Compat finds Ford, Nissan, Toyota in violation of antitrust law

New Delhi: The Competition Appellate Tribunal (Compat) on Friday found car manufacturers Ford India Pvt. Ltd, Nissan Motor India Pvt. Ltd and Toyota Kirloskar Motor Pvt. Ltd guilty of anti-competitive conduct in the spare parts market, ruling that there could not be any restrictions on the supply of spare parts.

Compat, in the process, upheld a 2014 order of the Competition Commission of India (CCI) pertaining to 14 car makers, including the three companies cited above. It imposed a 2% penalty on the companies’ annual average turnover from spare parts for the three years preceding the year of inquiry into the issue of their anti-competitive activity. The inquiry was initiated in 2011.

The penalty imposed by Compat differs from that levied by CCI. The latter had imposed a penalty that amounted to 2% of the companies’ average annual turnover for the three years, amounting to Rs93.38 crore in the case of Toyota, Rs1.63 crore in the case of Nissan and Rs39.78 crore in the case of Ford.

Vaibhav Gaggar, counsel appearing on behalf of CCI said, “The judgment could go a long way in bringing transparency, accessibility to consumers and fairness in the automobile and spare parts sector. It provides huge impetus to regulating the sector.”

In its order, the tribunal said that the three companies—Ford, Nissan and Toyota—denied independent workshops access to spare parts. The companies also entered into agreements which led to restrictions being placed on third-party workshops.

“Our lawyers are in the process of securing a complete copy of the order for a detailed study and understanding its impact. We would be in better position to comment about our next course of action... once we receive the order in hand and study the same,” Shekar Viswanathan, vice chairman and whole-time director at Toyota, said.

Ford and Nissan did not respond to Mint’s queries.

Lobby group Society of Indian Automobile Manufacturers declined to comment.

The three-member tribunal, headed by former Supreme Court judge G.S. Singhvi, directed the companies to remove all restrictions on original equipment suppliers selling spare parts in the aftermarket. The companies are also required to open additional distribution channels for spare parts. These changes have to be effected within a year.

It also directed the companies to make information available regarding spare parts manufactured, their maximum retail price, arrangements for their availability over the counter, and details of matching quality alternatives and maintenance costs to help consumers make an informed choice.

Ford, Nissan and Toyota approached Compat against a 25 August 2014 order of the CCI. Eleven others moved Delhi high court, challenging the constitutionality of certain sections of the Competition Act 2002 pertaining to CCI’s powers. The high court reserved its verdict in January.

The tribunal also asked the ministry of road transport and highways to develop voluntary standards to certify garages or independent workshops in a year’s time. The government is required to notify the minimum standards of information which is to be shared by manufacturers.

Compat, in its order, advised the car manufacturers against including blanket conditions negating warranties if consumers approach an independent workshop.

CCI will review the action taken by all the concerned parties, government agencies and report to Compat every three months.

Shamsher Kataria had filed a complaint with the CCI in 2011 alleging that genuine spare parts, diagnostic tools, software and technological information were not made available by three car manufacturers—Honda Cars India Ltd, Fiat India Automobiles Ltd and Volkswagen India Pvt. Ltd—to workshops other than company authorized ones.

Later, CCI expanded the investigation to include 11 other companies, including the three car makers affected by Friday’s order, taking the total number to 14.