Bad behavior by some car distributors and dealerships are behind price “unjustified” hikes, according to the General Authority for Competition (GAC), which says it is taking legal action against a number of companies. The competition watchdog has not publicly named the companies.

At issue: Car prices in Saudi are significantly higher than in other Gulf markets, GAC Governor Abdulaziz Alzoom told Rotana Khalijia on Tuesday (watch, runtime: 6:55).

Background: Car shoppers have been complaining about imported cars, noting that they have fewer features compared to counterparts in other parts of the world, but have higher sticker prices. Consumers have pointed fingers at distributors and dealerships, where some accused the distributors of “stripping some of the car parts to resell them,” (watch, runtime: 10:50).

Among the allegations:

  • Distributors were coercing dealers to purchase less-desirable cars to gain access to the more sought-after models. That forced some dealers to cover higher inventory costs and losses on the less-desirable models by jacking up the prices on cars consumers really want to buy;
  • Distributors were forcing independent showrooms to stick to fixed pricing, undercutting competition in the market.
  • Distributors forcing three-year warranties that add to the cost of a new car — and that are squeezing the market for independent service centers.

ELSEWHERE- GAC has also cracked down on unfair practices by bidders in government tenders. It’s setting up systems with the ministries of commerce and finance to tighten systems and ward off issues, Alzoom added (watch, runtime: 1:49).

GAC alleges that some foreign investors have used multiple front companies to rig bids, creating the perception of high competing bids to make their actual offer stand out when seeking government contracts.

In poultry + pharma: GAC is also investigating the poultry and pharma sectors for what it thinks may be violations of the fair competition act. Some players, it alleges, are colluding to hike prices (watch here, and here).

Tags: