The Competition Authority investigation into the dealings of a group of car dealers could be the first of a number into high-profile players in the country's wealthy motor trade.

Last week, The Irish Times revealed that a number of car dealers may face prosecution for price fixing, following an investigation by the authority and the Garda Bureau of Fraud Investigation.

Material gathered in 17 raids has been sent to the Director of Public Prosecutions (DPP), and the authority has stated that the inquiry involves breaches of the Competition Act, 2002.

The legislation basically outlaws two things: abuse of a dominant position and cartelism - companies acting together to fix prices or engage in other anti-competitive activities.

It is understood that the main allegation is price fixing - that the businesses involved agreed the minimum price at which their cars could be sold.

The investigation centred on an organisation called the Citroen Car Dealers' Association. A number of Citroen car dealerships, including the Lusk Motor Group, Lusk, Co Dublin; Rochestown Auto Centre, Cork; and Jack Doran Motors, Drogheda, were raided during the investigation. However, they have denied all knowledge of price fixing or any other anti-competitive activities.

The authority also raided the Templeogue, Dublin, home of a retired motor trade worker, Mr John McGlynn, who worked for the association.

He also denied any involvement in anti-trust activities, including price fixing.

The Competition Authority is primarily interested in the car dealing associations.

Sources this week said that there were at least half a dozen of these groups in the industry. They suggested that the authority was likely to look more closely at their activities, particularly now that it has grounds to take the first step towards criminal proceedings against one of them.

During the raid on Mr McGlynn's home, documents relating to his work for associations linked with the Mitsubishi, Volvo and Hyundai marques were also seized. That is not necessarily an indication that these organisations were involved in anti-competitive practices.

Nobody has been charged to date and the ultimate decision on whether or not companies and/or individuals should be prosecuted will rest with the DPP, who is studying the files.

The fact that the DPP was sent the files indicates that the authority thinks that the individuals involved have committed a serious offence. It prosecutes minor breaches of competition law in the District Court, where the penalties are low.

However, the DPP has the responsibility of taking serious competition offences to the Circuit Court.

If he decides to proceed, the motor dealers' case will be a full criminal proceeding, complete with jury. We have yet to see a Circuit Court prosecution under the 2002 Act.

The authority could offer its immunity programme to those involved. This gives immunity to members of a suspected cartel on the grounds that they come clean and give the authorities all information they have relating to the cartel.

Convicted companies face fines of up to €4 million or 10 per cent of its most recent year's turnover, whichever is the greater. Convicted individuals face similar fines and the possibility of a five-year jail sentence.

If a company is convicted, anyone involved in it who authorised the offence could also be found guilty under the terms of the 2002 Act.

This is not the first time in its 13-year history that the authority has scrutinised the motor trade. But it is the first time that it's had teeth to tackle the business if there's something amiss.

The Society of the Irish Motor Industry argues that the sector is very competitive. It points out that the margins from car sales are less than 2 per cent.

However, dealers also make money from the finance deals they organise for car buyers, the re-sale of second-hand cars and servicing customers' cars.

Accounts for some of the bigger players, none of which are implicated in the investigation, show profitable businesses with reasonably tight margins. None of them indicate that the industry is facing penury because people are buying less cars than they did four years ago.

The most recently available figures for Windsor Motors, the dealership network that is part of Nissan Ireland, shows it is making a consistent 2.5 per cent pre-tax margin between 2000 and 2002.

In the year ended March 31st, 2002, the company had a pre-tax profit of €4 million on a turnover of €162.4 million. The previous year, it had pre-tax profits of €5.5 million on €177.6 million sales.

The O'Flaherty-family owned Motor Services Ltd, which deals in Mercedes, Volkswagen and Audi, had profits of €3.26 million on the back of €216.4 million sales in 2002.

Its sister company, Motor Distributors Ltd, had €26.6 million pre-tax on the back of €682.6 sales, indicating that distribution is a more profitable venture.