CCI imposes ₹200 crore penalty on Maruti Suzuki over dealer discount policy
Subsequently, CCI has asked the automaker to ‘cease and desist' from anti-competitive practices related to dealer discounts
PremiumThe Competition Commission of India has imposed a penalty of ₹200 crore on automaker Maruti Suzuki for restricting discounts by dealers. The largest automaker in India also employed mystery shopping agencies to ensure no additional discount was offered to customers by its dealerships, the watchdog found in its investigation.
“The Competition Commission of India (CCI) passed a final order against Maruti Suzuki India Limited (MSIL) for indulging in anti-competitive conduct of Resale Price Maintenance (RPM) in the passenger vehicle segment by way of implementing Discount Control Policy vis-à-vis dealers, and accordingly, imposed a penalty of ₹200 crore upon MSIL," Ministry of Corporate Affairs said in a statement on Monday.
The CCI has asked the automaker to “cease and desist" from anti-competitive practices related to dealer discounts and deposit the fine within 60 days.
In 2019, the competition regulator started looking into allegations that Maruti Suzuki 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.
Subsequently, CCI found that Maruti had an agreement with its dealers whereby they were restrained from offering discounts to the customers beyond those prescribed by the company.
“In other words, MSIL had a ‘Discount Control Policy’ in place for its dealers whereby the dealers were discouraged from giving extra discounts, freebies, etc. to the consumers beyond what were permitted by MSIL. If a dealer wanted to offer additional discounts, prior approval of MSIL was mandatory," the ministry stated.
“In other words, MSIL had a ‘Discount Control Policy’ in place for its dealers whereby the dealers were discouraged from giving extra discounts, freebies, etc. to the consumers beyond what were permitted by MSIL. If a dealer wanted to offer additional discounts, prior approval of MSIL was mandatory," it added.
It was found that Maruti Suzuki would employ mystery shopping agencies (MSAs) to pose as customers to the company's dealerships and find out if any additional discounts were being offered to customers.
If they discovered such discounts, the MSA would report to Maruti Suzuki management with audio or video proof, who, in turn, would send an e-mail to the dealership with a ‘Mystery Shopping Audit Report’, confronting them with the additional discount offered and asking for clarification.
“If clarification was not offered by the dealership to the satisfaction of MSIL, penalty would be imposed on the dealership and its employees, accompanied in some cases, by the threat of stopping supplies. MSIL would even dictate to the dealership where the penalty had to be deposited and utilisation of the penalty amount was also done as per the diktats of MSIL," the ministry statement read.
CCI ruled that such conduct of Maruti Suzuki, which resulted in appreciable adverse effect on competition within India, was in contravention of the provisions of Competition Act.
Shares of Maruti Suzuki today trade 0.30% lower at ₹6,826.75 apiece on BSE.
Meanwhile, the country's largest carmaker said its total production in July increased by 58 per cent on a yearly basis to 1,70,719 units.
The company had produced a total of 1,07,687 units in the year-ago period, Maruti Suzuki India (MSI) said in a regulatory filing.
"While the number of vehicles manufactured in July 2021 is higher than that of July 2020, a comparison is not meaningful because sales in July last year had a much lower base due to pandemic related disruptions," the auto major noted.
The number of vehicles manufactured in July this year remained on the lower side as compared to July 2018, it added.
"Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!" Click here!
