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Old 26th August 2014, 00:47   #151
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Default CCI vs Car Manufacturers : Restricting over-the-counter sales of spare parts

Almost all the major car makers in India are in the list, including Maruti Suzuki, Mahindra, Tata, Toyota, Honda, VW, Fiat, Ford, General Motors, Nissan, Hindustan Motors, Mercedes and Skoda.
Whats interesting is that the biggest fine is for Tata, almost Rs.1346cr, followed by Maruti around 471cr & Mahindra 291cr. I always thought that these three companies were more liberal on making the spares available in aftermarket than companies like Honda/ Toyota / Ford. (AFAIK, sourcing Honda spares in open market is almost impossible).

Last edited by psp62in : 26th August 2014 at 00:48.
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Old 26th August 2014, 00:49   #152
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Default Re: CCI vs Car Manufacturers : Restricting over-the-counter sales of spare parts

I am a bit confused. Why is Maruti fined? They sell their MGP Over the counter. I have bought I do not know how many of them directly. True, finding workshop manual has been nigh impossible.
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Old 26th August 2014, 01:18   #153
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Default Re: CCI vs Car Manufacturers : Restricting over-the-counter sales of spare parts

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Originally Posted by Mohitkumaar View Post
I am a bit confused. Why is Maruti fined? They sell their MGP Over the counter. I have bought I do not know how many of them directly. True, finding workshop manual has been nigh impossible.
They might be selling it, but at a high premium. Have a look at the price of Maruti Genuine Accessories, for example to see the level of premium they charge for the MGP/MGA logo.

Even some of the parts are similar. The digital clock in my Swift had to be replaced back in 2011 since the LCD stopped working. The part had to be ordered and it cost me 1750 for the MGP part. They sell a similar accessory for ~500 that is fitted as MGA in LXi/LDi
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Old 26th August 2014, 08:23   #154
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Default Re: CCI vs Car Manufacturers : Restricting over-the-counter sales of spare parts

I wonder what are the factors involved in calculating the penalty.

If it's given in the judgement, would someone do us a favour and break it down/simplify it for us please
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Old 26th August 2014, 09:09   #155
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Default Re: CCI vs Car Manufacturers : Restricting over-the-counter sales of spare parts

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Originally Posted by GrammarNazi View Post
I wonder what are the factors involved in calculating the penalty.

If it's given in the judgement, would someone do us a favour and break it down/simplify it for us please
My guess: They calculate fines on a per unit basis and multiply by total sales. That might be the reason we are seeing high volume folks at the top. In case of Tata, commercial vehicles might also have been considered while computing the total sales.
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Old 26th August 2014, 09:30   #156
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Default Re: CCI vs Car Manufacturers : Restricting over-the-counter sales of spare parts

Complete Informaiton:

New Delhi: In the first major order against the auto sector, the Competition Commission of India (CCI) on Monday slapped a penalty of Rs. 2,545 crore on 14 carmakers, including Maruti Suzuki and Tata Motors, for violating trade norms in the spare parts market.

Honda Siel Cars India, Volkswagen India, Fiat India Automobiles, BMW India, Ford India, General Motors India, Hindustan Motors, Mahindra & Mahindra, Mercedes-Benz India, Nissan Motor India, Skoda Auto India and Toyota Kirloskar Motor have also been penalised.

In a 215-page order, fair trade watchdog CCI has imposed a penalty totalling Rs. 2,544.64 crore on the 14 auto companies.

For each entity, the individual fine amounts to 2 per cent of their average turnover. The penalty is to be deposited within 60 days of receipt of the order.

Nissan Motor India spokesperson declined to comment on the order. Comments from 13 other companies could not be immediately obtained.

A detailed investigation revealed that these car companies violated competition norms with respect to their agreements with local Original Equipment Suppliers (OESs) as well as in terms of pacts 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.

CCI also said that it found that these companies, which were found to be dominant in the after-markets for their respective brands, abused their dominant position affecting 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 as 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."

The fair trade watchdog has also directed the carmakers to "cease and desist" from anti-competitive practices.

According to the regulator, 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," it said.

Among the 14 carmakers, the maximum fine of Rs. 1,346.46 crore has been slapped on Tata Motors, followed by Maruti Suzuki (Rs. 471.14 crore), Mahindra & Mahindra (Rs. 292.25 crore) and Toyota Kirloskar Motors (Rs. 93.38 crore).

Among others, a fine of Rs. 84.58 crore has been imposed on General Motors, followed by 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).

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.

The regulator has asked the companies to allow Original Equipment Sellers (OEMs) to sell spare parts in the open market without any restriction, including on prices.

"OESs will be allowed to sell the spare parts under their own brand name, if they so wish. Where the OPs hold intellectual property rights on some parts, they may charge royalty/fees through contracts carefully drafted to ensure that they are not in violation of the Competition Act," the order said.

Besides, they have been directed not to impose any restrictions or impediments on the operation of independent repairers/garages.

Further, CCI has suggested that the carmakers may develop and operate appropriate systems for training of independent repairer/garages, and also facilitate easy availability of diagnostic tools.

"Appropriate arrangements may also be considered for providing technical support and training certificates on payment basis," it added.

While the complaint was only against three companies, others were included in the Director General's investigation due to the prevalence of anti-competitive issues throughout the automobile industry.

DG is the investigation arm of the Competition Commission.

Officials of different companies stated they would need to study the order.

With respect to penalty, CCI said there were some mitigating circumstances including the fact that "many of the opposite parties, though not all, indicated willingness to voluntarily discontinue many of these practices and offer greater choice and freedom to the consumers, repairers and dealers".

The fair trade watchdog also mentioned the companies' contention that absence of appropriate legislative and regulatory framework for safety and standards relating to spare parts and after sales services is a handicap vis-a-vis the position prevailing in many other jurisdictions like European Union, France, USA and even developing nations like Brazil, China and South Africa.

"This is something which may be separately brought to the notice of the government for appropriate action, which could include suitable legislation and setting up of an appropriate regulator as stated earlier in this order," the order said.

A copy of the order would also be sent to Ministry of Road Transport and Highways and ACMA (Automotive Component Manufacturers Association).

**********************
The Order Copy is in my Hand. however since is 19 mb, i cannot upload the pdf. Will be forwarding the same to the mods for uploading; Alternatively it can be downloaded from this link ----------> http://www.cci.gov.in/May2011/OrderO.../27/032011.pdf

Last edited by Sunilrj : 26th August 2014 at 09:48.
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Old 26th August 2014, 09:50   #157
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Default Re: CCI vs Car Manufacturers : Restricting over-the-counter sales of spare parts

Findings as regards BMW:

7. Findings of the DG with respect to BMW
7.1 BMW India (P) Ltd (“BMW”) was incorporated on August 26, 1997 and its manufacturing operations commenced on March 2007. It is a 100% subsidiary of the
C. No. 03 of 2011 Page 36 of 215
BMW Holdings B.V. Netherlands which in turn is held by BMW A.G., Germany. BMW is mainly concentrated in assembling and distributing various models of BMW cars in India. It imports: (a) constituent parts of BMW cars which it assembles at its plant in Chennai, Tamil Nadu, (b) completely built cars and (c) spare parts. BMW has a dealer network for it’s after sale operations in 22 cities in India. These 22 BMW accredited service centers have been equipped and trained to handle the BMW products and to service such products.
7.2 The specific findings of the DG against the alleged anti-competitive practices of BMW are summarized below:
7.2.1 BMW imports spare parts from BMW AG which is its group company. The DG has not found any clause in such importer agreements dealing with the right of BMW’s overseas suppliers, BMW AG, to sell spare parts in the open market in India. In practice BMW AG does not supply BMW spare parts in the Indian aftermarket. The DG contends that due to link between BMW AG and BMW, presumption of a possible arrangement can be drawn.
7.2.2 No clause in agreement with respect to OES’s right to access the aftermarket.
7.2.3 Counter sale of spare parts are not permitted.
7.2.4 Warranty conditions honoured by BMW if defects do not arise directly from the defective performance of an independent repairer.
7.2.5 Ability of dealers to deal in competing brands is restricted.
7.2.6 Price mark up for top 50 spare parts by revenue generated is 101.38% - 488.98%. Price mark-up of top 50 spare parts on the basis of consumption is 76.24% - 484.04%.
C. No. 03 of 2011 Page 37 of 215
7.2.7 Since BMW only procures seats for aftermarket purposes from BMW AG, hence no substantial IPR issues have been raised.
7.2.8 As per DG, denial to access diagnostic tools and spare parts amounts to denial of access to an “essential facility” and amounts to abuse of dominant position of BMW.
7.2.9 Since BMW does not allow over the counter sale of spare parts and since diagnostic tools are not readily available to the independent repairers, BMW imposes unfair terms and also denies market access to the independent repairers as per section 4(2)(a)(i) and 4(2)(c) of the Act, respectively. Further, BMW is in violation of section 4(2)(a)(ii) for imposing unfair prices.
7.2.10 BMW uses its dominance in one relevant market (i.e., supply of spare parts) to protect the other relevant market (i.e. market for repair services) which is violative of section 4(2)(e) of the Act.
7.2.11 BMW is in violation of provisions of sections 3(4)(c) and (d) of the Act with respect to its agreements with local OESs and agreements with authorized dealers for imposing absolute restrictive covenants and completely foreclosing the aftermarket for supply of spare parts and other diagnostic tools.
7.2.12 Agreements with the authorized dealers have restrictive clauses requiring dealers to source the spare parts only from BMW or its approved dealers. The DG has found these agreements in the nature of exclusive supply agreements in violation of section 3(4)(b) of the Act.


Agree with the price Markups that have been observed by the DG. a bottle of Wheel Cleaner Gel is imported at Rs. 470/- and Sold at 1496/-!!!

CCI vs Car Manufacturers : Restricting over-the-counter sales of spare parts-screen-shot-20140826-10.09.48-am.jpg
Findings against other manufacturers will be posted on request. PM me with your request

Last edited by Sunilrj : 26th August 2014 at 10:12.
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Old 26th August 2014, 10:14   #158
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Default Re: CCI vs Car Manufacturers : Restricting over-the-counter sales of spare parts

Quote:
Originally Posted by Sunilrj View Post
Findings as regards BMW:


Findings against other manufacturers will be posted on request. PM me with your request
While i'd appreciate if you can post the findings about Mahindra and Toyota, I am sure that this information about all the other manufacturers under the perview of this judgement shall be well received by fellow members owning respective brands.

EDIT: Just noticed that you have linked to the copy of judgement in your OP which would suffice, thanks!

Last edited by Puneet.S : 26th August 2014 at 10:17.
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Old 26th August 2014, 10:19   #159
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Default Car companies fined for spare parts monopoly

This was in "The Hindu' this morning. Competition Commission of India fined major car manufacturers in India for unfair practices related to spare-parts market.

Will this fine improve the customer experience? We have to wait and watch.

http://www.thehindu.com/business/Ind...Widget%20Promo
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Old 26th August 2014, 10:20   #160
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Default Re: CCI vs Car Manufacturers : Restricting over-the-counter sales of spare parts

Quote:
Originally Posted by Puneet.S View Post
While i'd appreciate if you can post the findings about Mahindra and Toyota, I am sure that this information about all the other manufacturers under the perview of this judgement shall be well received by fellow members owning respective brands.

EDIT: Just noticed that you have linked to the copy of judgement in your OP which would suffice, thanks!
Would have posted the findings as regards the 13 other manufacturers. but i would have to have 13 separate posts, and probably will be booked for infractions for back to back posts. hence with an example of BMW, since i own a BMW and also have compared the prices of accessories in India and USA, i have posted the BMW observations; along with the import price data. The other observations are in the link of the Judgement Copy
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Old 26th August 2014, 10:29   #161
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Default Re: CCI vs Car Manufacturers : Restricting over-the-counter sales of spare parts

Quote:
Originally Posted by SaneOp View Post
...
Lot of people buy Maruti cars because they can buy MGP and get it repaired at their preferred mechanic.
...
But this judgement includes Maruti! Infact they have been slapped with the second highest penalty after TML.

What did I miss? Maruti was the first one to setup a over the counter sale of MGP/MGA. Guess will have to go through the complete order to make head or tail of it.

Interestingly, no mention about Audi/JLR even though Merc, BMW made it to the list. Hyundai left out as well as they had already obtained a stay against this.

EDIT:

Read the judgement, and Maruti is there due to -

- Price markup of spares, those available OTC
- Invalidating warranty if repaired by independent garages
- Non availability of diagnostic tools to 3rd party garages
- Restricting overseas suppliers to enter independently in the indian market for sale of spares
- Authorised dealers not allowed to deal in cars of other manufacturers


Infact most of the manufacturers have been fined based on the above broad points.

Last edited by Dry Ice : 26th August 2014 at 10:40.
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Old 26th August 2014, 10:46   #162
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Default Re: Car companies fined for spare parts monopoly

This is great news indeed! Hope someone would look into the 'warranty void' syndrome of the dealers too!

Quote:
Originally Posted by Srikanthan View Post
This was in "The Hindu' this morning. Competition Commission of India fined major car manufacturers in India for unfair practices related to spare-parts market.

Will this fine improve the customer experience? We have to wait and watch.

http://www.thehindu.com/business/Ind...Widget%20Promo
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Old 26th August 2014, 10:50   #163
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Default Re: CCI vs Car Manufacturers : Restricting over-the-counter sales of spare parts

regarding the CCI verdict
- i am assuming the carmakers will 'appeal' and there is a possibility for this to be 'subjudice' (??)
- is this fine really going to serve the real purpose behind the verdict, "to make spare parts more affordable and thus leading to the closing down of the 'duplicate' market " - will this really happen ?
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Old 26th August 2014, 10:57   #164
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Default Re: Car companies fined for spare parts monopoly

A slightly more elaborate article on the same topic

http://profit.ndtv.com/news/corporat...mpaign=story-8

Total sounds glorious when looked at as a sum , but individually the estimate is that it is on an average 2% of the turnover for them , that is not going to hurt very much.

Last edited by puchoo : 26th August 2014 at 11:14.
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Old 26th August 2014, 11:03   #165
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Default Re: CCI vs Car Manufacturers : Restricting over-the-counter sales of spare parts

Complete order PDF can be found in the following link, other manufacturer like Hyundai has been given some more time. It is not that they have been exempted according to the report.

EDIT: Whoops this post (CCI vs Car Manufacturers : Restricting over-the-counter sales of spare parts) already has the details.

Case No.docx

Last edited by Jaggu : 26th August 2014 at 11:08.
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