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Here’s why CCI imposed Rs 200 crore penalty on Maruti Suzuki – India Today

The Competition Commission of India (CCI) imposed a Rs 200 crore penalty on the nation’s largest carmaker Maruti Suzuki India Limited (MSIL) on Monday. The carmaker has been asked to pay the fine within 60 days of the receipt of the order.

The competition watchdog passed the order against Maruti Suzuki for allegedly indulging in anti-competitive conduct through a policy of controlling the discounts dealers can offer to consumers.

In a statement, CCI said in a statement that it had found that MSIL had an agreement with dealers, under which they were restrained from offering discounts to the customers beyond those prescribed by MSIL. Simply put, the agreement discouraged dealers from giving extra discounts, freebies, etc. to consumers beyond what was permitted by MSIL.

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The CCI also asked MSIL to cease and desist from its discount control policy, stating that it is an agreement between entities at different levels in a distribution channel over resale pricing, adding that it is an anti-competitive practice under the law.

WHY THE PENALTY?

The matter came to light after an anonymous complaint was filed by an auto dealer in 2017.

The dealer had indicated that Maruti Suzuki’s sales policy was against the interest of customers and provisions under the Competition Act, reported livemint.com.

In the complaint, the person indicated that Maruti car dealers in some parts of Maharashtra were not allowed to give discounts to their customers beyond a limit outline by the carmaker. Dealers found giving extra discounts were penalised, as per the complaint.

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The CCI found this objectionable and stated the same in its order. According to the competition regulator, any dealer found violating MSIL’s discount control policy agreement 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,” the CCI said in a statement.

The CCI also added in its statement that MSIL appointed Mastery Shopping Agencies (MSAs) to enforce the discount control policy. These MSAs used to pose as customers to MSIL dealerships to find out if any additional discount was being offered to customers.

It found out that MSIL not only “imposed the discount control policy on its dealers, but also monitored 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 MSIL which resulted in an appreciable adverse effect on competition within India, ” it said.

MSIL’S STATEMENT

Soon after the CCI released its statement, an MSIL spokesperson confirmed that the company has seen the order dated August 23, 2021 published by the competition regulator.

“We are examining the order and will take appropriate actions under law,” the spokesperson said. “MSIL has always worked in the best interests of consumers and will continue to do so in the future.”

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