Britain is investigating exorbitant retail prices amid cries of rip-off Intel recently called British chain's markups on computers 'ridiculous'

November 29, 1998|By CHICAGO TRIBUNE

LONDON -- Visitors to Britain are often shocked by its high prices, but only recently have the British become aware that they might be the victims of a huge retail rip-off.

Not only are prices here, for everything from computers to hotel rooms to restaurant meals, much higher than those in the United States, surveys by the British media have found that they are steep even by continental European standards.

British retailers point to several justifications for high prices: the high cost of shop space in a crowded country, high labor costs resulting from generous welfare state benefits and high tax rates.

Those may be valid in making comparisons with the United States, but many of the costs are as high as or higher than those on the continent.

Investigations launched

Until recently, the British public seemed to accept high prices with remarkable passivity. But publicity in newspapers and television, comparing British prices with those abroad, has prompted the government's Office of Fair Trading, which is supposed to safeguard consumer interests, to investigate some retailers.

The issue was highlighted recently when Intel, the world's biggest semiconductor maker, accused a leading British retailer, Dixon's, of charging "ridiculous margins" for personal computers and deterring many people from buying them.

Analysts say Dixon's, through its stores and those of three affiliates -- PC World, the Link and Currys -- controls more than 50 percent of the market for personal computers in Britain.

Dixon's has denied the Intel charges. But Context, a market research group, said average personal computer prices in Britain are about a third higher than those in the United States and Germany. The average price paid in Britain is $2,400, compared with $2,058 in France and $1,745 in Germany.

Trade and Industry Secretary Peter Mandelson wrote to Sir Stanley Kalms, Dixon's chairman, to say he would be "extremely concerned" if high prices thwarted government plans to have Britain become a high-technology economy.

Mandelson also asked the Office of Fair Trading to look into the matter. Newspapers have accused some U.S. clothing companies of setting British prices as much as 40 percent higher than those charged in the United States for the same products.

The Sunday Times noted these comparisons: a Tommy Hilfiger jacket, $145 in the United States, $240 here; a Ralph Lauren Polo Sport sweat shirt, $80 in the United States, $147 here; Nike Air Zoom running shoes, $107 in the United States, $170 here; and a Sharp Viewcam, $607 in the United States, $1,038 here.

Cheaper to fly to New York

The newspaper calculated that a Briton could take a cheap flight to New York, buy those four items and still save $196. Many Britons do fly to the United States to do their Christmas shopping because of the savings.

Another article quoted a price of $107 for Timberland boots at a U.S. factory outlet and $224 here; $38 for Levi's 501 jeans in the United States and $83 here; and $32 for Gap chinos in the United States, $59 here.

But it said some items, such as books and a Remington shaver, were cheaper in Britain than in the United States.

Reporters from the Sunday Times set up a bogus discount company, America Inc., to determine whether U.S. companies would sell to them. Representatives from Polo Ralph Lauren, Tommy Hilfiger, Ray-Ban, O'Neill and Rockport all refused to do so, the newspaper reported.

High grocery prices in Britain, charged by the four supermarket chains that dominate the market, also have been closely scrutinized.

The BBC's "Panorama" program said fruits and vegetables in particular are cheaper at small grocery shops than in chain stores. It purchased a bag of fruit at a small store for $2.28 and found that the chains all charged much higher prices, one of them nearly twice as much.

Its reporters paid $16.80 for pork cuts at a family-run shop and as much as $21.57 at a supermarket.

Wider supermarket profits

The Sunday Times has reported that British supermarkets have a 7 percent profit margin, much wider than the 1 percent in France and 0.5 percent in the United States.

The Sunday Times investigations also have suggested that British consumers are being gouged on the prices of cars, furniture, mobile phones, stereos and TVs.

After accusing the electronics industry of covert price-fixing, the Department of Trade and Industry banned manufacturers of electrical goods from attaching recommended prices to their products and from refusing to supply discount retailers.

Pub Date: 11/29/98

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