The crackdown by the Competition Commission of India, has ruffled a lot feathers. Some of the car manufacturers in receipt of the penalty are in no mood to go down without a fight and Maruti Suzuki is one of them. The company has decided to challenge the CCI penalty.
Early last year, Maruti Suzuki had been called out by the competition watchdog for finding its deals with its component suppliers anti-competitive, and concluded that it had abused its position by restricting the supply of spares and charging a steep mark-up. The latest complaint is no less different. CCI has ordered that the penalty, which adds upto two per cent of its annual turnover must be paid to the government within two months. CCI found that some 14 auto firms violated competition norms with respect to its agreements with local Original Equipment Suppliers as well as with authorised dealers.
In restricting the component manufacturers from selling those parts directly in the open market, Maruti is able to control the prices of these components. The company’s service tools and other spare parts can only be accessed at authorised Maruti Suzuki service centres, denying customers the advantage or the choice to get work done from workshops of their choice.
MSI had previously said that in the absence of a larger regulatory framework in the industry, if the spare parts are available through other channels, it will be tough to check the spread of spurious parts.
This time the company has retorted saying that the CCI ‘lacks understanding’. Maruti Suzuki India (MSI), Chairman RC Bhargava,has been quoted saying, "I believe what CCI has done (is) that they have not understood the entire issue of spare parts of cars. What they are saying may apply to other industries (but not in auto)...There is a lack of understanding of the difference. (The auto) industry by its nature is totally different."
He also added that they will be challenging the order. CCI had slapped a total penalty of Rs 2,545 crore on 14 car makers, in India, on Monday. Out of the total, the fine imposed on MSI is Rs 471.14 crore.
Stating that the functioning of the automobile industry, especially with regards to the spares are different from other industrial sectors, Bhargava said CCI hasn't taken a holistic view.
"What the CCI has dealt with is that it will result in lowering the prices of the spare parts. They have totally forgotten that most parts of the car are critical for safety or for pollution or environment or for performance,” said Bhargava, defending his stand.
He further said: "Now cost does not cover the quality of the parts you put into the car, they have totally not dealt with the quality part of the car."
Maruti Suzuki now joins Tata Motors and Mahindra and Mahindra in challenging this penalty. This complaint against India’s largest car manufacturer and some other auto firms has been floating in the automobile industry for years now, but no concrete steps have been taken to stem this.