Britain's competition watchdog, the Office of Fair Trading, says car prices are still too high compared with the rest of Europe despite falls in the last three years, Reuters reported.

An OFT report said that UK car prices had fallen by around 10 percent since March 1999 when exchange rates were taken into account, the price gap between the UK and others parts of the EU had not narrowed proportionately, Reuters said.

The OFT recommended that the European Commission, currently reviewing the EU's block exemption laws shielding the car industry from normal competition rules, should abolish exclusive dealer sales territories and end manufacturer bans on dealers selling only one car brand, Reuters added.

The OFT found no evidence that car manufacturers were breaking UK laws by offering better terms and condition of sales to bulk fleet buyers than to individual dealerships, Reuters said.

However, dealers disagreed, according to the Daily Telegraph.

They said the OFT's decision showed the ineffectiveness of the car order mandating that dealers be offered the same discounts as fleets and urged the Government to reword it, the Daily Telegraph said.

"I must conclude that what the DTI set out to do hasn't happened because they have crafted the order so that it is not enforceable," Alan Pulham of the Retail Motor Industry Federation told the newspaper. He estimated that new cars are five percent cheaper in continental Europe.

A spokesman for Jamjar.com, an internet car dealer, told the Daily Telegraph: "Not all manufacturers have entered into the spirit of the order. Our concern about the order is that it's woolly and lacks clarity and therefore its application has been variable. We would call for greater clarity on how the fleet price equivalent is defined."