Foreign auto players more likely to bear the brunt of CCI notice

Saturday 22 September 2012, 10:31 AM by

Competition Commission of India (CCI), the government body for enforcing The Competition Act 2002, has sent show cause notices to 17 leading automotive players operating in the country. The notices have been sent in accordance with the alleged anti-competitive exercise by car companies of making their spares accessible only through their own authorised vendors. The consumers are left with no alternatives but to purchase the spare parts from the authorised dealerships, who sell the spares at a higher price.

According to industry sources, the international auto players functioning in the Indian market are more liable to being held responsible for the accused charges than the domestic auto players.

An industry source involved with the development said, “Homegrown companies such as Maruti Suzuki, Tata Motors and Mahindra & Mahindra sell spares in open market except for a few models. Hyundai too has started making parts available in retail. It is mostly the foreign companies who have been insisting that their customers go to authorized dealers for repairs which lead to an increase in service and maintenance costs of vehicles.”

After attending a meeting comprising 200 industry officials, which was called by CCI for providing evidences, the source quoted, “Nearly 50% of car owners move away from authorized dealerships due to higher servicing costs. Servicing expenses are higher by around 30% at company-operated service outlets than in independent and un-organised workshops. As margins get squeezed due to discounts in sales of new vehicles, dealers resort to increasing servicing costs to make up.”

Reportedly, CCI has arranged hearings in October 2012 to give the automobile companies operating in the Indian market, a chance to present their case. Further it has come up that independent service operators account for just one per cent fraction of the Rs. 25,000 crore after sales services and spares domestic industry.

The Competition Commission of India holds the authority on the penultimate decision on the alleged anti-competitive malpractice after it examines the probe report made by its Director General and the arguments received from the auto firms towards justifying their actions. CCI regulates this kind of situation under Section 4 of the Competition Act that controls the misuse of authority by enterprises, which in this case corresponds to selling spares to consumers at greater than usual costs.

If CCI enforces a ruling against the auto players of the alleged anti-competitive practise, then they will be forced to make their spare parts available to local service centres along with their own authorised vendors. The move will benefit the average Indian vehicle owners as the spares will be available easily, thereby resulting a drop in their costs.

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