CCI imposes Rs420-cr penalty on Hyundai Motor India for distorting after-sales market

The Competition Commission of India (CCI) has imposed a penalty of Rs420 crore on Hyundai Motor India for violating the provisions of the Competition Act, 2002.

The fair trade watchdog also found two other companies, Mahindra Reva Electric Car Company and Premier, to be contravening the provisions of the Act.

The three have been found to be violating agreements with local original equipment suppliers (OESs) and authorised dealers whereby they imposed absolute restrictive covenants and completely foreclosed the aftermarket for supply of spare parts and other diagnostic tools.

The latest order, which is a continuation of the commission's main order in the same case dated 25 August 2014, when penalties were imposed on 14 car companies.

The car companies were found to be indulging in practices resulting in denial of market access to independent repairers as the latter were debilitated to provide services in the aftermarket for repair and maintenance of cars for want of genuine spare parts.

Further, these car companies were also found to be using their dominant position in the market for spare parts and diagnostic tools to protect their market for repair services, thereby distorting fair competition.

The commission has prescribed corrective measures to Hyundai, Reva and Premier as were prescribed in its earlier order (dated 25 August 2014) to 14 companies to infuse competition in the after-sales market in the automobile sector.

In its order, CCI has directed the car companies to cease and desist from indulging in conduct which has been found to be in contravention of the provisions of the Act.

The car companies were also directed to adopt appropriate policies, which would allow them to put in place an effective system to make the spare parts and diagnostic tools easily available in the open market to customers and independent repairers.

Further, the commission directed the car companies to not to put any restrictions or impediments on the operation of independent repairers / garages.

The commission imposed a penalty calculated at the rate of 2 per cent of the average turnover on Hyundai, amounting to Rs420.26 crore, which is to be deposited within 60 days of receipt of the order.

However, CCI said, considering the mitigating factors that worked in favour of Reva and Premier, the two car companies were absolved from paying monetary penalty.

The order has been passed after taking into account the findings of the director-general (D-G) investigations and the detailed submissions by these three car companies.