Internet-based car retailer showroom4cars.com has banned the sale of Mercedes-Benz cars on its website following the German giant's decision to increase prices on right-hand drive models in what the e-tailer says is an attempt to stop the import of its cars from Europe, the internet news website netimperative.com reported today.

The company, which says it sells a number of Mercedes models on a regular basis, has stopped taking orders for cars made by the German manufacturer and has today sent an open letter to trade secretary Stephen Byers asking for action over the company's practices.

Showroom4cars says the move - which has led to surcharge increases of up to £3,500 on some models - along with an alleged move by Mercedes to charge VAT on right-hand models at source, is a clear attempt to dissuade UK customers from buying from abroad.

Under a loophole in EC law, British buyers can buy a right-hand drive cars in continental Europe at lower pre-tax prices (which reflect the higher taxes charged at retail in most European countries), import the car into the UK and pay UK-rate taxes locally, saving thousands of pounds especially on luxury cars such as Mercedes-Benz. In recent weeks, a number of prestige European brands have moved to raise prices charged by continental Europe dealers for right-hand drive cars in an apparent effort to discourage the trade and protect their UK dealer networks from this 'grey import' trade.

Showroom4cars.com claims the moves represent 'extreme anti-competitive action' and is asking the Department of Trade and Industry to investigate, netimperative.com said.

The website reported showroom4cars internet strategist Tony Butterfield as saying: "The major manufacturers have to recognise that consumer power, channelled through the internet, has broken down traditional geographical barriers to free trade…the days of ignoring the views of their customers are well and truly over."

Mercedes-Benz reportedly confirmed that six months ago it increased the surcharge for orders of right-hand drive models from dealers based outside the UK. However, it said that the price increases on right-hand drive orders are "part of normal business" due to the costs associated with making right-hand drive models.

A spokesman told netimperative.com: "Many manufacturers have increased the cost of right-hand drive models. If you build the vast majority of your models in left-hand drive, then the cost of building right-hand drive models is significantly higher."