Maruti to challenge CCI penalty; order lacks understanding

CCI had slapped total penalties of Rs 2,545 crore on 14 car makers

Maruti Suzuki India on Wednesday said it would challenge the penalty imposed on it by CCI for violation of trade norms in the spare parts and after services market.

“I believe what CCI has done (is) that they have not understood the entire issue of spare parts of cars. What they are saying may apply to other industries (but not in auto)...There is a lack of understanding of the difference. (The auto) industry by its nature is totally different,” Maruti Suzuki India (MSI) Chairman R C Bhargava said.

Asked if the company would challenge the order, he said: “We will have to challenge the order. There is no question of not challenging the order.”

The Competition Commission of India (CCI) had slapped a total penalty of Rs 2,545 crore on 14 car makers in India on Monday. Out of the total, the fine imposed on MSI was Rs 471.14 crore.

Stating that the functioning of the automobile industry, specially with regards to the spares are different from other industrial sectors, Bhargava said CCI hasn’t taken a holistic view.

“What the CCI has dealt with is that it will result in lowering the prices of the spare parts. They have totally forgotten that most parts of the car are critical for safety or for pollution or environment or for performance,” Bhargava said.

He further said: “Now cost does not cover the quality of the parts you put into the car, they have totally not dealt with the quality part of the car.”Already Mahindra & Mahindra and Tata Motors have said they would challenge the CCI order at an appropriate forum.

As per the Competition Act 2002, orders passed by the Competition Commission of India (CCI) can be challenged before the COMPAT (Competition Appellate Tribunal) within 60 days.

The other companies fined by CCI are Volkswagen India, Fiat India Automobiles, BMW India, Ford India, General Motors India, Hindustan Motors, Mercedes-Benz India, Nissan Motor India, Skoda Auto India and Toyota Kirloskar Motor.

CCI found that auto firms violated competition norms with respect to its agreements with local Original Equipment Suppliers (OESs) as well as with authorised dealers.

Through these agreements, the car makers “imposed absolute restrictive covenants and completely foreclosed the after market for supply of spare parts and other diagnostic tools”, CCI had said.