[aim120]

Even though Maruti and Tata has over the counter sales.The CCI has found that the price mark up is very high and they also don't sell a service manual and diagnostic tools.

The CCI has fined 2% of their respective revenues.

[sgiitk]

Originally Posted by nkrishnap

The reason I ask this is, I have seen fake air filters for MJD in JC road, enquired only when I heard the cost which was about 40-45% cheaper than the MRP of OEM.

I remember the Maruti OE Air Filter for the Esteem was Rs.1000+, while the same thing from Purolator was about 500, which became under 450 with discount. The stuff was identical. There is a 30% or so markup for the OE label, while the market normally sells at a 20% discount. So 2x is not unusual. Of course you have o ensure the stuff is genuine. Similarly, Purolator or Elofic oil filters are much cheaper than the OE.

Once you go to the open market you have to trust your source and judgement.

[Urban_Nomad]

Like many doubting Thomas's here I too am skeptical of how well this would be implemented. But am equally elated that something is being done about this. Signs of a market maturing

Now only if someone could drag these manufacturers to court for selling cars that take 11 seconds plus to hit hundred kph and branding them "sports" or "hot hatches" and the likes

[anoop.nair]

THE ORDER (partial)

Date: 25/08/2014
In re:
Shri Shamsher Kataria Informant
And
1. Honda Siel Cars India Ltd. Opposite Party No.1
2. Volkswagen India Pvt Ltd. Opposite Party No.2
3. Fiat India Automobiles Ltd. Opposite Party No.3
4. BMW India Pvt. Ltd. Opposite Party No.4
5. Ford India Pvt. Ltd. Opposite Party No.5
6. General Motors India Pvt. Ltd. Opposite Party No.6
7. Hindustan Motors Ltd. Opposite Party No.7
8. Mahindra & Mahindra Ltd. Opposite Party No.8
9. Maruti Suzuki India Ltd. Opposite Party No.9
10. Mercedes-Benz India Pvt. Ltd. Opposite Party No.10
11. Nissan Motor India Pvt Ltd. Opposite Party No.11
12. Skoda Auto India Pvt. Ltd. Opposite Party No.12
13. Tata Motors Ltd. Opposite Party No.13
14. Toyota Kirloskar Motor Pvt. Ltd. Opposite Party No.14

CORAM:
Mr. Ashok Chawla
Chairman
Mr. Anurag Goel
Member
Mr. M. L. Tayal
Member
C. No. 03 of 2011 Page 2 of 215

Present: Sh. Sameer Oberoi, Sh. Aditya Patni, Advocates for Informants
Sh. S. Seetharaman, Sh. S. Ramanathan, Advocates for Opposite Party 1
Sh. A.N. Haksar, Sr. Advocate, Sh. R. Sudhindar, Advocate for Opposite Party 2
Sh. R. Narain, Ms. Kanika Gomber, Advocates for Opposite Party 3
Sh. Ramji Srinivasan, Sr. Advocate, Sh. Ravi Nath, Advocate for Opposite Party 4
Sh. Ravinder Sethi, Sr. Advocate, Sh. Ajay Monga, Advocate for Opposite Party 5
Sh. Jaideep Gupta, Sr. Advocate, Sh. Anand S. Pathak, Advocate for Opposite Party 6
Sh. Abhishek Malhotra, Ms. Unnati Agarwal, Advocates for Opposite Party 7
Sh. Ramji Srinivasan, Sr Advocate, Ms. Avantika Kakkar, Advocate for Opposite Party 8
Ms. Pallavi Shroff, Ms. Dinoo Muthapa, Advocates for Opposite Party 9
Sh. Ashwini Mata, Sr. Advocate, Sh. R.B. Pendse, Advocates for Opposite Party 10
Sh. Ramji Srinivasan, Sr. Advocate, Sh. Atul Dua, Advocate for Opposite Party 11
Sh. A.N. Haksar, Sr. Advocate, Sh. R. Sudhindar, Advocate for Opposite Party 12
Sh. R. Narain, Ms. Kanika Gomber, Advocates for Opposite Party 13
Sh. Samir Gandhi, Sh. Vipin Singhania, Advocates for Opposite Party 14

ORDER UNDER SECTION 27 OF THE ACT

1. Factual Background

The present information has been filed by Shri Shamsher Kataria (hereinafter, referred to as the “Informant”) under Section 19 (1)(a) of the Competition Act, 2002 (hereinafter, referred to as the “Act”) against Honda Siel Cars India Ltd (hereinafter, referred to as “Honda” or OP-1), the Volkswagen India Pvt Ltd (hereinafter, referred to as “Volkswagen” or OP-2) and Fiat India Auomobiles Ltd (hereinafter, referred to as “Fiat” or OP-3), alleging anti-competitive practices on part of the OPs whereby the genuine spare parts of automobiles manufactured by OP-1, OP-2 and OP-3, respectively, are not made freely available in the open market. OP-1 to OP-3 are involved in the business, inter alia, of manufacture, sale, distribution and servicing of passenger motor vehicles in India. It has been averred that the Opposite Parties also operate/authorize/regulate or
C. No. 03 of 2011 Page 3 of 215 otherwise control the operations of various authorized workshops and service stations which are in the business of selling automobile spare parts, besides, rendering aftersale automobile maintenance services.

1.1 The Informant has also alleged, that even the technological information, diagnostic tools and software programs required to maintain, service and repair the technologically advanced automobiles manufactured by each of the aforesaid OPs were not freely available to the independent repair workshops. The repair, maintenance and servicing of such automobiles could only be carried out at the workshops or service stations of the authorized dealers of OP.
1.2 The Informant has further alleged that the restriction on the availability of genuine spare parts and the technical information/know–how required to effectively repair, maintain or service the automobiles manufactured by the respective OPs is not a localized phenomenon. The OPs and their respective dealers, as a matter of policy, refuse to supply genuine spare parts and technological equipment for providing maintenance and repair services in the open market and in the hands of the independent repairers. In support of his allegations, the Informant has submitted letters from some independent service stations, where they have expressed their inability to service the Informant’s vehicle due to the lack of access of such independent repairers to genuine spare parts and other technological information required to service /maintain the automobiles manufactured by the respective OPs. It has been stated by the Informant that he earlier owned a Maruti Suzuki vehicle and could easily get it repaired at independent workshops because the spare parts and the technological tools required to repair and maintain a Maruti Suzuki vehicle were freely made available by the company in the open market.
1.3 It has been further alleged that the OPs 1-3, by restricting the sale and supply of the genuine spare parts, diagnostic tools/equipment, technical information required to maintain, service and repair the automobiles manufactured by the respective OPs, have effectively created a monopoly over the supply of such genuine spare parts and
C. No. 03 of 2011 Page 4 of 215
repair/maintenance services and, consequently, have indirectly determined the prices of the spare parts and the repair and maintenance services. Additionally, the Informant has alleged, that such restrictive practice carried out by the OPs in conjunction with their respective authorized dealers, amounts to denial of market access to independent repair workshops.
1.4 The Informant has stated that the cost of getting a car repaired in an independent workshop is cheaper by 35-50% as compared to the authorized service centers of the OPs. The Informant has alleged that the OPs charge arbitrary and high prices to the consumers who are forced to avail the services of the authorized dealers of the OPs for repairing and maintaining their automobiles since the genuine spare parts, diagnostic tools and the technological information required to service their cars are not made available by the OPs to independent repair workshops. It has been also stated that the prices charged for the genuine spare parts and for repair and maintenance services by the authorized dealers of the OPs are even higher than what they charge in other markets in Europe. The Informant has alleged that such practices which allow the OPs to charge arbitrary and high prices result in significant increase in the maintenance cost to car owners.
1.5 It has been stated in the information that the components and parts used in the manufacture of their respective brand of automobiles are often sourced from independent original equipment suppliers (hereinafter, referred to as “OESs”) and other suppliers who are restrained by the OPs from selling the parts/components in the open market. Such restriction on the ability of the OESs to sell the spare parts/components further limits the access of such spare parts/components in the open market, thereby, allowing the OPs to create a monopoly-like situation wherein they become the sole supplier of the spare parts/components of their respective brand of automobiles. Such restrictions allow the OPs to influence and determine the price of the spare parts/components used to repair and maintain the respective brands of automobiles.
C. No. 03 of 2011 Page 5 of 215
1.6 The Informant has alleged that the restrictive and monopolistic trade practices, as detailed above, of the OPs and their authorized dealers have a negative effect not only on the consumer but also on the whole Indian economy since such practices increase the cost of the consumer to maintain an automobile. The Informant has stated that in a country like India where road transport is essential for the mobility of people and goods, the increased cost of vehicle maintenance may hamper the overall economic growth of the country. The Informant has stated that as per a CII report, the size of the Indian automotive industry is estimated to be US$ 122-159 billion by the year 2016, which will be larger than the U.S. automotive market. It has been stated that growth in the market for genuine spare parts and repair and maintenance services is expected to be proportionate to the growth in the vehicle sales, as enumerated above.
1.7 The Informant has stated that effective competition at each level of automotive aftermarket is essential for fostering innovation and keeping mobility affordable. It has been contended that if a consumer is given a choice of getting his vehicle serviced/repaired at a workshop of his choice, it will foster competition among service providers which will in turn will not only lead to improvement in quality of service and a competitive pricing policy by the OPs, but also encourage innovation in the market. The Informant has alleged that due to the restrictive trade practices of the OPs, effective competition at each level of the Indian automotive industry is getting adversely affected.
1.8 The Informant has also alleged that the anti-competitive practices by the OPs have resulted in denial of market access to independent workshops which are usually micro, small and medium enterprises (MSMEs). The Informant has stated that MSMEs give employment to 45% of industrial workers. Furthermore, on the one hand the Government has introduced several policies and initiatives to encourage and support the MSMEs and on the other hand the current practices of the OPs are adversely affecting the sector.
1.9 The informant has stated that the European Commission has the so called ‘Block Exemption Regulation’ in place since the year 2002 to compel auto manufacturers to
C. No. 03 of 2011 Page 6 of 215
provide spares and tools etc., to independent operators. These regulations prohibit discrimination between authorized service dealers and independent operators. The European Commission had also taken commitments from auto majors to ensure supply of spares and technological knowhow to independent operators. To ensure effective competition in the auto repair and maintenance market, the European Commission issued the new regulation no. 461/2010 in the year 2010, which included specific guidelines apart from the earlier block exemption rules.
1.10 The Informant has stated that there are regulations in place in United States to ensure that emissions related diagnostic tools and information is available to independent vehicle repair shops. Several states of the U.S. have introduced the ‘Right to Repair Act’ to curb restrictive practices by automobile manufacturers. The Informant has further stated that all over the world consumers and governments are seeking to implement a free and fair competition regime in the automotive sector, with varying degree of success.
1.11 The Informant has alleged that the acts of the OPs in restricting the sale and supply of spare parts and technical information, diagnostic equipments and tools to independent automobile service providers indirectly determine the purchase or sale prices of both the price of automobile spare parts as well as the price of repair and maintenance services. The Informant has alleged that the anti-competitive acts of the OPs are arbitrary, illegal and devastating to free and fair competition. The Informant has alleged that such practices are in direct contravention of sections 3(3)(a) and 3(3)(b) of the Act. By refusing to sell the spare parts to independent operators the OPs are in violation of section 3(4)(d) of the Act. Further, the denial of access to the repair and maintenance market to the independent service workshops are in violation of section 4(2)(a), 4(2)(b) and 4(2)(c) of the Act.
1.12 The Informant has also filed additional information wherein it has been alleged that that the OPs and other vehicle manufacturers impose restrictions on their OESs from supplying automobile parts into the open market. It has been alleged that such practices
C. No. 03 of 2011 Page 7 of 215
amount to limiting and controlling production and supply of components/spares in the Indian automobile aftermarket and are in violation of section 4(2)(d) of the Act. As per the Informant the European Commission has effectively tackled the abovementioned restrictive practice aspect under their block exemption regulations by affording a statutory right to OESs to sell vehicle parts in the open market.
1.13 The Informant has also alleged in the supplementary information that the restriction by the OPs on their authorized dealers from taking up dealerships of other competing vehicle manufacturers is in contravention to the provisions of section 4(2)(a), 4(2)(b) and 4(2)(c) of the Act.
1.14 The Informant has sought the following reliefs:
“(a) hold an enquiry into the trade practices of the Respondents and/ or any other vehicle manufacturer and their authorized dealers/ service centers indulging in similar activities as detailed herein and give a finding that such parties have committed restrictive and/ or unfair trade practices in contravention of the Act;
(b) order the Respondents to cease and desist from such restrictive, unfair, monopolistic trade practices and misusing its dominant position;
(c) pass appropriate orders directing the Respondents No.1-3 and other contravening vehicle manufacturers and their authorized dealers/ services centers to provide spare parts, technical information, diagnostic tools, software and any other information and goods required for the repair, maintenance and servicing of the vehicles to independent repair workshops and also make the same freely available in the open Indian automotive aftermarket;
C. No. 03 of 2011 Page 8 of 215
(d) pass appropriate orders directing the Respondents and other contravening vehicle manufacturer indulging in similar activities as detailed herein to allow authorized dealers the right to undertake franchises/dealerships from different vehicle manufacturers without fear of malevolent action from the respondents or other defaulting vehicle manufacturers;
(e) pass appropriate orders ensuring that access tro the spare parts, tools, technical information, technical training and equipment for repair, maintenance and service of the vehicles and manufacturers by OESs is provided to the independent service providers, consumers and in the open market upon request and without undue delay and the price charged from such parts, tools, equipment should not be fixed by the vehicle manufacturers but be determined by independent market forces and free and fair competition;
(e) award reasonable amount for costs incurred towards legal fees;
(g) pass such further order as this Hon’ble Commission may deem fit and proper in the facts and circumstances of the case.
2. Prima Facie Opinion
The Commission after forming an opinion that a prima facie case exits in the matter, vide an order dated February 24, 2011, passed under section 26(1) of the Act directed the Director General (hereinafter, referred to as the “DG”) to conduct an investigation into the matter and submit a report.
3. Investigation and Findings of the DG
C. No. 03 of 2011 Page 9 of 215
3.1 In pursuance of the direction of the Commission the DG conducted investigation into the matter and submitted his investigation report (hereinafter, referred to as, the “DG Report”) to the Commission.
3.2 From the submissions of the Informant, initial discussions held and the preliminary enquiries made during the investigation, the DG gathered that other automobile manufactures (other than the OPs (1-3)) may also be indulging in similar restrictive trade practices in the areas of after sales service, procurement and sale of spare parts from the OESs, setting up of dealership etc. In view of the fact that these practices may not be confined to the OPs (1-3) and considering that the case involved the larger issue related to prevalent anti-competitive conduct of the players in the Indian automobile sector and its implications on the consumers at large, the DG realized that the investigation should not be restricted to the OPs (1-3) mentioned above. Accordingly it was proposed by the DG that the investigation may be allowed to examine the alleged anti-competitive trade practices of all car manufacturers in India, as per the list maintained by the Society of Indian Automobile Manufacturers (“SIAM”). The DG, therefore, requested the Commission for direction to initiate investigations against all car manufacturers in India.
3.3 The Commission considered the abovementioned request of the DG to include within the scope of its investigations all automobile manufacturers in India as per the list maintained by SIAM and, vide order dated 26.04.2011, allowed the request to initiate investigation against other automobile manufactures of India (in addition to the OPs(1-3)). Such car manufactures were:
1) BMW India Pvt. Ltd. (hereinafter, referred to as “BMW”)
2) Ford India Pvt. Ltd. (hereinafter, referred to as “Ford”)
3) General Motors India Pvt. Ltd. (hereinafter, referred to as “GM”)
4) Hindustan Motors Ltd. (hereinafter, referred to as “Hindustan Motors”)
5) Hyundai Motor India Ltd. (hereinafter, referred to as “Hyundai”, “HMIL”)
6) Mahindra & Mahindra Ltd. (hereinafter, referred to as “M&M”)
C. No. 03 of 2011 Page 10 of 215
7) Mahindra Reva Electric Car Company (P) Ltd. (hereinafter, referred to as “Reva”)
8) Maruti Suzuki India Ltd, (hereinafter, referred to as “MSIL”)
9) Mercedes-Benz India Pvt. Ltd. (hereinafter, referred to as “Mercedes”)
10)Nissan Motor India Pvt Ltd. (hereinafter, referred to as “Nissan”)
11) Premier Ltd. (hereinafter, referred to as “Premier”)
12) Skoda Auto India Pvt. Ltd., (hereinafter, referred to as “Skoda”)
13) Tata Motors Ltd., (hereinafter, referred to as “Tata”)
14) Toyota Kirloskar Motor Pvt. Ltd. (hereinafter, referred to as “Toyota”)
3.4 During the course of the investigation, the DG issued detailed questionnaires to seek information from each of the OEMs listed above, including their group companies, engaged in the automobile aftermarket in India. The DG also recorded statements on oath of representatives of the OEMS, the OESs and other multi-brand retailers. Besides, information was also collected from various third party stakeholders, such as:
(a) OES (original equipment suppliers)
(b) Authorized dealers appointed by each of the OEMs
(c) Multi brand service providers
(d) Independent repairers
(e) Discontinued dealers of the OEMs
3.5 Additionally, the DG obtained information from the following entities, namely:
(a) trade associations related to the Indian automotive industry, including SIAM, Automotive Component Manufacturer Association (“ACMA”) and Federation of Automobile Dealers Association (“FADA”); and
(b) SPX India Limited (“SPX”), which supplies the specialized diagnostic tools for aftermarket servicing and repairing requirements to a large number of the OEMs.
3.6 The DG conducted its investigation of the market practices of all the automobile manufacturers or original equipment manufacturers (“OEMs”) listed above and have submitted his findings to the Commission.
C. No. 03 of 2011 Page 11 of 215
3.7 The DG has filed a main report (containing the DG’s overall findings) and seventeen (17) sub-reports (each sub-report contains the findings of the DG’s investigation with respect to the alleged anti-competitive trade practices of each of the 17 OEMs mentioned above).
3.8 The Commission makes it clear at this stage that the present order governs the alleged anti-competitive practices and conduct of OPs (1-14) only. The Commission shall pass separate order in respect of three car manufacturers, viz., Hyundai, Reva and Premier after affording them reasonable opportunity to make their submissions in respect of the findings of the DG report and queries raised by the Commission. Keeping this in mind, the findings of the DG report and contentions raised, if any, in respect of these three OPs have not been dealt with in this order.
3.9 After investigation the DG has found that the conduct and practices of the OPs are in violation of the provisions of section 3 and section 4 of the Act. The findings of the DG report, in brief, are discussed as under:
Relevant Product Market
3.9.1 The DG Report has identified following two separate product markets for the passenger vehicle sector in India:
1) The Primary Market: consisting of the manufacturing and the sale of the passenger vehicles.
2) The Secondary Market which is essentially the “Aftermarket”. “Aftermarket” is the expression used to describe a market comprising complementary or secondary products and services which are purchased after another product i.e. the primary product which they relate to. According to the DG report the aftermarket in the present case comprises of spare parts, diagnostic tools, technical manuals and after sales repair
C. No. 03 of 2011 Page 12 of 215
and maintenance services that are required to be purchased after the purchase of primary product.
3.9.2 The DG further identified the two segments of the aftermarket for passenger vehicle sector in India. They are:
a) Supply of spare parts, including the diagnostic tools, technical manuals, catalogues etc. for the aftermarket usage; and
b) Provision of after sale services, including servicing of vehicles, maintenance and repair services.

[prmd_cochin]

Though not coming under the CCI preview, the next move in the auto sector should be making crash testing mandatory and displaying the results in ads and brochures.

[stanjohn123]

All car manufacturers are going to get United against CCI on this or just pay some bribes and hide this under the carpet as is the usual case in India.

Anyways one thing I don't understand from the judgment is that a manufacturer can not say that a cars warranty is voided if repairs are done from independent garages outside. It's good obviously from customers point of view but definitely not fair to the brand and ASC.

[Urban_Nomad]

Originally Posted by stanjohn123

Anyways one thing I don't understand from the judgment is that a manufacturer can not say that a cars warranty is voided if repairs are done from independent garages outside. It's good obviously from customers point of view but definitely not fair to the brand and ASC.

Not really. IIRC, the practice in UK / US is that in case you get your vehichle repaired / serviced from an independant garage and can produce sufficient proof of the task being carried out (service bill for example, with break up of consumables / parts used) satisfactorily, the warranty stays intact.

[joybhowmik]

Originally Posted by anoop.nair

THE ORDER (partial)



1.1 The Informant has also alleged, that even the technological information, diagnostic tools and software programs required to maintain, service and repair the technologically advanced automobiles manufactured by each of the aforesaid OPs were not freely available to the independent repair workshops. The repair, maintenance and servicing of such automobiles could only be carried out at the workshops or service stations of the authorized dealers of OP.

Does this mean the CCI will also mandate that the manufacturers should all come out with the service manuals in the public domain?
Would be wonderful if that's the case.

[troublemaker]

Tata being #1 in fines list (and Maruti #2), I'm sure this will get toned down soon.

[suhas_raj]

Serves them right !! They had it coming their way. But looking at the quantum of fines I am pretty sure they will drag this case for another decade until all of the gathered steam is lost & finally end up as just another headline news article.

On the contrary, let's hope this can actually instill fear among the ones who are taking us for a ride & bring about positive changes for us as customers. Is it too much to ask ? I don't think so...

[dhuli]

Apparently, the Competition Commission of India has fined car companies in India over $420 million for restricting access to spare parts and diagnostic tools to independent repairers/service shops and therefore denying market access.

I saw this story first on NY Times, which also mentioned similar fines of $200 million levied by China, especially on Japanese bearings and auto parts manufacturers last week for fixing prices.

The list for firms fined in India are Maruti Suzuki India, Tata Motors, Honda Cars India, Volkswagen India, Fiat India Automobiles, BMW India, Ford India, General Motors India, Hindustan Motors, Mercedes—Benz India, Nissan Motor India, Skoda Auto India and Toyota Kirloskar Motor. Tata Motors received the biggest fine, 13.46 billion rupees, or about $222 million followed by M&M was fined Rs.292 crores.

The article mentions "The regulator’s inquiry into the practices of auto manufacturers began in 2011 after Shamsher Kataria, a private citizen, filed a complaint against Honda Cars India, Volkswagen India and Fiat India Automobiles. "

Noteworthy is the CCI's view - "The Competition Commission’s order also pointed out the poor safety regulations in India’s automobile industry, which has come under scrutiny after independent crash tests earlier this year showed that domestic cars fell short of international standards. "

Both Tata Motors and M&M have reacted saying they will appeal against what they view as unjust. I was surprised to see Maruti Suzuki.

"The regulator’s inquiry into the practices of auto manufacturers began in 2011 after Shamsher Kataria, a private citizen, filed a complaint against Honda Cars India, Volkswagen India and Fiat India Automobiles. "

[drsingh]

Tata and Maruti have decided to protest /appeal the fine.



Big thumbs up for the verdict though, and a bigger thumbs up for the rise of citizen activism in our country.

[ajaypjayaraj]

Topic already being discussed in the following thread:

http://www.team-bhp.com/forum/indian...-parts-13.html

[F150]

Originally Posted by troublemaker

Tata being #1 in fines list (and Maruti #2), I'm sure this will get toned down soon.

Do we know the reason why Tata Motors is charged the highest fine of the lot @ 1300 Crores ?

[dhuli]

Originally Posted by sgiitk

Once you go to the open market you have to trust your source and judgement.

I agree with SG. In my experience going to a non-authorized service center, I went because I trusted him. Also, this particular Maruti service guy was ex- employee of an authorized service center.

However, I didnt experience any issue with genuine parts as he 'informally' procured the part (in this case front left drive shaft of a WagonR automatic).

The single issue though is delay in procuring and replacing. Here he is left to the mercy of his contacts within the authorized spare parts circuit.

My opinion is that while Tatas and Mahindras can challenge this order its a moral victory for consumer.