The Competition Commission of India (CCI) has imposed a penalty of Rs 200 crore on Maruti Suzuki India Ltd over anti-competitive practice of imposing a discount control policy, thereby restricting dealers from offering higher level of concessions to the consumers.
The anti-trust body, in its order, said that Maruti Suzuki not only entered into an agreement with its dealers across India for the imposition of discount control policy amounting to retail price maintenance (RPM), but also monitored the same by appointing Mystery Shopping Agencies (MSA) and enforced the same through the imposition of penalties, which resulted in “appreciable adverse effect on competition” within India.
It has directed MSIL to cease and desist from indulging in RPM directly or indirectly, which has been found by the commission in the present order to be in contravention of the provisions of Section 3(4)(e) of the Act.
“Having considered the nature of the infringing conduct and the post-pandemic phase of recovery of automobile sector, the Commission takes a considerate view and deems it appropriate to impose a penalty of Rs 200 crore only upon the MSIL, as against a maximum penalty permissible under the provisions of the Act, which may extend upto ten per cent of the average of the turnover of the entity for the last three preceding financial years,” it said.
The investigation found that each and every discount offered by the dealers of the MSIL over and above the customer offers of the MSIL, had to be permitted by the MSIL. If discount without prior approval was given, the imposition of a penalty was threatened.
The dealers were informed by the MSIL that no discounts above the stated discounts are to be offered to consumers. Additionally, the MSIL dictated that any dealership, after price rise, if found selling/billing on old price, will be considered violating selling norms and it will be treated as a discount offered to customers.
The MSIL circulated communications of warning and threats of imposing high penalties in case dealers offered extra discounts without prior approval, the CCI order said.
A MSIL spokesperson said: “We have seen the order dated 23 August 2021 published by the Competition Commission of India.”
“We are examining the order and will take appropriate actions under law. MSIL has always worked in the best interests of consumers and will continue to do so in the future.”
KS Legal & Associates Managing Partner Sonam Chandwani said: “According to CCI, MSIL has an agreement with its dealers that prohibited the dealers from offering consumers discounts other than those prescribed by MSIL.”
“Maruti caters to the middle class, therefore offering the dealer a free ride would have helped the customer.”
Chandwani pointed out that the development will be a major setback for Maruti, as it will be obliged to deposit Rs 200 crore in 60 days and amend its agreement to remove any discount control measures.