The office of fair trading yesterday added its voice to calls for sweeping changes in the European car market amid continuing concern about high prices being paid in Britain.

The call, echoed by the Consumers' Association, comes as European commissioners prepare to publish changes to the "block exemption" that spares the motor industry some of the rigours of the single market.

New car prices in Britain have fallen by 10% since the domestic market was referred to the competition commission for investigation three years ago. The OFT, the government's consumer watchdog, said it remained concerned about the continuation of unexplained EU price differentials.

"Allowing for exchange rate movements the price gap between the UK and others parts of the EU has not narrowed proportionately," an OFT spokesman said yesterday. "We still feel there are unexplained price differences."

In an attempt to make the new car market work better for consumers the OFT is urging the competition commissioner, Mario Monti, to introduce changes as part of the EU's seven-year review of the block exemption arrangements. These run until September and allow manufacturers to grant exclusive sales territories to dealers. They can also require dealers not to sell other brands of new cars.

Documents seen by the Guardian suggest the commissioner's proposals, due to be published shortly, will disappoint consumer lobbies by falling well short of the distribution free-for-all some would like to see.

The Consumers' Association fears that the commission's proposals will not work in practice. It is urging Mr Monti to close loopholes it claims will allow manufacturers to maintain artificially high prices and restrict choice for consumers in Britain.

It said it would be putting pressure on the commission to change the process under which manufacturers can choose who sells their cars and at what price and would seek to ensure internet companies and supermarkets are not blocked from entering the market.

The OFT said it believed the block exemption should be reformed to abolish exclusive sales territories for dealers and remove requirements to sell only one make of car.

It also wants the link between sales and servicing to be severed, allowing independent garages to compete with authorised dealers on a fair basis.