The Competition Commission of India has found that 14 car manufacturers have contravened provisions of the Competition Act, 2002.
Tata Motors Ltd suffered the highest penalty of Rs 1,346.46 crore, followed by Maruti Suzuki (Rs 471.14 crore), Mahindra & Mahindra (Rs 292.25 crore) and General Motors (Rs 84.58 crore). The other car companies that have been penalised are: Honda Siel, Volkswagen India, Fiat India, BMW India, Ford India, Hindustan Motors, Mercedes Benz, Nissan Motor, Skoda Auto India and Toyota Kirloskar India.
Fines have been slapped on Honda Siel (Rs 78.47 crore), Skoda Auto India (Rs 46.39 crore), Ford India (Rs 39.78 crore), Fiat India Automobiles (Rs 29.98 crore), BMW India (Rs 20.41 crore), Mercedes-Benz (Rs 23.08 crore), Hindustan Motors (Rs 13.85 crore), Volkswagen India (Rs 3.25 crore) and Nissan Motors (Rs 1.63 crore).
Informant Shamsher Kataria had approached the commission, alleging anti-competitive conduct by 3 car companies in not allowing the spare parts and after-sales services market to grow to the detriment of consumers and independent repairers. In view of prevalence of anti-competitive issues throughout the automobile industry, the commission directed the director general to include other car companies also under the scanner of its investigation.
Following detailed investigation, the commission found that the car companies had indeed violated provisions of Section 3(4) of the Act with respect to its agreements with local original equipment suppliers (OESs) and those with authorised dealers. Through these agreements, the carmakers “imposed absolute restrictive covenants and completely foreclosed the after-market for supply of spare parts and other diagnostic tools,” the regulator said.
Further, the commission found that the said companies, which were found be dominating the aftermarkets of their respective brands, had abused their position under Section 4 of the Act and affected around 2 crore car consumers. The 14 car companies were found to be indulging in practices resulting in denial of market access to independent repairers; the latter were not provided access to branded spare parts and diagnostic tools, which hampered their ability to provide services in the aftermarket for repair and maintenance of cars. Having a monopolistic control over the spare parts and diagnostic tools of their respective brands, the car companies charged arbitrary and high prices for their spare parts. The car companies were also found to be using their dominant position in the market for spare parts and diagnostic tools to protect their market for repair services, thereby distorting fair competition.
The commission has prescribed corrective measures to make the automobile market more competitive and put an end to the present anti-competitive conduct of car companies. While deciding the case, the commission was guided by two prime motivations:
- to enable the consumers to have access to spare parts;
- to have freedom of choice between independent repairers and authorised dealers and
- to enable the independent repairers to participate in the aftermarket and provide services in a competitive manner.
Accordingly, the commission, under Section 27 of the Act, directed the car companies to cease and desist from indulging in conduct that has been found to be in contravention of the provisions of the Act. The car companies were also directed to adopt appropriate policies which shall allow them to put in place an effective system to make spare parts and diagnostic tools easily available in the open market to customers and independent repairers. Further, the commission directed the car companies not to put any restrictions or impediments on the operations of independent repairers/garages. Other behavioural remedies to ensure a competitive market conditions were also prescribed by the Act.
The commission has also imposed a penalty calculated at the rate of 2% of the average turnover of the 14 car companies amounting to Rs 2544.64 crores in aggregate. The penalty is to be deposited within 60 days of receipt of the order.
Noting that cars are an intrinsic part of life in today’s world, the fair trade watchdog said that owners have to take care of their maintenance over a long period of time with significant financial implication.
“As such, anti-competitive conduct of the opposite parties (14 companies) impacts a very large number of consumers in the country estimated to be around two crore,” the CCI order noted… the anti-competitive conduct of the opposite parties has restricted the expansion of spare parts and independent repairers segment of the economy to its full potential, at the cost of the consumers, service providers and dealers.”
The regulator also observed that some of these companies have made consumer-friendly commitments in other jurisdictions like Europe but failed to adopt similar practices in India. “This makes their conduct even more deplorable,” it said.