Auto firms to appeal against Rs 2,545-cr fine

Order directs cos to pay a fine of Rs 2,545 crore over alleged unfair practices relating to spare parts and technology sharing

Car and utility vehicle manufacturers will challenge the order of the Competition Commission of India (CCI) that has directed them to pay a fine of Rs 2,545 crore for alleged unfair practices relating to spare parts and technology sharing.

The commission claimed 14 companies, including Tata Motors, Maruti Suzuki and luxury car makers, were found guilty of violating trade norms after they failed to make their genuine spare parts available freely in the open market.

The penalty, which is the first of its kind on vehicle manufacturers, comes two years after the CCI levied a Rs 6,300 crore fine on the country’s top 11 cement companies on charges of cartelisation.

CCI SPEED BREAKER

• CCI has directed automakers to pay a fine of Rs 2,545 crore for alleged unfair practices relating to spare parts and technology sharing
• The penalty, which is the first of its kind on vehicle manufacturers, comes two years after the CCI levied a Rs 6,300 crore fine on the country’s top 11 cement companies on charges of cartelisation

“The company, aggrieved by this order, proposes to appeal against it before the appropriate forum,” a statement from the Mumbai-based sports utility vehicle market leader Mahindra & Mahindra (M&M) said on Tuesday. “The company furnished all information and clarifications requested by the authorities in the context of the investigation,” it added. Like all companies, M&M has been asked to pay a sum equivalent to two per cent of its average annual turnover for three years starting 2007-08.

India's largest automaker Tata Motors too will be filing an appeal against this order before “appropriate authorities”. It further highlighted that the Rs 1,346 crore penalty levied on the company was calculated on the consolidated global turnover, which includes Jaguar Land Rover revenues, instead of turnover pertaining to its passenger vehicle business in India.

Through agreements with parts manufacturers, carmakers “imposed absolute restrictive covenants and completely foreclosed the after-sale market for supply of spare parts and other diagnostic tools,” the CCI order said.

Honda Cars, Volkswagen, Fiat , BMW, Ford, General Motors, Hindustan Motors, Mercedes-Benz, Nissan Motors, Skoda Auto and Toyota complete the list of 14 companies penalised by the CCI. Hyundai, Renault, Audi and Jaguar Land Rover, which also have local manufacturing and assembly operations, do not figure in the list.

When contacted spokespersons of Honda Car India, Ford Motor India and Toyota Kirloskar India said that they were yet to receive the CCI order and would be able to provide a definitive comment only upon its receipt. India's apex automotive body, the Society of Indian Automobile Manufacturers, did not respond.

The order relates to competition law proceedings initiated in 2011 which aimed at investigating the conduct of several leading automobile companies in India with respect to supply of spare parts and other diagnostic tools in the aftermarket.

The issue started when Shamsher Kataria, who owned a Maruti Suzuki car earlier, filed a complaint in early 2011 with the CCI against Honda, Volkswagen and Fiat, alleging anti-competitive methods and abuse of dominant position.

Kataria alleged that besides spare parts even the technological information, diagnostic tools and software programmes required to maintain service and repair the vehicles made by the three companies were not freely available to independent repair workshops. It was found later that automobile companies had created a monopoly over the supply of genuine spare parts and repair and maintenance services and, consequently, have indirectly determined the prices of the spare parts and repair and maintenance services. Korean company Hyundai and Japanese giant Nissan argued that the investigation be restricted to the three companies as the CCI had expanded the probe to cover 17 manufacturers. The Madras High Court last month dismissed their petition.

Automotive companies are expected to approach the Competition Appellate Tribunal for redressal like the cement companies which had challenged the penalty slapped on them. The Supreme Court, consecutively, directed the cement companies to deposit 10% (Rs 630 crore) of the total penalised amount.