to three years, 28 search warrants were issued, there were 30 cautioned interviews of suspects, 28 summonsed hearings and more than 50 witness statements,” Mr Leonard said.
The Central Criminal Court was told yesterday that the price-fixing related to the prices of new cars, the delivery charges for these and the additional charge for metallic paint.
A key date in the investigation was December 5, 2003, the date that Competition Authority officers obtained a search warrant and went, with gardaí, to the home of Denis Manning at 11 Allendale Avenue, Melbourn Estate, Bishopstown, Cork, at noon. The search was conducted in very hospitable circumstances, where some of the officers were directed to an upstairs office while Mr Leonard and the defendant talked downstairs in the sitting room as Mrs Manning provided tea.
Mr Leonard suggested that there was a bigger picture beyond Mr Manning and the IFDA. “I believe cartelism is endemic in the industry and we have cartels operating against cartels,” Mr Leonard said. He described the IFDA profitability programme as removing competition and leaving the illusion of competition.
“Attempts were made to compete, but that was oppressed by the IFDA,” Mr Leonard said.
Manning pleaded guilty to the charge of aiding and abetting the Irish Ford Dealers’ Association and its members to commit an offence, namely the implementation of an agreement which had as its objective the prevention, restriction or distortion of competition in the trade of motor vehicles in the State by directly or indirectly fixing the sale price of motor vehicles, between July 1, 2002, and June 30, 2003.
