Relief for Hyundai: Supreme Court stays Rs 420-crore fine

The Supreme Court on Friday stayed the Competition Commission of India’s order that imposed over Rs 420-crore penalty on the country’s second-largest car maker Hyundai Motors India for anti-trade practices including lack of standardisation of spare parts and allowing original equipment suppliers (OESs) to sell spare parts in the open market without any restrictions.

A Bench led by Justice AM Khanwilkar stayed the CCI’s order after senior counsel P Chidambaram sought a stay on the grounds that the apex court had in other appeals also granted interim relief against the impugned directions.

The National Company Law Appellate Tribunal last month had rejected the company’s plea for complete stay of the CCI July 2015 order that imposed a penalty of Rs 420.26 crore on Hyundai for violating Sections 3(4) and 4 of the Competition Act, based on its total turnover and also issued several directions to be complied by the car manufacturer, including standardisation of spare parts and allowing original equipment suppliers (OESs) to sell spare parts in the open market without any restrictions, as per the regulator’s earlier directions.

The appellate tribunal has asked Hyundai to deposit 10% of the CCI penalty imposed on it based on its total turnover and also comply with the regulator’s directions.

According to the car maker, as a result of the NCLAT’s order, it is supposed to deposit 10% of the penalty based on its total turnover, which is 54.54 times the penalty had it been imposed on its relevant turnover.

It further said that the SC had in other appeals by three OEMs — Ford, Nissan and Toyota — stayed similar CCI’s directions. Even Delhi High Court had also given relief to other car makers, but the CCI directions remain applicable only with regard to Hyundai, the appeal stated.

Hyundai told the court that the CCI penalty on it was based on its total turnover as opposed to relevant turnover as held by the apex court earlier. Besides, the CCI had incorrectly considered completely different financial years (2009-12) for determining the penalty as compared to other 14 original equipment manufacturers (OEMs) and that too without providing any rationale for the same.

Stating that the CCI’s directions are extreme, vague, impractical and irreversible in nature, the company stated that these directions, which include putting into place a system to ensure that independent repairers have access to spare parts, technical manuals and diagnostic tools, training for independent repairers/dealers, and standardisation of spare parts, are also disproportionate to the alleged contravention.

Further, there is no guidance as to how these directions are to be complied with, it added.

“The CCI directions are to be complied without the assurance of any quality standards for the independent repairers; without any guarantee of maintaining integrity of its spare parts; and most importantly, without any legal framework to prevent sale of counterfeit spare parts.

The Indian aftermarket is inundated with counterfeit spare parts that amount to 30-40% of the aftermarket where thousands of deaths and injuries every year can be attributed to the use of such spurious parts.

Under such circumstances, compliance with the CCI Directions would only jeopardise consumer safety,” Hyundai stated.