CCI to pass order against auto majors

Charge relates to misuse of dominant position to sell spare parts at high rates

The Competition Commission of India (CCI) is likely to soon pass an order against 17 leading automobile manufacturers for allegedly using their dominant position to sell spare parts only through authorised dealers, leading to exorbitant prices in the market.

The list of manufacturers expected to be penalised included major car makers like Tata Motors and Maruti Suzuki, besides some foreign players, a CCI official confirmed.

CCI’s investigative arm, director-general (investigations), has given its report after a detailed probe. “The DG report points at anti-competitive practices by almost all major automobile manufacturers. CCI is expected to endorse this report,” the official said.

According to him, the commission was in the final stage of preparing the order, which could be expected sometime in March. If CCI rules against the car makers, these companies might have to pay hefty penalties.

CCI is pursuing the case under Section 4 of the Competition Act on abuse of dominant position by enterprises. The probe was initiated with a complaint filed with the commission in 2011 against certain automobile makers for allegedly abusing their dominant market position to sell auto spare parts only through authorised dealers. This allegedly led to higher prices of these products.

“The allegations are that these companies often insist their customers go to authorised dealers for repairs. This leads to an increase in service and maintenance costs of vehicles,” an official said.

Currently, independent service chains have one per cent share in the Rs 25,000-crore after-market service and spares industry, which includes Rs 6,000-crore body shop and Rs 15,000-crore service and spare works. It is growing at a CAGR of over 20 per cent.

Even as consumer forums appreciate the expected move of the fair trade regulator, they fear car makers might form a cartel to tweak the law in the absence of a consumer protection policy in the country.

“A fair value should be given to consumers. In India, there is little sensitivity about issues concerning consumers. We must first have a policy to protect consumers from such powerful companies,” says Bejon Misra, chairman, Cell for Consumer Education and Advocacy.

In other developed markets, such as the UK, France and Germany, independent workshops account for a third of the servicing market. The European Commission has passed a ‘Right to Repair’ regulation, making it mandatory for all original equipment manufacturers to make spares available in the open market, bringing down servicing costs for consumers.