Competition Commission slaps Rs 87 crore fine on Hyundai Motor for unfair business ways

Competition Commission today imposed a penalty of Rs 87 crore on Hyundai Motor India for unfair business practices with respect to providing discounts for passenger cars. Besides, the company has been directed to cease and desist from such anti-competitive practices. In a 44-page order, the regulator said the company’s anti-competitive conduct include putting in place arrangements that resulted in resale price maintenance by way of monitoring of maximum permissible discount level. This was done through discount control and penalty mechanisms for non-compliance of the discount scheme, it added.

“Such conduct pertains to and emanates out of sale of motor vehicles. Hence, for the purposes of determining the relevant turnover for this infringement, revenue from sale of motor vehicles alone has to be taken into account,” CCI noted. The company did not offer any immediate comments on the CCI order. It was alleged that the company has a discount control mechanism whereby dealers are permitted only to provide a maximum permissible discount and not beyond the recommended range.

The watchdog has slapped a fine of Rs 87 crore on the car maker. The penalty amount translates to 0.3 per cent of the company’s average relevant turnover in the last three financial years from 2013-14. Among others, CCI said the company contravened competition law through arrangements which resulted into resale price maintenance and by mandating its dealers to use “recommended lubricants/ oils and penalising them for use of non-recommended lubricants and oils”.

According to the watchdog, the arrangements perpetuated by the company caused hindrance in the distribution of goods and provision of services in relation to new cars. It also resulted in creation of “barriers” to the new entrants, the order said. “The level of discount was determined by the OP (Hyundai Motor India) for each model and variant of the passenger cars and the OP had also appointed a mystery shopping agency to collect data from dealers for such monitoring and reporting to the OP,” it added.

Further, the regulator noted the practice followed by the company to get the lubricants supplied by IOCL and Shell only and at pre-fixed price resulting in price discrimination is not accruing any benefit to the dealers as well as the consumers of the cars. “The practice and arrangements followed by the OP also result into creation of barriers to the new entrants in the market with regard to the supply and marketing of lubricants for use in the cars manufactured by the OP,” CCI said.

As per the regulator, that Hyundai Motor India mandates its dealers to use particular oil and lubricants and penalises its dealers where non-recommended oils are used, amounts to ‘tie-in arrangement’ in contravention of provisions of the Competition Act. Following two separate complaints, the regulator had ordered a detailed by its investigation arm DG (Director General) in 2014. The complaints were filed by Delhi-based Fx Enterprise Solutions India and Kerala-based St. Antony’s Cars.