Compat breather for carmakers with reduction in penalties

Tribunal asks companies to pay 2% on average turnover of spare parts sale

Providing relief to some auto companies, the Competition Appellate Tribunal (Compat) on Friday ruled that companies would have to pay two per cent penalty on the average annual turnover of spare parts sale. The Competition Commission of India (CCI) had imposed the same rate of penalty on the average annual turnover in the country.

CCI and the companies concerned have to ensure that the order is implemented within a year. CCI had, in an order on August 25, 2014, asked Toyota to pay Rs 93.38 crore, Ford to pay Rs 39.78 crore, and Nissan to pay Rs 1.63 crore. The companies had appealed against it to Compat.

The order on Friday stated, “Since we are following the yardstick of relevant turnover, our concerns about mitigating circumstances are automatically getting addressed as the penalty amount will now be calculated on the basis of the relevant turnover of spare parts in the aftermarket.” 

To determine the exact amount of penalty, the tribunal directed CCI to collect relevant data.

Toyota Kirloskar vice-chairman and whole-time director, Shekar Vishwanathan, in an e-mail statement said, “We had highlighted, in our appeal, that we are already selling spare parts through our dealerships and through on-line parts distribution channel Toyota Parts Connect. This is being expanded across India. We have not engaged in any anti-competitive practices that would warrant any penalty whatsoever.” 

The director-general of CCI had, in a report on June 30, 2012, recommended an investigation against the companies for not allowing over-the-counter sale of spare parts. As the carmakers were aware that these were not available to independent mechanics, the terms of sale were unfair.

According to the report, denial to access to diagnostic tools and spare parts amounts to denial of access to an “essential facility” and amounts to abuse of dominant position by the carmakers. 

The carmakers were also preventing, through agreements and practices, original equipment suppliers from selling spare parts as well as technical manuals and diagnostic tools. 

This was perceived by the CCI as an attempt to use their dominant positions in the auto sector to protect interests in the repairs and maintenance segment.

Compat order

• Competition Appellate Tribunal (Compat) provides partial relief for auto companies Toyota Kirloskar, Ford India and Nissan Motor India 

• Says penalty to be levied on average annual turnover of spare parts

• Mandates two per cent penalty on average annual turnover of spare parts

• CCI had imposed a penalty of two per cent on total turnover of companies

• The order had alleged anti-competitive practices on part of companies by not making spare parts available in the free market