What is Competition Commission of India (CCI) & why has it fined Maruti Suzuki (MSIL) for Rs 200 crore?

Competition Commission of India

Competition Commission of India(CCI) had established as per provisions laid down in Chapter III, Section 7 of Competition Act, 2002. 
Competition Act, 2002 was enacted keeping in view of the economic development of the country, for the establishment of a Commission to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto.

This act replaced the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) on the recommendations of Raghavan committee.



Why has CCI fined Maruti Suzuki for Rs 200 Crore?

CCI has found that MSIL not only imposed the Discount Control Policy on its dealers, but also monitored and enforced the same by monitoring dealers through MSAs, imposing penalties on them and threatening strict action like stoppage of supply, collecting and recovering penalty, and utilisation of the same.

 CCI found that these practices restrict the competition and were in contravention of the provisions of Section 3(4)(e) read with Section 3(1) of the Competition Act, 2002.

 Let's first see what Section 3(4)(e) and Section 3(1) of Competition Act says:

 Anti-competitive agreements

 3. (1) No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India.

3. (4) Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, including-

(a) tie-in arrangement;

(b) exclusive supply agreement;

(c) exclusive distribution agreement;

(d) refusal to deal;

(e) resale price maintenance,

 shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable adverse effect on competition in India.

Now, let's see what Maruti Suzuki(MSIL) did:

1. Maruti Suzuki had a ‘Discount Control Policy’ in place for its dealers whereby the dealers were discouraged from giving extra discounts, freebies, etc. to the consumers beyond what were permitted by MSIL. If a dealer wanted to offer additional discounts, prior approval of MSIL was mandatory. Any dealer found violating such Discount Control Policy was threatened with imposition of penalty, not only upon the dealership, but also upon its individual persons, including Direct Sales Executive, Regional Manager, Showroom Manager, Team Leader, etc.

 2. To enforce this policy Maruti Suzuki also hires Mystery Shopping Agencies for audit of dealers. Mystery shopping agencies are a kind of third-party audit agents who visit the showrooms by being a customer and enquire about the working style of the store. For E.g., to know that how store keepers are dealing with customers. Maruti Suzuki used such agencies to know that what maximum discount are dealers of Maruti Suzuki are providing. If some dealer was providing discount beyond company policy, they were at risk of imposition of penalty, not only upon dealership but also upon individuals. This practice as per CCL was restricting the competition.

Let's understand the same by an example: If there are 10 shops for buying a cloth, Customer will buy from the person who provides the best discount. But, if these 10 shops form a cartel and fix a particular price and no one is allowed to sell less than that price, this would be a monopolistic practice and customer has to pay high price for that good. In our case Maruti Suzuki is restricting its dealers to sell beyond a price fixed by Maruti Suzuki.

In short, what MSIL did was it created a cartel by not allowing its dealers to give discount beyond certain amount which was against the rights of consumers. CCI basically aims to increase competition in market, so that consumers can get maximum advantage of competition and buy a good at maximum discount. Due to which MSIL was fined for Rs 200 Crore.



References:
Competition Act, 2002
Press Information Bureau(PRID=1748288)

 


 

-Tushar Bawa

 


Comments

Post a Comment

Popular posts from this blog

Case Summary : Duncans Industries Ltd. v. State of U.P. (2000) 1 SCC 633 | Property Law

Bench: N.S. Hegde, B.N. Kirpal Facts of the case: 1.  ICI  India Ltd. executed an agreement of sale wherein it agreed to transfer on an “as is where is” basis and “as a going concern” its fertilizer business of manufacturing, marketing, distribution and sale of urea fertilizer in favour of Chand Chhap Fertilizer and Chemicals Ltd. (“CCFCL”), also a company incorporated under the Companies Act, 1956 which company has since been renamed as M/s Duncans Industries Limited, Fertilizer Division, Kanpur Nagar (the appellant herein) for a total sale consideration of Rs 70 crores which was termed as “slump price” in the agreement. 2.  Pursuant to the said agreement, a deed of conveyance was executed by the said ICI in favour of CCFCL, on the presentation of the said Conveyance Deed for registration.  3. The Sub- Registrar made a reference to the Collector under  Section 47-A(2)  of the Stamp Act, 1899 (hereinafter refe...
Read more

Case Summary: Central Bureau Of Investigation vs V.C. Shukla & Ors on 2 March, 1998 | Indian Evidence Act | S. 10,17,21,34 IEA

Sections Involved Section 10 IEA: Things said or done by conspirator in reference to common design. –– Where there is reasonable ground to believe that two or more persons have conspired together to commit an offence or an actionable wrong, anything said, done or written by any one of such persons in reference to their common intention, after the time when such intention was first entertained by any one of them, is a relevant fact as against each of the persons believed to be so conspiring, as well for the purpose of proving the existence of the conspiracy as for the purpose of showing that any such person was a party to it. Section 17 IEA:  Admission defined.––An admission is a statement, 1 [oral or documentary or contained in electronic form], which suggests any inference as to any fact in issue or relevant fact, and which is made by any of the persons, and under the circumstances, hereinafter mentioned.  Section 18 IEA:  Admission––by party to proceeding or his agent....
Read more

Case Summary: State of Haryana v. Dinesh Kumar | Criminal Law | Cr.P.C.

 Case Citation : (2008) 3 SCC 222 Bench: Altamas Kabir. J Facts of the case: 1. The respondent in the first of these two appeals and the appellants in the other appeal applied for appointment as Constable-Drivers under the Haryana Police and submitted their respective application forms, which contained two columns, namely, 13(A) and 14, which read as follows:-      13(A): Have you ever been arrested?      14: Have you ever been convicted by the Court of any offence? Respondent answered the both questions as negative. 2. Subsequently, during verification of the character and antecedents of the said respondent, it was reported that he had been arrested in connection with a case arising out of FIR. However, he was aquitted in that matter by judicial magistrate. 3. Appellant, however, alleged that the respondent had concealed these facts from the Selection Committee and had not correctly furnished the information in columns 13(A) and 14 of the applica...
Read more