CCI imposes Rs 200 crore penalty on Maruti for restricting discounts by dealers
Aug 23, 2021
New Delhi [India], August 24 : The Competition Commission of India (CCI) has passed a final order against Maruti Suzuki India Limited (MSIL) for indulging "in anti-competitive conduct" of Resale Price Maintenance (RPM) in the passenger vehicle segment by way of implementing Discount Control Policy vis-a-vis dealers.
It has imposed a penalty of Rs 200 crore besides passing a cease-and-desist order.
A Ministry of Corporate Affairs release said CCI found that MSIL had an agreement with its dealers and they were restrained from offering discounts to the customers beyond those prescribed by MSIL.
"MSIL had a 'Discount Control Policy' in place for its dealers whereby the dealers were discouraged from giving extra discounts, freebies, etc. to the consumers beyond what were permitted by MSIL. If a dealer wanted to offer additional discounts, prior approval of MSIL was mandatory. Any dealer found violating such Discount Control Policy was threatened with the imposition of penalty, not only upon the dealership but also upon its individual persons including direct sales executive, regional manager, showroom manager and team leader," the release said.
To enforce the Discount Control Policy, MSIL appointed Mystery Shopping Agencies (MSAs) who used to pose as customers to MSIL dealerships to find out if any additional discounts were being offered to customers.
If such discounts were offered, the MSA would report to MSIL management with proof (audio/ video recording) who, in turn, would send an e-mail to the errant dealership with a 'Mystery Shopping Audit Report', confronting them about the additional discount offered and seeking clarification.
"If clarification was not offered by the dealership to the satisfaction of MSIL, a penalty would be imposed on the dealership and its employees, accompanied in some cases by the threat of stopping supplies," the release said.
MSIL would even dictate to the dealership where the penalty had to be deposited and utilisation of the "penalty amount was also done as per the diktats of MSIL".
"CCI found that MSIL not only imposed the Discount Control Policy on its dealers but also monitored and enforced the same by monitoring dealers through MSAs, imposing penalties on them and threatening strict action like stoppage of supply, collecting and recovering penalty. Hence, such conduct of MSIL which resulted in an appreciable adverse effect on competition within India, was found by CCI to be in contravention of the provisions of Section 3(4)(e) read with Section 3(1) of the Competition Act, 2002," the release said.
