India’s antitrust body Competition Commission of India (CCI) on Monday passed a final order against Maruti Suzuki India (MSI) for indulging in anti-competitive conduct of Resale Price Maintenance (RPM) in the passenger vehicle segment by way of implementing Discount Control Policy visà-vis dealers, and accordingly, imposed a penalty of INR 200 crore upon the company, besides passing a cease-and-desist order.
CCI found that Maruti Suzuki had an agreement with its dealers whereby the dealers were restrained from offering discounts to the customers beyond those prescribed by the company, it said in a press release.
On the order passed by CCI, the carmaker 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 the law. MSI has always worked in the best interests of consumers and will continue to do so in the future.
MSI had a ‘Discount Control Policy’ in place for its dealers, whereby the dealers were discouraged from giving extra discounts, freebies, and others to the consumers beyond what was permitted by the carmaker.
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 the 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.
To enforce the Discount Control Policy, the company appointed Mystery Shopping Agencies (MSAs)who used to pose as customers to MSIL dealerships to find out if any additional discounts were offered to customers. If found offered, the MSA would report to MSI management with proof (audio/ video recording), who, in turn, would send an e-mail to the errant dealership with a ‘Mystery Shopping Audit Report’, confronting them with the additional discount offered and asking for clarification.
If the dealership did not offer clarification to the satisfaction of the OEM, the penalty would be imposed on the dealership and its employees. In some cases, it is accompanied by the threat of stopping supplies. MSI would even dictate to the dealership where the penalty had to be deposited, and utilisation of the penalty amount was also done as per its diktats.
Thus, CCI found that MSI 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.
Hence, such conduct of MSI, which resulted in an appreciable adverse effect on competition within India, was found by CCI to be in contravention of the provisions of Section 3(4)(e) read with Section 3(1) of the Competition Act, 2002.