The European Commission is to dash British hopes of a radical shake-up of the car-buying market that would allow supermarkets and web-based suppliers of new vehicles to undercut traditional dealers.
Brussels plans a change in the way new cars are sold in a move designed to create a real single market by boosting competition and putting pressure on prices within the 15-nation bloc, especially in the UK.
But the overhaul will disappoint politicians, consumer groups and Britain's competition commission which had hoped for a more radical approach to end the differential between UK prices and those in mainland Europe.
Two years ago, at the height of the government's "rip-off Britain" campaign designed to put the squeeze on the high prices paid by UK car buyers, the competition commission called for "substantial changes" to the regime which exempts car makers and dealers from some of the EU's competition rules.
Among its demands were an end to exclusive territories for dealers and measures to force manufacturers to supply vehicles to any retailer.
The EC's competition authority, under Mario Monti, acknowledges that the current system is failing to deliver the level of competition the EC is seeking. It says the level of complaints shows the regime is unpopular with consumers while it "has not been well respected" by manufacturers.
But though draft proposals seen by the Guardian and due to be endorsed by the full commission next week call for extensive reform designed to encourage dealers to market their cars across the entire EU, it stops short of a "free-for-all" approach.
Far from forcing the manufacturers to open the market to new entrants, it argues that to do so could damage the consumers' interest - leading in the longer term to higher prices and less choice.
It does, however, impose a more stringent set of rules that will allow dealers to escape restrictions by area-based sales targets, bonus schemes and vehicle allocations.
The EC argues that its proposals do not close the door on new entrants such as supermarkets, not least by removing the obligation for retailers to provide after-sales service. But it acknowledges that there will be no overnight revolution.
"It will not happen right away but when car sales are sluggish someone like Richard Branson could go to Ford and offer to shift 10,000 Fiestas by selling through supermarkets," one EU source predicted. "And I can't see Ford saying no. It will be a gradual process."
Consumer groups concede that the new rules are an improvement but believe that Mr Monti could have gone further.
"We fear that it will not be enough. The commission has not gone as far as we wanted," Caroline Hayat, a spokeswoman for the pan-European consumer group BEUC, said yesterday.
"They are a step forward but there is not enough petrol in the tank, as they say. We do not understand why the car industry has so privileged a [regulatory] regime compared to other industries. Manufacturers often say that their product is very complicated but so are computers and full competition exists in that market."
The car industry for its part has already publicly said it is unhappy about the new regime. "We are concerned by the approach. It could defeat the object of the exercise and could disrupt a system that works well with negative consequences for everybody and for the consumer in the first instance," Jean-Martin Folz, the chairman of Peugeot-Citroën, and president of ACEA, the industry lobby group, said recently.
But privately the manufacturers must be breathing an enormous sigh of relief, because the commission has allowed them to continue to choose who sells their cars, a right which consumer groups wanted to see revoked.
A draft of new rules is expected to go before the Commission next month and, after consultations with member states, it is expected to enter force on October 1. Officials say they will remain in place until May 31 2010.
