New Delhi: Fair trade regulator Competition Commission of India (CCI) has imposed a Rs 420 crore penalty on leading automobile maker Hyundai Motor India for violating the provisions of the competition act, 2002 by using its dominant position to restrict supply of genuine car spare parts to independent repairers.
The CCI order dated July 27 has also named two other car companies - Mahindra Reva Electric Car Company and Premier — to be in contravention of the provisions of the act and asked them to ‘cease and desist’ from anti-competitive practices. The CCI order is in continuation of its main order in the same case dated August 25, 2014, when penalties were imposed on 14 car companies.
CCI found Hyundai guilty of indulging in anti-competitive practices, as it entered into contracts with original equipment manufacturers and its dealers, restricting supply of car spare parts in the open market. The fine has been calculated at 2 per cent of the average turnover. The penalty will have to be paid by Hyundai within 60 days of the receipt of the order.
“The matter is sub judice, since the issue is pending before the Madras high court. We shall await the final order from the hon’ble Madras high court,” Hyundai said in a statement. The commission has also directed Hyundai not to impose any blanket condition that warranties would be cancelled if the consumer avails of services of any independent repairer.
In August 2014, CCI had imposed a combined penalty of over Rs 2,545 crore on 14 carmakers, excluding Hyundai, for indulging in unfair practices in the spare parts market. These included companies such as Honda Siel, Fiat, Volkswagen, BMW, Ford, General Motors, Hindustan Motors, M&M, Maruti Suzuki, Mercedes-Benz, Nissan Motors, Skoda, Tata Motors and Toyota Kirloskar Motors.
In that order, CCI had said it would pass a separate order in respect of three car manufacturers — Hyundai, Reva and Premier — after allowing them reasonable opportunity to make their submissions in respect of the findings of the director general’s report and queries raised by the commission. CCI said that all these companies “had stringent warranty conditions, which required their customers to get their automobile repaired only at their authorised service network of dealers, failing which their warranty would get invalidated.”
Accordingly, CCI decided to impose a penalty of 2 per cent of the average annual turnover for three financial years in India, resulting in a fine of Rs 420.26 crore, as per the 58-page order given on Monday. The anti-trust regulator also ordered all the three companies to “immediately cease and desist from indulging in anti-competitive conduct. Besides, they have been asked to allow sale of spare parts in the open market without any restrictions, including on prices.”
In the case of intellectual property rights on some parts, they may charge royalty/fees through contracts carefully drafted to ensure that they are not in violation of the act.
