Companies

Maruti under Competition Commission lens

Reuters NEW DELHI | Updated on May 21, 2019

Curbing of dealer discounts by company seen hurting customers

The Competition Commission of India is looking into allegations that Maruti Suzuki, the country’s biggest car maker, resorted to anti-competitive practices by controlling how its dealers discounted cars, three people aware of the matter said.

The anti-trust regulator is looking into allegations that Maruti forces its dealers to limit the discounts they offer, effectively stifling competition among them and harming consumers who could have benefited from lower prices if dealers operated freely, the people told Reuters.

It was not clear over which period Maruti allegedly engaged in this conduct, but one of the people with direct knowledge of the case said the CCI has been reviewing the allegations for about 10 months. A final decision on whether there needs to be a full investigation has not been reached, the person added.

The sources declined to be identified as details of the case were not public. Maruti Suzuki and the CCI did not respond to Reuters’ requests for comment.

Automakers typically sell cars at wholesale prices to dealers, who sell them to customers at a higher retail price that includes their commissions.

It is up to the dealer to offer discounts and take a lower profit margin, which they often do.

Car makers at times set a limit on discounts its dealers could offer to ensure there is no price war among them, two of the sources said, but Indian law says the practice, described as ”resale price maintenance”, is prohibited if it causes “appreciable adverse effect on competition in India”.

Similar to Hyundai case

In 2017, South Korean firm Hyundai Motor Co’s India unit was fined $12.5 million by the CCI for anti-trust violations, including resale price maintenance.

The CCI found Hyundai fixed the maximum amount of discount for its cars and restricted competition among dealers.

Hyundai was also penalising dealers who breached the set discount controls, the CCI said at the time. “The Maruti case is similar to Hyundai’s; it’s a resale price maintenance issue,” the person with knowledge of the case said.

If the CCI finds merit in allegations against Maruti and launches a full probe, the case could be far stronger than the one against Hyundai as Maruti accounts for more than half of India’s car market, an anti-trust official told Reuters.

Published on May 21, 2019

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