In a potentially far-reaching move, the Delhi High Court today allowed car companies in India to move NCLT
challenging Competition Commission of India’s Rs 2,544 crore penalty on them.
The penalty pertains to a high-profile case that had alleged 14 car companies of abusing their dominant position vis-a-vis component makers, which it said was helping these companies make exorbitant profits at the cost of car owners.
The companies have been given six weeks’ time to approach the NCLT over the matter.
It was in August 2014 that the CCI had imposed the combined penalty on 14 carmakers for indulging in unfair practices in the spare parts market, in an almost unprecedented verdict in India’s corporate history.
The companies fined by the CCI are Tata MotorsNSE 1.00 %, MarutiNSE 0.02 % Suzuki, Mahindra & Mahindra, General Motors, Honda Car India, Honda Siel, Volkswagen India, Fiat India, BMW India, Ford India, General Motors, Hindustan Motors, Mercedes–Benz, Nissan Motors, Skoda Auto India and Toyota Kirloskar.
Scarce spare parts
Tata Motors had been slapped with the maximum fine of Rs 1,346 crore, followed by Maruti Suzuki at Rs 471 crore, Mahindra & Mahindra at Rs 292 crore, General Motors at Rs 85 crore and Honda Car India Rs 78 crore.
CCI had held that these auto indulged in anti-competitive practices as they did not make genuine spare parts freely available in the open market.
The case goes back to January 2011, when one Shamsher Kataria complained to CCI that three carmakers — Honda, Volkswagen and Fiat — were abusing their position in the market by following a restricted policy on auto parts. He alleged that these companies were selling spares only through their dealers and not in the open market.
Not just this, Kataria also alleged that these companies were also preventing their auto component suppliers from selling stuff in open market. These companies were earning extraordinary margins through such a policy, he had alleged.
The CCI later expanded the probe to all carmakers in India that are listed by Society of Indian Automobile Manufacturers. In its hearing in 2014, it it largely upheld the allegations: carmakers implicitly controlled the spare-parts business and were really making extraordinary margins.
The car companies, who questioned all along the extension of the probe to the entire industry, argued that they have a restrictive spare-parts policy to make sure customers buy only genuine parts. Fakes are widely available in the market and authories are unable to stop sale of fakes, they said.
“If the order of CCI were to be implemented fully, there will be risks of mishandling of electronic parts by untrained garages, leading to serious consequences to life of consumers and vehicles, and consumers tricked into buying fake parts at retail shops under the impression of buying genuine parts,” said Maruti boss RC Bhargava.
The case that started it all
One of Shamsher Kataria’s submissions was that the cost of servicing a car in a non-company garage was up to 50% more than in a company-owned workshop. However, car owners were forced to go to company-owned workshops because carmakers don’t readily share spares with non-company ones. Car companies were using this situation to make sky-high profits, he had alleged.
In defence of the carmakers, Maruti’s Bhargava said companies like his pick and choose who to sell their parts through precisely because they are looking out for consumers like Kataria. He cited an ACMA survey which had found that fakes — imitations of sub-standard quality — accounted for 36% of all auto parts sold in India by value.