The Competition Commission of India (CCI), a statutory body of government of India, on August 23 penalised the country’s biggest carmaker Maruti Suzuki India Limited (MSIL) with a fine of Rs200 crore for anti-competitive conduct relating to how it pressured dealers to reduce automobiles.
A statement issued by the CCI read: “The Competition Commission of India passed a final order against Maruti Suzuki India Limited (MSIL) for indulging in anti-competitive conduct of Resale Price Maintenance (RPM) in the passenger vehicle segment by way of implementing Discount Control Policy vis-à-vis dealers, and accordingly, imposed a penalty of Rs 200 crore upon MSIL, besides passing a cease-and-desist order.”
It added: “CCI found that MSIL had an agreement with its dealers whereby the dealers were restrained from offering discounts to the customers beyond those prescribed by MSIL.”
“In other words, MSIL 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 was permitted by MSIL.”
In 2017, the matter came to the surface when an anonymous complaint was filed by an auto dealer. According to livemint.com, the dealer stated that Maruti Suzuki’s sales policy was against the interests of consumers and requirements under the Competition Act.
The complainant pointed out that in some parts of Maharashtra Maruti car dealers were not permitted to offer discounts to their customers above the limit set by the automaker. According to the lawsuit, dealers who were discovered offering further discounts were penalised.
The CCI had some reservations about this conduct, they found it objectionable. According to the regulatory body, the dealers were threatened with the imposition of a penalty if found violating MSIL’s discount control policy agreement.
“Not only upon the dealership, but also upon its individual persons, including Direct Sales Executive, Regional Manager, Showroom Manager, Team Leader etc,” the CCI statement read.
The CCI also said that MSIL appointed Mastery Shopping Agencies (MSAs)to administer the discount control policy. These MSAs used to pretend as customers to MSIL dealerships to speculate whether the additional discount was being offered to customers or not.
It was found that MSIL not only “implemented a discount control policy on its distributors, but also supervised the distributors through MSA, imposed sanctions on them, and threatened to take severe measures such as interruption of supply, collection and recovery of fines, and use of the same products” . “.
In reply to the CCI order, Maruti Suzuki said: “We have seen the order dated 23 August 2021 published by the CCI. We are examining the order and will take appropriate actions under the law. The MSIL has always worked in the best interests of consumers and will continue to do so in the future.”