OFT to launch inquiry into Dixons pricing

Dixons is mounting its defence against a swelling tide of criticism that claims it has artificially kept PC prices inflated in the UK's high streets.

Intel has remained silent since its chief executive, Craig Barrett, commented last week that Dixons charges 'ridiculous margins' (PC Dealer, 25 November).

However, the comment has resulted in Trade and Industry Secretary Peter Mandelson writing to the Office of Fair Trading (OFT) to suggest an investigation, a call echoed by the Consumer Association.

An OFT representative confirmed: 'We will be looking for any evidence of anti-competitive behaviour following this complaint.'

The response from Dixons has been that Intel's claims were sour grapes due to the chip giant's diminishing market share.

Rival chip vendor National Semiconductor has come to Dixon's defence.

Hermann Stehlik, director of marketing communications Europe, claimed that Dixons' £499 PC, which uses NatSemi's Cyrix processor, 'clearly has some of the competition very worried'. He also alluded to a failure by Intel to accept the value of entry-level systems: 'Cyrix effectively pioneered the entry-level PC sector, while others were still in denial.'

John Clare, chief executive of Dixons, has replied to the Trade and Industry Secretary, welcoming the enquiries. However, he added: 'Any study should include an assessment of the role of microprocessor and other component suppliers, such as Intel, as well as the impact of VAT on the purchase price of PCs.'

A Dixons representative claimed its margin on a PC is 'about 10 per cent'.

OFT GETS TOUGH

John Bridgeman, director general of the Office of Fair Trading (OFT), revealed that the Competition Act will drastically strengthen the OFT's enforcement powers from 1 March, 2000.

'The UK will move from having one of the most permissive competition regimes in the world to one of the toughest. The new law gives my officials the power to enter premises and request the production of documents.

'I will be able to impose penalties on those who abuse a dominant market position or enter secret deals to destroy competition in order to keep prices high for UK consumers. The days of price fixing and market sharing are numbered,' he added.