By TIOL News Service
NEW DELHI, AUG 30, 2014: THE Competition Commission of India has passed an order under Sec 27 of the Act, 2002 and this order is being dubbed as an eye opener in explaining many concepts.
As per the records, the information was filed by Shamsher Kataria, who highlighted the anti-competitive practices of the car makers in the country by restricting availability of genuine spare parts and technical know-how required to effectively repair, maintain or service the automobile manufactured by the OP's (Opposite parties).
The informant also highlighted that original equipment suppliers (OES's) and other suppliers were restrained by the OP's from selling the spare parts/components in the open market. U.S. example was cited, where several states had introduced the "Right to Repair Act" to curb restrictive practice by automobile industry.
Based on the information, the Commission formed an opinion that prima-facie case exists in the matter and accordingly, ordered it's Director General to conduct investigation into the matter and submit a report. The DG proposed that investigation may be allowed to examine the alleged anti-competitive trade practices of all car manufacturers in India and not just the named OP's. The same was allowed by the Commission, which highlights an important change in mind set, wherein the regulator took a proactive step of its own with the sole objective of promoting competition.
The Commission after carefully going through the DG's Report and the submissions of the OP's (car manufacturers) and other stakeholders, recorded it's conclusion.
Relevant Market
The commission concluded that the relevant market comprises of following markets, i.e 1) Primary Market consisting of manufacturing and the sale of passenger vehicles and 2) The secondary market or the aftermarket comprising of the two segments i.e a) Supply of spare parts and b) provisions of after sale services.
The commission discussed the concept of aftermarket and distinguished it with "systems market" and rejected the contention of OP's that there is no distinction between the primary and secondary market and that the consumers take into account the whole life cycle cost before making a choice.
Commission observed: " The whole life costing theory is not a feasible test for an average unsophisticated consumer in the Indian automobile market. Therefore the commission is not in agreement with the submission of OEMs that the average car owner undertakes a life cycle cost analysis before purchasing a car in the primary market.
Various facts and figures were discussed, showing how some manufacturers were even facing losses in the primary market (i.e sales of car) and making up for the same by selling spares. Also the mark up on spare parts ranged from 100% to even 5000%,
After detailed discussion, in which leading cases relevant on the issue were also cited, commission concluded that violation of various provisions of the act is established and hence ordered the following under Section 27 of the Act:-
1) Develop and operate systems for training of independent repair/garages, and also facilitate easy availability of diagnostic tools. Appropriate arrangement may also be considered for providing technical support and training certificates on payment basis.
2) Allow OES to sell spare parts in open market without restriction, including on prices.
3) No restriction on operation of independent repairers/garages
4) Work for standardisation of spare parts of an increasing number of parts in such manner as they can be used across different brands, like tyres, batteries etc.
5) Not to impose blanket condition that warranties would be cancelled if the consumer avails of services of any independent repairer.
6) make available in public domain, information regarding spares etc.
It has to be seen whether the Commissions order is actually followed in letter and spirit. It would be really interesting to see, as to how does the Commission monitor the implementation of its orders which seems to be more of sermons.
Apart from above, a hefty penalty totaling to around Rs 2500 crore has also been ordered. The journey has just begun, lets see what is the next stop.
