On the first day of his vacation in the United States, Londoner Ian McMillan was walking along a street in Boston when he spotted something familiar and something amazing.
Glancing in the window of a bicycle shop, McMillan saw a bright red Trek 6000 mountain bike equipped with Shimano V-brakes and Jett-C shock absorbers. "I felt proud at first to see it displayed there," McMillan said, "because that's the exact model I had just bought back home. But then I saw the price, and it was totally amazing."
In Boston, that bike was priced at $499, which is a fairly standard retail price for the 6000 model in U.S. stores, according to Trek. But what amazed McMillan was that he had bought the same bike on sale a month earlier in London--and paid $818.
Thus it was that one more disillusioned consumer came face to face with the unhappy fact of life known here as "rip-off Britain," a phrase used now even by Prime Minister Tony Blair. Whether it's bikes or bananas, cars or computers, perfume or petrol, British consumers pay more than almost anybody else.
Even British-made products cost more in Britain. A liter bottle of single-malt Scotch that costs about $36 in London or Glasgow can be had for $23 across the channel in France. Land Rover's popular four-wheel-drive Discovery model, made in Birmingham, costs $46,000 here--$15,500 more than in the Netherlands, according to Britain's Consumers' Association. Ex-Spice Girl Geri Halliwell's first solo album, "Schizophonic," costs $24 in Britain, about $10 more than in U.S. stores.
This high-price pattern does not seem to be new. Studies by the European Union and the Organization for Economic Cooperation and Development have shown for years that Britons pay 20 to 40 percent more than most other Europeans for cars, appliances and other goods. The gap between Britain and the United States is even greater.
But in recent weeks, the level of awareness and anger here has grown sharply, and "rip-off" has become a burning issue in the media. Newspapers, magazines and television networks have had a field day exposing instances of price gouging.
The Sunday Times reported that British Airways charges a standard fare here of $5,320 for a business class London-New York round trip. But a flier in Zurich can buy the same ticket for $2,286--and have a Zurich-London trip thrown in for free. A magazine called Which? reported that Britons also pay a premium for tickets on the Eurostar, the train that connects London and Paris through the Channel Tunnel. A round-trip ticket bought in Paris costs 20 percent less than the same ticket purchased in London.
Even Internet shoppers pay higher prices here. A report in the Sunday Times listed numerous cases--including a Jar Jar Binks plastic model that costs $25.39 on the Toys R Us Web site in the United States but is priced at $49.18 on the same store's British site.
Analysts offer a variety of explanations: Simple market forces, an ingrained culture against competition, higher retailing costs and outright price gouging are some. But whatever the cause, Blair and his government have promised new laws and tougher enforcement to bring the pricing of goods and services into line with that of other developed countries.
The government's strongest weapon is a new Competition Act that takes effect in March. It permits multimillion-dollar fines for manufacturers or retailers found guilty of price fixing.
"The new law is powerful," said Phil Evans, a senior researcher at the Consumers' Association, a nonprofit group affiliated with Consumers Union in the United States. "One of the reasons for the rip-offs is that we've had historically weak regulation of competition. There has been a culture here of noncompetition. That whole American thing of beating the other store on price--that was considered unseemly."
In a land where price cutting is unseemly, retail profits run high. British retailers tend to have considerably higher margins than their counterparts elsewhere. The big grocery chains generally run profits of 4 percent to 6 percent of sales; margins in U.S. chains are about half that.
Another problem is that retailing is costlier in Britain. The British Brands Group, which represents domestic manufacturers of consumer products, recently issued a report saying that retailers actually are the ones being ripped off--because wages, retail space, utilities and sales taxes tend to be higher here than in the United States and much of continental Europe. These higher costs explain the higher prices, it said. "U.K. shoppers are getting a fair deal," the study concluded.
Another problem, said Evans, is that the island nation is running out of room for big shopping centers, particularly in the crowded southeast. Under the government's urban planning guidelines, it is hard for developers to get the land they need for new retail outlets. Further, local movements to save the "high street"--the traditional main street merchants, smaller and more expensive than superstores--have had much more success in this tradition-minded society than in the United States.
Much of the price cutting pressure comes from America. Personal computer prices fell noticeably this year after Craig Barrett, chief executive officer of Intel, the California-based microprocessor maker, complained out loud that the big British electronics chains were gouging customers and thus limiting PC sales.
Wal-Mart's purchase of Asda, a major supermarket chain, is expected to force prices down; it was front-page news here this month when Wal-Mart executives said they plan to charge the same prices for goods in Asda stores that they charge in the United States. If so, it would revolutionize retailing here. "This could lead to the mother of all price wars," said the Grocer, a trade magazine.
But even amid the rip-offs, Britain has some bargains. Internet access is available free from dozens of providers, while American providers generally still charge a fee of around $20 a month. British Web surfers do have to pay a per-minute charge to the telephone company, but the monthly bill is generally less than $20 for all but the most avid Net users.
For almost any other product or service, though, Britons tend to look on the United States as a low-price paradise. Travel magazines here routinely advise people visiting D.C. or Disneyland to bring along an empty suitcase so they can carry back the toys, toasters, towels and TV sets they will find at bargain prices in U.S. malls.
This tactic, of course, risks an even bigger "rip-off." British passengers caught bringing back expensive consumer items can be liable for customs duties, adding 39 percent to the U.S. retail price.
British prices for consumer goods are much higher than those charged in the rest of Europe and in the United States, and Britons are complaining loudly.
Some price comparisons:
Item Price in London Price in D.C.
Unleaded gasoline (per gallon) $ 5.44 $ 1.30
Pop CD $ 24.00 $ 14.00
6-pack of Coke $ 4.90 $ 2.50
Encarta English Dictionary $ 49.20 $ 42.50
Color printer, H-P Deskjet 1100 $655.00 $400.00
Callaway Hawk Eye driver (golf club) $504.00 $399.00
SOURCE: Staff reports
A Web site that rails against high car prices in Britain.
CAPTION: A lone shopper surveys merchandise in a clothing shop window on London's Oxford Street, long a center for fashionable apparel at formidable prices.
CAPTION: Spice Trade: Geri Halliwell album costs $24 in Britain, $14 in D.C.
CAPTION: Four Wheeler: Land Rover model costs $15,500 more in Britain than in the Netherlands
CAPTION: Toy Star : Plastic Jar Jar Binks costs almost $25 more in Britain than at Toys R Us.
CAPTION: Two Wheeler: Popular mountain bike costs $818 in Britain, about $500 in the U.S.