Maruti Suzuki errs in sale of spare parts, faces fine up to Rs. 3400 crore
The Competition Commission of India (CCI) has come to know that top passenger car manufacturer Maruti Suzuki India has been charging a heavy premium on sale of spare parts and also been creating an artificial scarcity of the same. If the commission upholds the findings of the Director General (investigations), who has accused the company to be guilty of violating Sections 3 (4) and 4 of the competition law, Maruti could be looking at paying a maximum amount of Rs. 3400 crore. While this steep fine could be a maximum of 10 per cent of Maruti's yearly turnover, the component industry would also have to change the procedure followed for selling spare parts.
The final hearing of this legal matter would take place on April 25, 2013. Maruti Suzuki India has been accused by the Competition Commission of abusing its dominance in the Indian passenger vehicle market. When asked to comment on the matter, a Maruti spokesperson declined to reveal any information. He said, “We would not comment as the matter is sub judice," Interestingly, the investigation of Maruti's activities is a part of industry wide probing of possible unscrupulous activities.
As per the report from the Director General (investigations), Maruti Suzuki's exclusive contracts with their original equipment suppliers prevents sale of spare parts to any other company or party and through its activities, Maruti Suzuki has clearly violated Section 3(4) of the Competition Act. This is what the Section says, "Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, including; tie-in arrangement, exclusive supply agreement, exclusive distribution agreement-...shall be an agreement in contravention of sub-section 1 if such agreement causes or is likely to cause an appreciable adverse effect on competition in India".
It is possible that Maruti may get away with a lesser fine compared to other manufacturers, since its dominance was abused to a lesser degree, but this is in the hands of CCI. The company had restricted installation of diagnostic tools in its cars that can check faults in the vehicles. These tools were supplied only to authorised service stations, which prevented customers from getting their Maruti vehicles repaired from other service stations. This was the violation of Section 4 of the Act, which talks about abuse of dominance.
The interpretation of Section 4 is similar to the 'Right to Repair' law passed by US state of Massachusetts. As per this law, companies need to make all diagnostic repair and information available to separate dealers and repair shops by the year 2015. Other US auto makers would be given time up to 2018 to implement the above mentioned regulation.
Car companies in India must try to prevent inconveniencing customers for spare parts. They would feel safer if organisations like the Competition Commission of India executed their investigations clearly and pointed out defaulting companies from time to time.
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