BackDelhi high court stays CCI fine on Maruti Suzuki
The court said CCI order will not take effect until the Madras high court disposes of a plea filed before it by Hyundai
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Mumbai/New Delhi: The Delhi high court on Wednesday stayed a ₹ 471.14 crore fine imposed on Maruti Suzuki India Ltd, the country’s largest car maker, by the antitrust regulator for violating competition law by not selling spare parts in the open market.
The court said the order by the Competition Commission of India (CCI) will not take effect until the Madras high court disposes of a petition filed before it by Hyundai Motor India Ltd, which has obtained a stay on the order.
On 25 August, CCI slapped a combined penalty of ₹ 2,554 crore on Maruti Suzuki and 13 other auto makers for failing to sell spare parts in the open market, saying it wanted to make the components market more broad based, user friendly and less expensive for consumers. For each auto maker, the fine amounted to 2% of average sales. The penalty was to be deposited within 60 days of receipt of the order.
Maruti Suzuki challenged the order in the Delhi high court, pointing to the stay granted by the Madras high court in Hyundai’s case. The court accepted the application by Maruti and granted the stay. Mint has not reviewed a copy of the order.
A spokesperson for Maruti Suzuki, the Indian arm of Japan’s Suzuki Motor Corp., declined to comment on the stay granted on Wednesday on grounds that the matter is sub judice.
The other companies on which penalties have been imposed were Mahindra and Mahindra Ltd, Tata Motors Ltd, Toyota Kirloskar Motor Pvt. Ltd, Honda Cars India Ltd, Volkswagen India, Fiat Group Automobiles India Pvt. Ltd, Ford India Pvt. Ltd, General Motors India Pvt. Ltd, Nissan Motor India Pvt. Ltd, Hindustan Motors Ltd, Mercedes-Benz India Pvt. Ltd, BMW India Pvt. Ltd ₹ and Skoda Auto India Pvt. Ltd.
Tata Motors and Mahindra and Mahindra said on 26 August that they too will appeal against the order. On 29 August, Business Standard newspaper reported that the Madras high court had stayed CCI action against Nissan.
Pravin Shah, chief executive for the automotive division at Mahindra and Mahindra, said the company had received a copy of the CCI order on Tuesday and was yet to take any action.
Spokespersons at other firms including Tata Motors, Toyota Kirloskar and Honda Cars India also said the companies had received the CCI order very recently and were yet to take any action on it.
“We will act in the best interest of the consumer and other stakeholders," said Shekhar Viswanathan, vice-chairman at Toyota Kirloskar.
The spare parts market is lucrative for auto firms, being less vulnerable to demand fluctuations because component sales are driven by the existing vehicular population. While the average margin on the sale of a new vehicle is 10%, on spares it could range between 25% and 40%, according to an auto industry analyst who declined to be identified. Typically, spares account for 5% to 9% of a company’s annual net sales revenue.
For Mahindra, the contribution of sales of spares in earnings before interest, taxes, depreciation and amortization (Ebitda)—an indicator of operating profitability—is 9-10%, for Maruti Suzuki it is as high as 15-20%, the analyst estimated.
The car companies denied access to branded spare parts and diagnostic tools to independent repairers, hampering their ability to repair and maintain certain car models, CCI found. Monopolistic control over the spare parts and diagnostic tools market allowed these companies to charge arbitrary and high prices, it said.
The competition regulator had directed the car companies to “cease and desist from indulging in conduct which has been found to be in contravention of the provisions of the Act (Competition Act)". The car companies were also directed by the commission to put in place an effective system to make spare parts easily available in the open market.
Tata Motors was fined ₹ 1,346.46 crore—the highest penalty—followed by Maruti Suzuki and Mahindra and Mahindra ( ₹ 292.25 crore). Toyota Kirloskar Motors was fined ₹ 93.38 crore, General Motors ₹ 84.58 crore, Honda ₹ 78.47 crore, Skoda ₹ 46.39 crore, Ford ₹ 39.78 crore, Fiat ₹ 29.98 crore, Mercedes-Benz ₹ 23.08 crore, BMW ₹ 20.41 crore, Hindustan Motors ₹ 13.85 crore, Volkswagen ₹ 3.25 crore and Nissan ₹ 1.63 crore.
CCI’s investigation into the practices of car makers followed a complaint that car makers were following anti-competitive practices by restricting the sale of spare parts. The complaint was filed in January 2011 against Honda, Volkswagen and Fiat.
In April 2011, CCI extended its probe to other manufacturers it found were following a similar practice. Hyundai obtained a stay order from the Madras high court against CCI’s proceedings in February 2013. The company argued that CCI had, on its own, expanded the scope of its investigation to cover the entire car industry even though it had originally received a complaint only against the three car makers.
The commission investigated 17 companies in the case.
“CCI has competition law jurisdiction in exclusion to civil courts. Writ jurisdiction lies with High Courts," said K.K Sharma, chairman of Delhi-based K.K. Sharma Law Offices and a former director general of the CCI. “It is a little disturbing trend that the competition law matters are being entertained in high courts in the garb of writ petitions. This is perhaps because the Competition Appellate Tribunal bench, which usually hears such matters, is currently not in place after the retirement of Justice V.S. Sirpurkar."
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