Companies

Maruti under Competition Commission lens

Reuters NEW DELHI | Updated on May 21, 2019 Published 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

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.