Order Date: 25/08/2014
In re:
Shri Shamsher Kataria Informant
And
1.
Honda Siel Cars India Ltd. Opposite Party No.1
2.
Volkswagen India Pvt Ltd. Opposite Party No.2
3.
Fiat India Automobiles Ltd. Opposite Party No.3
4.
BMW India Pvt. Ltd. Opposite Party No.4
5.
Ford India Pvt. Ltd. Opposite Party No.5
6.
General Motors India Pvt. Ltd. Opposite Party No.6
7.
Hindustan Motors Ltd. Opposite Party No.7
8.
Mahindra & Mahindra Ltd. Opposite Party No.8
9.
Maruti Suzuki India Ltd. Opposite Party No.9
10.
Mercedes-Benz India Pvt. Ltd. Opposite Party No.10
11.
Nissan Motor India Pvt Ltd. Opposite Party No.11
12.
Skoda Auto India Pvt. Ltd. Opposite Party No.12
13.
Tata Motors Ltd. Opposite Party No.13
14. Toyota Kirloskar Motor Pvt.
Ltd. Opposite Party No.14
CORAM:
Mr. Ashok Chawla
Chairman
Mr. Anurag Goel
Member
Mr. M. L. Tayal
Member C. No. 03 of 2011 Page 2
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Present:
Sh. Sameer Oberoi, Sh. Aditya Patni, Advocates for Informants
Sh. S. Seetharaman, Sh. S.
Ramanathan, Advocates for Opposite Party 1
Sh. A.N. Haksar, Sr. Advocate,
Sh. R. Sudhindar, Advocate for Opposite Party 2
Sh. R. Narain, Ms. Kanika
Gomber, Advocates for Opposite Party 3
Sh. Ramji Srinivasan, Sr.
Advocate, Sh. Ravi Nath, Advocate for Opposite Party 4
Sh. Ravinder Sethi, Sr.
Advocate, Sh. Ajay Monga, Advocate for Opposite Party 5
Sh. Jaideep Gupta, Sr.
Advocate, Sh. Anand S. Pathak, Advocate for Opposite Party 6
Sh. Abhishek Malhotra, Ms.
Unnati Agarwal, Advocates for Opposite Party 7
Sh. Ramji Srinivasan, Sr
Advocate, Ms. Avantika Kakkar, Advocate for Opposite Party 8
Ms. Pallavi Shroff, Ms. Dinoo
Muthapa, Advocates for Opposite Party 9
Sh. Ashwini Mata, Sr. Advocate,
Sh. R.B. Pendse, Advocates for Opposite Party 10
Sh. Ramji Srinivasan, Sr.
Advocate, Sh. Atul Dua, Advocate for Opposite Party 11
Sh. A.N. Haksar, Sr. Advocate,
Sh. R. Sudhindar, Advocate for Opposite Party 12
Sh. R. Narain, Ms. Kanika
Gomber, Advocates for Opposite Party 13
Sh. Samir Gandhi, Sh. Vipin
Singhania, Advocates for Opposite Party 14
ORDER UNDER SECTION 27 OF
THE ACT
1. Factual Background
The present information has
been filed by Shri Shamsher Kataria (hereinafter, referred to as the “Informant”)
under Section 19 (1)(a) of the Competition Act, 2002 (hereinafter, referred to
as the “Act”) against Honda Siel Cars India Ltd (hereinafter, referred to as
“Honda” or OP-1), the Volkswagen India Pvt Ltd (hereinafter, referred to as
“Volkswagen” or OP-2) and Fiat India Auomobiles Ltd (hereinafter, referred to
as “Fiat” or OP-3), alleging anti-competitive practices on part of the OPs
whereby the genuine spare parts of automobiles manufactured by OP-1, OP-2 and
OP-3, respectively, are not made freely available in the open market. OP-1 to
OP-3 are involved in the business, inter alia, of manufacture, sale,
distribution and servicing of passenger motor vehicles in India. It has been
averred that the Opposite Parties also operate/authorize/regulate or C. No. 03
of 2011 Page 3 of 215
otherwise
control the operations of various authorized workshops and service stations
which are in the business of selling automobile spare parts, besides, rendering
aftersale automobile maintenance services.
1.1 The Informant has also
alleged, that even the technological information, diagnostic tools and software
programs required to maintain, service and repair the technologically advanced
automobiles manufactured by each of the aforesaid OPs were not freely available
to the independent repair workshops. The repair, maintenance and servicing of
such automobiles could only be carried out at the workshops or service stations
of the authorized dealers of OP.
1.2 The Informant has further
alleged that the restriction on the availability of genuine spare parts and the
technical information/know–how required to effectively repair, maintain or
service the automobiles manufactured by the respective OPs is not a localized
phenomenon. The OPs and their respective dealers, as a matter of policy, refuse
to supply genuine spare parts and technological equipment for providing
maintenance and repair services in the open market and in the hands of the
independent repairers. In support of his allegations, the Informant has
submitted letters from some independent service stations, where they have
expressed their inability to service the Informant’s vehicle due to the lack of
access of such independent repairers to genuine spare parts and other
technological information required to service /maintain the automobiles
manufactured by the respective OPs. It has been stated by the Informant that he
earlier owned a Maruti Suzuki vehicle and could easily get it repaired at
independent workshops because the spare parts and the technological tools required
to repair and maintain a Maruti Suzuki vehicle were freely made available by
the company in the open market.
1.3 It has been further alleged
that the OPs 1-3, by restricting the sale and supply of the genuine spare
parts, diagnostic tools/equipment, technical information required to maintain,
service and repair the automobiles manufactured by the respective OPs, have
effectively created a monopoly over the supply of such genuine spare parts and
C. No. 03 of 2011 Page 4 of
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repair/maintenance services
and, consequently, have indirectly determined the prices of the spare parts and
the repair and maintenance services. Additionally, the Informant has alleged,
that such restrictive practice carried out by the OPs in conjunction with their
respective authorized dealers, amounts to denial of market access to
independent repair workshops.
1.4 The Informant has stated
that the cost of getting a car repaired in an independent workshop is cheaper
by 35-50% as compared to the authorized service centers of the OPs. The
Informant has alleged that the OPs charge arbitrary and high prices to the
consumers who are forced to avail the services of the authorized dealers of the
OPs for repairing and maintaining their automobiles since the genuine spare
parts, diagnostic tools and the technological information required to service
their cars are not made available by the OPs to independent repair workshops.
It has been also stated that the prices charged for the genuine spare parts and
for repair and maintenance services by the authorized dealers of the OPs are
even higher than what they charge in other markets in Europe. The Informant has
alleged that such practices which allow the OPs to charge arbitrary and high
prices result in significant increase in the maintenance cost to car owners.
1.5 It has been stated in the
information that the components and parts used in the manufacture of their
respective brand of automobiles are often sourced from independent original
equipment suppliers (hereinafter, referred to as “OESs”) and other suppliers
who are restrained by the OPs from selling the parts/components in the open
market. Such restriction on the ability of the OESs to sell the spare
parts/components further limits the access of such spare parts/components in
the open market, thereby, allowing the OPs to create a monopoly-like situation
wherein they become the sole supplier of the spare parts/components of their
respective brand of automobiles. Such restrictions allow the OPs to influence
and determine the price of the spare parts/components used to repair and
maintain the respective brands of automobiles.
C. No. 03 of 2011 Page 5 of
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1.6 The Informant has alleged
that the restrictive and monopolistic trade practices, as detailed above, of
the OPs and their authorized dealers have a negative effect not only on the
consumer but also on the whole Indian economy since such practices increase the
cost of the consumer to maintain an automobile. The Informant has stated that
in a country like India where road transport is essential for the mobility of
people and goods, the increased cost of vehicle maintenance may hamper the
overall economic growth of the country. The Informant has stated that as per a
CII report, the size of the Indian automotive industry is estimated to be US$
122-159 billion by the year 2016, which will be larger than the U.S. automotive
market. It has been stated that growth in the market for genuine spare parts
and repair and maintenance services is expected to be proportionate to the
growth in the vehicle sales, as enumerated above.
1.7 The Informant has stated
that effective competition at each level of automotive aftermarket is essential
for fostering innovation and keeping mobility affordable. It has been contended
that if a consumer is given a choice of getting his vehicle serviced/repaired
at a workshop of his choice, it will foster competition among service providers
which will in turn will not only lead to improvement in quality of service and
a competitive pricing policy by the OPs, but also encourage innovation in the
market. The Informant has alleged that due to the restrictive trade practices
of the OPs, effective competition at each level of the Indian automotive
industry is getting adversely affected.
1.8 The Informant has also
alleged that the anti-competitive practices by the OPs have resulted in denial
of market access to independent workshops which are usually micro, small and
medium enterprises (MSMEs). The Informant has stated that MSMEs give employment
to 45% of industrial workers. Furthermore, on the one hand the Government has
introduced several policies and initiatives to encourage and support the MSMEs
and on the other hand the current practices of the OPs are adversely affecting
the sector.
1.9 The informant has stated
that the European Commission has the so called ‘Block Exemption Regulation’ in
place since the year 2002 to compel auto manufacturers to
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215
provide spares and tools etc.,
to independent operators. These regulations prohibit discrimination between
authorized service dealers and independent operators. The European Commission
had also taken commitments from auto majors to ensure supply of spares and
technological knowhow to independent operators. To ensure effective competition
in the auto repair and maintenance market, the European Commission issued the
new regulation no. 461/2010 in the year 2010, which included specific
guidelines apart from the earlier block exemption rules.
1.10 The Informant has stated
that there are regulations in place in United States to ensure that emissions
related diagnostic tools and information is available to independent vehicle
repair shops. Several states of the U.S. have introduced the ‘Right to Repair
Act’ to curb restrictive practices by automobile manufacturers. The Informant
has further stated that all over the world consumers and governments are
seeking to implement a free and fair competition regime in the automotive
sector, with varying degree of success.
1.11 The Informant has alleged
that the acts of the OPs in restricting the sale and supply of spare parts and
technical information, diagnostic equipments and tools to independent
automobile service providers indirectly determine the purchase or sale prices
of both the price of automobile spare parts as well as the price of repair and
maintenance services. The Informant has alleged that the anti-competitive acts
of the OPs are arbitrary, illegal and devastating to free and fair competition.
The Informant has alleged that such practices are in direct contravention of
sections 3(3)(a) and 3(3)(b) of the Act. By refusing to sell the spare parts to
independent operators the OPs are in violation of section 3(4)(d) of the Act.
Further, the denial of access to the repair and maintenance market to the
independent service workshops are in violation of section 4(2)(a), 4(2)(b) and
4(2)(c) of the Act.
1.12 The Informant has also
filed additional information wherein it has been alleged that that the OPs and
other vehicle manufacturers impose restrictions on their OESs from supplying
automobile parts into the open market. It has been alleged that such practices
C. No. 03 of 2011 Page 7 of
215
amount to limiting and
controlling production and supply of components/spares in the Indian automobile
aftermarket and are in violation of section 4(2)(d) of the Act. As per the
Informant the European Commission has effectively tackled the abovementioned
restrictive practice aspect under their block exemption regulations by
affording a statutory right to OESs to sell vehicle parts in the open market.
1.13 The Informant has also
alleged in the supplementary information that the restriction by the OPs on
their authorized dealers from taking up dealerships of other competing vehicle
manufacturers is in contravention to the provisions of section 4(2)(a), 4(2)(b)
and 4(2)(c) of the Act.
1.14 The Informant has sought
the following reliefs:
“(a) hold an enquiry into
the trade practices of the Respondents and/ or any other vehicle manufacturer and their authorized
dealers/ service centers indulging in similar activities as detailed herein
and give a finding that such parties have committed restrictive and/ or unfair
trade practices in contravention of the Act;
(b) order the Respondents to
cease and desist from such restrictive, unfair, monopolistic trade practices
and misusing its dominant position;
(c) pass appropriate orders
directing the Respondents No.1-3 and other contravening vehicle
manufacturers and their authorized dealers/ services centers to provide
spare parts, technical information, diagnostic tools, software and any other
information and goods required for the repair, maintenance and servicing of the
vehicles to independent repair workshops and also make the same freely
available in the open Indian automotive aftermarket; C. No. 03 of 2011 Page 8 of 215
(d) pass appropriate orders directing the Respondents and other
contravening vehicle manufacturer indulging in similar activities as detailed
herein to allow authorized dealers the right to undertake
franchises/dealerships from different vehicle manufacturers without fear of
malevolent action from the respondents or other defaulting vehicle
manufacturers;
(e) pass appropriate orders
ensuring that access tro the spare parts, tools, technical information,
technical training and equipment for repair, maintenance and service of the
vehicles and manufacturers by OESs is provided to the independent service
providers, consumers and in the open market upon request and without undue
delay and the price charged from such parts, tools, equipment should not be
fixed by the vehicle manufacturers but be determined by independent market
forces and free and fair competition;
(e) award reasonable amount
for costs incurred towards legal fees;
(g) pass such further order
as this Hon’ble Commission may deem fit and proper in the facts and
circumstances of the case.
2. Prima Facie Opinion
The Commission after forming an
opinion that a prima facie case exits in the matter, vide an order dated
February 24, 2011, passed under section 26(1) of the Act directed the Director
General (hereinafter, referred to as the “DG”) to conduct an investigation into
the matter and submit a report.
3. Investigation and
Findings of the DG
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3.1 In pursuance of the
direction of the Commission the DG conducted investigation into the matter and
submitted his investigation report (hereinafter, referred to as, the “DG
Report”) to the Commission.
3.2 From the submissions of the
Informant, initial discussions held and the preliminary enquiries made during
the investigation, the DG gathered that other automobile manufactures (other
than the OPs (1-3)) may also be indulging in similar restrictive trade
practices in the areas of after sales service, procurement and sale of spare
parts from the OESs, setting up of dealership etc. In view of the fact that
these practices may not be confined to the OPs (1-3) and considering that the
case involved the larger issue related to prevalent anti-competitive conduct of
the players in the Indian automobile sector and its implications on the
consumers at large, the DG realized that the investigation should not be
restricted to the OPs (1-3) mentioned above. Accordingly it was proposed by the
DG that the investigation may be allowed to examine the alleged
anti-competitive trade practices of all car manufacturers in India, as per the
list maintained by the Society of Indian Automobile Manufacturers (“SIAM”). The
DG, therefore, requested the Commission for direction to initiate
investigations against all car manufacturers in India.
3.3 The Commission considered
the abovementioned request of the DG to include within the scope of its
investigations all automobile manufacturers in India as per the list maintained
by SIAM and, vide order dated 26.04.2011, allowed the request to initiate
investigation against other automobile manufactures of India (in addition to
the OPs(1-3)). Such car manufactures were:
1)
BMW India Pvt. Ltd. (hereinafter, referred to as “BMW”)
2)
Ford India Pvt. Ltd. (hereinafter, referred to as “Ford”)
3)
General Motors India Pvt. Ltd. (hereinafter, referred to as “GM”)
4)
Hindustan Motors Ltd. (hereinafter, referred to as “Hindustan Motors”)
5)
Hyundai Motor India Ltd. (hereinafter, referred to as “Hyundai”, “HMIL”)
6) Mahindra & Mahindra Ltd.
(hereinafter, referred to as “M&M”)
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7)
Mahindra Reva Electric Car Company (P) Ltd. (hereinafter, referred to as
“Reva”)
8)
Maruti Suzuki India Ltd, (hereinafter, referred to as “MSIL”)
9)
Mercedes-Benz India Pvt. Ltd. (hereinafter, referred to as “Mercedes”)
10)Nissan
Motor India Pvt Ltd. (hereinafter, referred to as “Nissan”)
11)
Premier Ltd. (hereinafter, referred to as “Premier”)
12)
Skoda Auto India Pvt. Ltd., (hereinafter, referred to as “Skoda”)
13)
Tata Motors Ltd., (hereinafter, referred to as “Tata”)
14) Toyota Kirloskar Motor Pvt.
Ltd. (hereinafter, referred to as “Toyota”)
3.4 During the course of the
investigation, the DG issued detailed questionnaires to seek information from
each of the OEMs listed above, including their group companies, engaged in the
automobile aftermarket in India. The DG also recorded statements on oath of
representatives of the OEMS, the OESs and other multi-brand retailers. Besides,
information was also collected from various third party stakeholders, such as:
(a)
OES (original equipment suppliers)
(b)
Authorized dealers appointed by each of the OEMs
(c)
Multi brand service providers
(d)
Independent repairers
(e) Discontinued dealers of the
OEMs
3.5 Additionally, the DG
obtained information from the following entities, namely:
(a)
trade associations related to the Indian automotive industry, including SIAM,
Automotive Component Manufacturer Association (“ACMA”) and Federation of
Automobile Dealers Association (“FADA”); and
(b) SPX India Limited (“SPX”),
which supplies the specialized diagnostic tools for aftermarket servicing and
repairing requirements to a large number of the OEMs.
3.6 The DG conducted its
investigation of the market practices of all the automobile manufacturers or
original equipment manufacturers (“OEMs”) listed above and have submitted his
findings to the Commission.
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3.7 The DG has filed a main
report (containing the DG’s overall findings) and seventeen (17) sub-reports
(each sub-report contains the findings of the DG’s investigation with respect
to the alleged anti-competitive trade practices of each of the 17 OEMs mentioned
above).
3.8 The Commission makes it
clear at this stage that the present order governs the alleged anti-competitive
practices and conduct of OPs (1-14) only. The Commission shall pass separate
order in respect of three car manufacturers, viz., Hyundai, Reva and Premier
after affording them reasonable opportunity to make their submissions in
respect of the findings of the DG report and queries raised by the Commission.
Keeping this in mind, the findings of the DG report and contentions raised, if
any, in respect of these three OPs have not been dealt with in this order.
3.9 After investigation the DG
has found that the conduct and practices of the OPs are in violation of the
provisions of section 3 and section 4 of the Act. The findings of the DG report,
in brief, are discussed as under:
Relevant Product Market
3.9.1 The DG Report has
identified following two separate product markets for the passenger vehicle
sector in India:
1)
The Primary Market: consisting of the manufacturing and the sale of the
passenger vehicles.
2) The Secondary Market which
is essentially the “Aftermarket”. “Aftermarket” is the expression used to
describe a market comprising complementary or secondary products and services
which are purchased after another product i.e. the primary product which they
relate to. According to the DG report the aftermarket in the present case
comprises of spare parts, diagnostic tools, technical manuals and after sales
repair
C. No. 03 of 2011 Page 12 of
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and maintenance services that
are required to be purchased after the purchase of primary product.
3.9.2 The DG further identified
the two segments of the aftermarket for passenger vehicle sector in India. They
are:
a)
Supply of spare parts, including the diagnostic tools, technical manuals,
catalogues etc. for the aftermarket usage; and
b) Provision of after sale
services, including servicing of vehicles, maintenance and repair services.
3.9.3 The DG further analysed
whether the aftermarket segments described above constitute distinct relevant
product markets or the products in the primary market (i.e. the cars) and the
products in the aftermarket (i.e., repair services and spare parts) were part
of one indivisible ‘system’ of products consisting of a durable primary product
and a complimentary secondary product.
3.9.4 While determining the
relevant product markets, the DG took into account the technical difference
between the various primary market products which leaves the customers with
limited choice in complimentary products or services compatible with the
primary product. This in the opinion of the DG implies that once the primary
product has been purchased, consumer choice is confined to those aftermarket products
or services compatible with that primary product. Hence, consumers are to a
greater or lesser extent ‘locked’ into certain aftermarket suppliers.
Secondary Market for Spare
PartsC. No. 03 of 2011 Page 13 of
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3.9.5 To assess whether the
spare parts market for each brand of car is a separate relevant market distinct
from the respective primary market i.e., of that particular brand of car, the
DG following international precedents identified two grounds where the two
markets may not be separate relevant markets. Those grounds are as under :
a)
If it was possible for a consumer to switch to spare parts manufactured by
another producer (OEM); and
b) If it was possible for the
consumer to switch to another primary product to avoid a price increase on the
market for spare parts.
3.9.6 Regarding the first
question, whether a consumer could switch to the spare parts produced by
another OEM, the DG concluded that, based upon the submissions of the OEMs,
most of the spare parts other than a few generic spare parts like tyres,
batteries were manufactured specifically for the respective models of the cars.
Moreover, even within the models of the same OEMs interchangeability of spare
parts was limited. Hence substitutability of spare parts across OEMs is drastically
diminished. The DG further found that for spare parts that are manufactured
in-house by the OEMs there is almost nil interchangeability and for those body
parts that are procured from local OESs and other overseas suppliers there is
limited substitutability. In this context the DG noted that the practice of the
OEMs to consider only those spare parts as genuine which are purchased from the
OEMs or the OESs specified by them and which bear the OEMs logo or trademark
which further diminishes the possibility of a consumer, including the
authorized dealer, purchasing spares from sources other than the OEMs or their
specified vendors. It was also observed that, the OEMs also impose adverse
implications on validity of warranties in using parts sourced from other
channels. Based upon the above facts, the DG concluded that it is impossible
for a consumer to switch to spare parts manufactured by
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another producer (OEM) as
interchangeability between the spare parts manufactured by different OEMs is
almost nil.
3.9.7 With respect to the
second question, as to the possibility of the consumers to switch to another
primary product (to avoid a price increase on the spare parts market), the DG
concluded that due to high switching costs and the fact that post registration
the residual value of a new car is lower than the price of a pre-registration
new car, the owner of a car may only shift to another product in the primary
market after incurring substantial financial loss. Thus, in the opinion of the
DG, a purchaser of a product in the primary market is to a great extent locked
in with the primary product and the feasibility of switching to another primary
product to avoid a price increase in the secondary market of spare parts or
repair services is limited.
3.9.8 Based on the above
mentioned analysis, the DG concluded that the spare parts market for each brand
of cars (each OEMs), comprising of vehicle body parts (manufactured by each
OEMs, spare parts sourced from the local OESs or overseas suppliers),
specialized tools, diagnostic tools, technical manuals for the aftermarket
service formed a distinct relevant product market as defined under section 2(t)
of the Act.
Secondary Market for Repair
and Maintenance Services
3.9.9 In order to determine
whether the maintenance and repair services of the products in the primary
market constitutes a separate relevant market, the DG analyzed following
factors:
a) The cost of after sale
services in relation to the initial cost of the product in the primary market:
The DG referred to data collected by ACMA which states that while the overall
size of the automotive aftermarket in India is
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approximately Rs.330 billion,
three fourths of this constitutes spare parts and one fourth consists of
maintenance and repair costs. The DG concluded after analyzing the aforesaid
data and other data from similar sources, that the cost of after sale services
over the lifetime of usage constitutes a significant amount. However, the DG
viewed that such costs in the secondary market could not be efficiently
compared with the costs of the products of the primary market as the choice of
the consumers to choose a particular product in the primary market was based
upon a variety of factors which differed amongst various users.
b) The DG then analyzed the
ability of the consumers to factor in the after sale service and maintenance
costs while purchasing the products of the primary market and whether such information
was ascertainable and made available by the OEMs to the consumers. The DG after
examining statements made by representatives of various OEMs, concluded that it
was not possible to estimate the cost of after sale service and maintenance
over the years during which a consumer intends to use a car and that such costs
varies depending upon the average run of the vehicle, the make and model, age
of the vehicle, road condition, driving habits, regularity of maintenance
services etc. Further, several OEMs claimed that such data were confidential in
nature thereby indicating that such data was not shared with consumers.
c) The DG found that the OEMs
provide after sale services through a network of authorized dealers who are
engaged by the OEMs to either sell their products in the primary market, sell
spare parts and/or provide maintenance and repair services in the secondary
market. The presence of such specialized entities was evidence in itself that
there was a separate product market for after sale maintenance and repair
services.
C. No. 03 of 2011 Page 16 of
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3.9.10 Based on the aforesaid
analysis the DG concluded that after sale repair and maintenance services
constitute a distinct relevant product market as defined under section 2(t) of
the Act.
Relevant Geographic
Market
3.9.11 Regarding the relevant
geographic market the DG has noted that the spare parts are available for a
particular brand of vehicle from the authorized dealers of the OEMs in any part
of India. Further, a perusal of the dealer agreements between the OEMs and the
authorized dealers suggest that such dealers are required to provide service
requirements to an OEM’s customer irrespective of the State in which the
vehicle is registered. Based on such findings, the DG has concluded that the
relevant geographical market would be India.
DG’s findings regarding
dominance of the OEMs in the market for the supply of spare parts
3.9.12 The DG during its
investigation carried out an assessment for each of the OEM in terms of the
factors contained in section 19(4) to determine whether such OEMs can be stated
to be dominant in the market for supply of spare parts for their brands of
cars. This analysis is available in the sub-reports prepared by the DG in
respect of each of the OEMs. The DG report, after analyzing the practices of
each OEM, based upon the factors stipulated in section 19(4) of the Act, have
concluded that, each OEM is a monopolistic enterprise/dominant player in the
relevant market of supply of spare parts (including those manufactured
in-house, sourced from overseas or obtained from local OESs), diagnostic tools,
technical manuals, software, etc required to repair and maintain their
respective brand of automobile. The main features of the DG’s analysis have
been summarized in the following paragraphs.
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3.9.13 During the course of the
investigation the DG identified that for the OEMs which manufacture all its
spare parts in-house, there are no alternate sources available. Each OEM is the
only source of such spare parts in the aftermarket. The DG also identified that
the OEMs which source their spare parts from OESs restrict the ability of the
OESs through restrictive agreements/contracts to sell spare parts in the open
market. The over-seas suppliers of spare parts also in-fact does not sell such
spare parts in the open market. Additionally, the dealers are required to
source the spare parts only from the OEMs or their authorized vendors. Further,
in India there is no concept of certification of matching quality and in the
absence of such mechanism of quality confirmation for spare parts manufactured
by alternate sources, the consumers have no means of ascertaining the
compatibility of spare parts sourced from other sources. The DG further noted
that due to the fact that the overseas suppliers are not selling the spare
parts to entities apart from the respective OEM, each OEM becomes the only
source of supply of these spare parts for aftermarket requirement and acquires
a position of dominance. The DG report elucidated in detail the restrictive
agreements/contracts between OEMs & OESs, OEMs & Overseas Suppliers and
OEMs and their authorized dealers while dealing with contravention under
section 3(4) of the Act.
3.9.14 The DG’s investigation
has revealed that most of the cars across brands require specialized diagnostic
tools, technical manual etc. for being serviced, repaired and maintained. The
OEMs either source such specialized technical equipment from their overseas
parent company or such tools are manufactured by SPX. The DG’s investigation
has shown that these diagnostic tools are not being sold directly into the
aftermarket by the manufacturer of these tools on account of restrictions in
agreement or arrangements between the OEMs and such equipment manufacturers.
The investigation has also revealed that although in limited number of cases
there may be alternate diagnostic tools available through other sources,
however, in the absence of the required software to
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detect the fault codes (which
are required by a repairer to effectively detect a particular fault in the
highly sophisticated automobiles manufactured by the OEMs), the utility of such
equipment would be limited. Therefore, given the circumstances, the DG finds
each OEM to be the only viable source of supply of these specialized tools,
technical manuals, fault codes, etc., for their particular brand of
automobiles.
3.9.15 Therefore, the DG has
concluded that each OEM is in a dominant position in the supply of its spare
parts for its own brand of cars.
DG’s findings regarding
Abuse of Dominance
3.9.16 The DG has analyzed the
practices and conduct of each OEM in terms of provisions of section 4 of the
Act. The DG notes that the dominance of the OEMs emerge to a large extent on
account of purported holding of relevant intellectual property rights over the
spare parts being manufactured by the OESs or the OEMs themselves. Moreover,
the DG after an exhaustive analysis of several international precedents have
concluded that though the mere possession of a protective right does not amount
to abuse of dominance by the holder of such protective rights, however, such
exclusive rights may be prohibited when they result in discriminatory condition
of sale, fixing of prices for spare parts at an unfair level or refusal to
continue to manufacture spare parts of a particular type of automobile which is
still in use.
3.9.17 The DG, during the
course of its investigation, found that due the restrictions placed by the OPs
on OESs and authorized dealers, spare parts, diagnostic tools etc. are not
available in the open market particularly to the independent repairers and in
the absence of availability of genuine spare parts, diagnostic tools, technical
manuals etc. in the open market the ability of the independent repairers to
undertake repairs and service of the vehicle of such brands of cars
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and effectively compete with
the authorized dealers of the OEMs is severely impeded. The DG concluded that
such conduct amounts to an imposition of unfair condition and denial of market
access to independent repairers in terms of section 4(2)(a)(i) and 4(2)(c) of
the Act, respectively. The DG further states that on account of the
restrictions, the users of the cars are not in a position to choose between the
independent repairers and the authorized dealers for their aftermarket
requirements which amounts to imposition of unfair condition in violation of
section 4(2)(a)(i) of the Act. Further, the DG also opined that OEMs use their
dominant position in market for the supply of its spare parts to protect their
position in the market for repair and maintenance services which amounts to
violation of section 4(2)(e) of the Act.
3.9.18 The DG states that in
case of some OEMs, although the limited range of spare parts are available to
the independent repairers as well as the owners of the cars in the open market,
the ability of the independent repairers to undertake such jobs has been
limited by not making available the appropriate diagnostic tools, technical
manuals, fault codes, software etc., required to service and repair the
respective brands of automobiles of the OEMs. This is particularly true with
respect to those models of cars of the OEMs which require special tools for
diagnosis and repairs. Further, for spare parts which are available in the open
market, there is usually non-parity of terms at which the spare parts are
available to the independent repairers vis-à-vis authorized dealers which
adversely affects the ability of the former to compete effectively Therefore,
the DG found that the conduct of such OEMs also results in denial of market
access to independent repairers in terms of section 4(2)(c) of the Act. As such
conduct also shuts out the choice of the car owners to choose their repair and
maintenance service providers, it amounts to imposition of unfair conditions on
the users of the automobiles in-terms of section 4(2)(a)(i) of the Act.
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3.9.19 Further, based upon its
investigation and analysis of international case-law and practices, the DG
concluded that spare parts, diagnostic tools, manuals etc. of each OEM would
constitute essential facilities for the independent repairers to be able to
provide consumers with effective after sale repair and maintenance work and for
such independent repairers to effectively compete with the authorized dealers
of the OEMs. The DG has pointed out that the essential factors to be taken into
account in determining whether spare parts, diagnostic tools, manuals etc. of
each OEM would constitute essential facilities for the independent repairers,
are: (a) control of the essential facility by the monopolist; (b) the inability
to duplicate the facility; (c) the denial of the use of the facility, and (d)
the feasibility of providing the facility.
3.9.20 The DG observed that due
to the usage of high technology most of the models of automobiles manufactured
by the OEMs require sophisticated diagnostic tools, technical manuals for
proper diagnosis, service and repair. Therefore access to such technology is
critical for any entity to undertake after sale service to compete effectively
with the authorized dealers of the OEMs. Additionally, as explained above, the
DG has found each OEM to be dominant with respect to its brand of automobiles
and the spare parts of each brand of automobile is unique and cannot be
replicated by the independent repairers from alternate sources. Therefore,
based upon such considerations, the DG has concluded that the essential
facilities doctrine is applicable to the restrictive practices of the OEMs,
since the DG’s investigation has revealed that by not making such material
available to the independent repairers, the OEMs have put such repairers at a
distinctly disadvantageous position and jeopardized their ability to undertake
repairs of the automobiles manufactured by the OEMs.
3.9.21 The DG’s investigation
also shows that each OEM has substantially escalated the price of spare parts,
for their respective brands of automobiles, from the price at which such spare
parts have been sourced to the price at which such
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spare parts are available to
the customers. There are also wide variations in the extent of escalation
across spare parts which are an indication of the extent of discretion
available with each OEM to price the spare parts. Consequently, the DG is of
the opinion that OEMs are imposing unfair prices in the sale of spare parts in
terms of section 4(2)(a)(ii) of the Act, which is substantiated by the
considerable mark up of the prices and the significant variation across the
escalated prices of the spare parts of various brands of automobiles.
DG’s findings regarding
contravention of section 3 of the Act
3.9.22 The DG has gathered that
the OESs are the suppliers of the auto components for the assembly line
purposes as well as for the aftermarket requirements of the OEMs. The DG after
conducting its investigation has broadly categorized OESs under the following
heads:
(a)
Where the design, drawing, technical specification, technology, know-how,
equipment, quality parameters etc. are provided to the OESs by OEMs, the OESs
are required to make the parts and supply according to these parameters.
(b)
Where the patents, know-how, technology belong to the OESs however, the parts
are manufactured based on the specification, drawings, designs supplied by the
OEMs. The tooling/tooling cost may also be borne by the OEMs in some of these
cases.
(c) Where the parts developed
and sold by the OESs are made to their own specifications or designs which are
commonly used in the automobile industry. Such parts are very few, for example,
batteries, tyres etc.
3.9.23 The DG has reported that
most of the OESs cannot supply spare parts which fall within category (a) and
(b) mentioned above without seeking prior consent of the OEMs.
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3.9.24 The DG after an
examination of the agreements/letters of intent entered into between the OEMs
and the OESs has found that most of such agreements/letters of intent have
clauses which restrict the ability of the OESs to supply spare parts directly
to third parties or in the aftermarket without the prior written consent of the
OEMs. The DG’s investigation has further revealed that such restrictive clauses
typically appear in such agreements/letters of intent, where the OESs are
manufacturing the spare parts using the proprietary drawings/designs and other
intellectual property rights of the OEMs.
3.9.25 As per the DG’s analysis
such agreements between the OEMs and the OESs are, therefore, having features
of exclusive distribution agreement and refusal to deal as per the provisions
of section 3(4)(c) & (d) of the Act, respectively. Further, the DG stated
that its investigation has not revealed a single instance where an OEM has
granted permission to the OESs to supply spare parts directly into the
aftermarket.
3.9.26 The DG has also observed
that a large number of OEMs particularly those having foreign affiliations are
sourcing large number of spare parts from overseas suppliers. The DG has
undertaken a review of the import agreements/purchase order/letters of intent
executed between the OEMs and the foreign suppliers of spare parts. The DG has
reported that although no clause exists in such agreements which specifically
restrict overseas suppliers from supplying such spare parts to independent
repairers in the after market of spare parts in India, the investigation
reveals that even such overseas suppliers are not supplying spare parts to any
entities apart from the OEMs. The DG has further found out that in most cases the
overseas suppliers are a group company or a parent company of the OEMs or has
some linkages with the OEMs which indicates the possibility of an unwritten
arrangement between the OEMs and the overseas suppliers for ensuring that such
entities only supply the spare parts to the OEMs or its authorized vendors in
contravention of section 3(4) of the Act.
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3.9.27 The DG report also dealt
with, in detail, the rationale of the restriction claimed by the OEMs for
restricting OESs from distributing the spare parts manufactured by them without
the consent of the OEMs in the open market. The OEMs have claimed the
exemptions under section 3(5)(i) of the Act stating that the restrictions
imposed upon the OESs are reasonable since considerable investments have been
made in research and development facilities for developing the products. The DG
noted that such an exemption is granted to certain categories of intellectual
property rights holders to protect their intellectual property by imposing
reasonable restrictions, as may be necessary to protect such intellectual
property rights.
3.9.28 The DG while reviewing
the documents evidencing the grant of the intellectual property right upon an
OEM found that there were several issues relating to the fact whether the OEMs
actually are in the possession of a particular intellectual property right. In
some of the instances the OEMs could not provide sufficient documentary
evidence linking the design of a particular spare part with the claimed intellectual
right protection over such design. Some of the intellectual property rights
claimed by the OEMs are actually held by their overseas parent corporation and
such proprietary technology has been transferred to the OEMs through technology
transfer agreements (“TTA”). However, such TTAs do not contain any specific
details of the intellectual property rights that are being transferred to the
OEMs. Thus, given the lack of adequate information, the DG could not verify the
claim of such OEMs that they were in possession of a legally valid intellectual
property right. The DG also noted that the intellectual property rights claimed
by the OEMs were territorial in nature and the particular right is vested upon
the holder of such intellectual property rights only in a given jurisdiction.
Thus even if the parent corporation of the OEMs held such rights in the
territories where such rights were originally granted, the same cannot be
granted upon the OEMs operating in India by entering into a TTA. Thus, the OEMs
pursuant to a TTA were holding a right to exploit a particular
C. No. 03 of 2011 Page 24 of
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intellectual property right
held by its parent corporation and not the intellectual property right itself.
Consequently, the DG concluded that such OEMs could not avail of the exemption
provided in section 3(5)(i) of the Act.
3.9.29 During investigation
before the DG, OEMs also claimed protection in the form of copyrights over the
drawings, designs, specifications etc. for every spare part manufactured on their
behalf by the respective OESs. The DG after a thorough study of several
judgments relating to the Indian copyright law has concluded that the copyright
protection claimed by several of the OEMs over the designs, drawings and
specifications of their respective spare parts are not available to the OEMs.
The DG has come to this conclusion based upon the fact that though there are no
requirements to register the copyright over a design of a spare part under the
[Indian] Copyright Act, 1957, the right has been limited by the Copyright Act,
which mandates that the copyright over the designs registered under the
[Indian] Design Act, 1911 or such designs which are capable of being registered
under the Designs Act, but not registered, shall cease to exists once the
concerned design has been applied more than 50 times by industrial process by
the owner of the copyright or his licensee. Given this background the DG has
concluded that copyright may not subsist in the designs and drawings of all the
spare parts, as claimed by the OEMs.
3.9.30 The OEMs have further
contended that the knowhow provided by the OEMs to the OESs to enable the OESs
to manufacture the spare parts for the OEMs is confidential in nature and is
protected as a trade secret. The DG has rightly pointed out that confidential
information must be in fact confidential and backed by an obligation/duty of
confidence owed between the parties sharing such information. The DG has
concluded that the OEMs need to satisfy that the information provided to the OESs
qualify to be protected as “trade secret”. Additionally, the DG has further
stated that trade secrets are not provided in section 3(5)(i) as one of the
various forms of intellectual property rights whose holder can avail of an
exemption from the provisions of section 3 of the Act.
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3.9.31 The DG observed that
even in cases which are covered in terms of section 3(5)(i) of the Act, only
reasonable conditions, as may be necessary for protecting of rights under
various legislations referred therein, can be imposed. Notwithstanding the fact
that OEMs have not established that they possess valid intellectual property
rights in India for being considered for the exemption under section 3(5)(i) of
the Act, during the course of investigation it was examined whether based on
available facts and circumstances, restrictions imposed by the OEMs could be
termed as “reasonable”. The DG after examining the agreements between the OEMs
and the OESs have found that in most instances the OESs are restricted from
selling spare parts to third parties without “prior consent”. The DG has also
revealed that not a single instance of such permission by any OEM has been
confirmed. The DG has further stated that the reason for the OESs not
approaching the OEMs could be either that OES do not expect to get the
permission or are apprehensive that any such request would be viewed adversely
by the OEMs. Hence, the DG is of the opinion that the requirement of “prior
consent” before OESs can sell spare parts to third parties acts as a major
deterrent and effectively amounts to prohibition on OESs from direct sales in
the aftermarket.
3.9.32 The OEMs and their
authorized dealers have entered into agreements/arrangements pursuant to which
the authorized dealers of the OEMs sell cars and provide after sale services to
the consumers of the OEMs. The DG reviewed such agreements and has made the
following observations.
a) In certain cases, the
agreements between the OEMs and their dealers specifically restricted the sale
of spare parts over the counter which were in the nature of exclusive
distribution agreements and such practices also amounted to refusal to deal
under the terms of section 3(4)(c) and 3(4)(d) of the Act.
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b) Certain agreements between
the OEMs and the authorized dealers did not contain specific terms restricting
the sale of spare parts in the open market, however, the DG gathered that there
existed some kind of unwritten understanding or arrangement between such
dealers and the respective OEMs pursuant to which the dealers in fact did not
sell spare parts in the open market to prevent consumers from shifting to the
independent repairers. Based on the factual situation, the DG has concluded
that such practices are also in contravention of section 3(4)(c) and 3(4)(d) of
the Act.
c) Most of the OEMs and the
authorized dealers have clauses in their agreements requiring the authorized
dealers to source spare parts only from the OEMs and their authorized vendors.
The DG has concluded that such agreements are in the nature of exclusive supply
agreements in terms of section 3(4)(b) of the Act.
d) The dealer agreements
between the OEMs and their authorized dealers contain restrictions on dealing
in competing brands of cars without seeking their consent in writing. Further,
the investigation of the DG revealed that most of the OEMs could not confirm a
single instance where such permission was granted to the authorized vendors.
Further, the DG also discovered that certain dealerships were cancelled on the
basis that such dealers were attempting or proposing to seek dealerships of
competing brands. The DG, therefore, found that the agreements entered by OEMs
with their dealers are in nature of exclusive distribution agreement in terms
of Section 3(4)(c)of the Act.
Assessment of AAEC
3.9.33 The DG has analyzed each
set of vertical agreement/arrangement that the OEMs have with: a) local OESs
who manufacture spare parts for the OEMs for their
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assembly lines or to be sold in
the aftermarket through authorized dealers, (b) over-seas dealers who supply
OEMs with spare parts and (c) dealers through whom the OEMs sell their cars and
spare parts and provide their consumers with after sales service with respect
to the factors listed under section 19(3) of the Act, which includes, inter
alia, creation of barriers to entry, driving existing competitors out of the
market, foreclosure of competition, accrual of benefit to consumers,
improvement in production or distribution of goods or provision of services,
promotion of technical, scientific and economic development.
3.9.34 The DG has analyzed the
appreciable adverse effect on competition (“AAEC”) on each of the secondary
markets of spare parts and repair and maintenance services. The analysis of the
DG with respect to the AAEC on each of the secondary markets (market for supply
of spare parts and market for service, repair and maintenance) are summarized
below.
a) AAEC in the secondary market
of supply for spare parts
The DG had found during the
course of its investigation that the OEMs are the only source of supply of
genuine spare parts in the Indian automobile aftermarkets. The requirement on
the authorized dealers to source spare parts only from the OEM or its
authorized suppliers restricts the ability of the OESs to sell directly in the
aftermarket. These restrictions therefore create entry barriers for the OES who
could produce matching quality spare parts, eliminates direct access by OES to
an OEM’s aftermarket and in the process foreclose competition in the supply of
genuine spare parts. Further the DG has also found out that there is a
substantial mark up in most of the top 50 spare parts of each of the OEM from
the price at which it has been sourced from the OESs and the price at which it
is made available to the consumers. The ability of the OEMs to price the spare
parts without being subject to any constraints does not safeguard the interests
of the automobile consumer in the Indian automobile aftermarket. C. No. 03 of
2011 Page 28 of 215
Based
upon the above facts and circumstances, the DG opined that the
agreements/arrangements of an OEM which have been analyzed foreclose
competition in the market for supply of spare parts of that OEM, create entry
barriers for OES to explore after market opportunities directly, driving
existing competitors out of the market and have other implications such as
ability of OEMs to price spare parts without being subject to competitive
forces. Thus there is an AAEC on competition in terms of section 19(3) of the
Act in market of spare parts of each OEM on account of the restrictions
pursuant to agreements which are in the nature of exclusive supply agreements,
refusal to deal and exclusive distribution agreements.
b) AAEC in the secondary market
of repair and maintenance services
The DG’s investigation revealed
that during the warranty period the consumers of all OEMs are required to get
their car repaired using the OEMs authorized dealer network failing which the
consumers lose their warranty over the car. Such restriction amounts to a
blanket exclusion of independent repairers and denial of options to the
consumers, especially for consumers who are not staying in cities where the
authorized dealers are typically located. In the post warranty period the independent
repairers continue to be foreclosed from the service and maintenance
aftermarket since the OEMs ensure that the genuine spare parts and other
diagnostic tools necessary for carrying out repair work are available only to
authorized dealers. Thus, even in the post warranty period consumer choice
remains limited and independent repairers remain excluded from the automobile
aftermarket.
There are some limited
exceptions where independent repairers can purchase spare parts from the
authorized dealers. However, even in such cases the independent repairers lack
the adequate training and do not have C. No. 03 of 2011 Page 29 of 215
access
to diagnostic tools, technical manuals and necessary software required to carry
out repair work on sophisticated automobiles.
c) AAEC of restrictions of
dealers in dealing in other brands of cars
The DG’s review of the
agreements/arrangements between the OEMs and their dealers revealed that the
requirement of seeking permission from the OEMs before a dealer can deal in the
cars of other OEMs create a major entry barrier for the dealers to enter into
business of other brands of cars. DG has also noted that there are other unfair
conditions in the dealership agreements and such restrictions/conditions
prevent the dealers from exploring other business opportunities that are not
detrimental to the business interests of the OEMs. During the course of the
investigation it has been revealed by FADA that there would be many dealers who
aspire to acquire additional dealerships of other brands for expansion of
business and to hedge risks of continuing with a single OEM but are unable to
pursue such opportunities because of the one sided nature of the relationship
between the OEM and the exclusive dealers. The dealers have contended that
there are huge sunk costs involved in exiting a dealership, e.g., the
dealers would be left with a huge inventory which is not bought back, have
guarantees deposited with the OEM which may not be refunded. Hence, the DG has
concluded that the vertical agreements entered into between the OEMs and their
authorized dealers cause AAEC based upon the conditions set forth in section
19(3) of the Act.
4. Findings of the DG with
respect to Honda
Honda Siel Cars India Ltd.
(“HSCIL”) is engaged in the manufacturing and marketing of Honda branded cars
in the territories of India, Sri Lanka, Bhutan, Nepal and Bangladesh and was
incorporated on 5th December 1995. HMC presently holds around 95% of the
C. No. 03 of 2011 Page 30 of 215
shareholding
of HSCIL. HSCIL is a joint venture between Honda Motors Co. Ltd (Japan) (“HMC”)
and Usha International and HSCIL has technical collaboration agreement with
HMC. HSCIL has a subsidiary in the name of Honda Motor India Ltd (“HMI”) which
takes cars of spare parts business pertaining to Honda branded cars which are
being sold in India. HSCIL has its manufacturing facilities at the Greater
Noida Industrial Development Area, Uttar Pradesh. HSCIL has 128 authorized
dealers and workshops across India.
4.1 The specific findings of
the DG against the alleged anti-competitive practices of Honda are summarized
below:
4.2 Honda has entered into a
memorandum of supply of parts with overseas suppliers. Although, the DG did not
discover the existence of any clause which restricts the ability of the
overseas supplier from selling directly into the aftermarket in India, the DG
has reported that considering the fact that the overseas suppliers are
associates of Honda and HMI and they supply spare parts only to Honda in India,
there may exist an arrangement between Honda and such overseas supplier for not
supplying spare parts directly into the Indian aftermarket. Further, local
OES’s are restricted from accessing the aftermarket in the name of protecting
the OEM’s IPRs.
4.3 Based upon the submissions
of multi-brand retailers and independent repairers, the DG has concluded that
although the agreement between Honda and its authorized dealers does not
contain any clause dealing with the right of the authorized dealers to sell
spare parts over the counter, but in practice such sales are not permitted.
Diagnostic tools are available only to authorized dealers of the OEM.
4.4 Warranty conditions are
invalidated if a Honda branded car is repaired by independent repairers.
C. No. 03 of 2011 Page 31 of
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4.5 Ability of dealers to deal
in competing brands is restricted. Honda’s dealers are not permitted to deal
with competing brands in any manner without seeking the prior permission of the
OEM.
4.6
Price mark up for top 50 spare parts in terms of revenue generated is: 12.10% -
984.73% and price mark-up of top 50 spare parts on the basis of consumption is:
77.20% - 939.13%.
4.7 OP has failed to establish
that Honda and HIL possess valid IPRs in India, with respect to all spare parts
for which restrictions are being imposed upon OESs.
4.8 As per DG, denial to access
diagnostic tools and spare parts amounts to denial of access to an “essential
facility.”
4.9 The DG has concluded that
since (a) Honda has a policy of allowing over the counter sale of spare parts
only to actual Honda customers and not to independent repairers; and (b) Honda
restricts the availability of diagnostic tools to its authorized dealers, Honda
imposes unfair terms and denies market access to the independent repairers as
per section 4(2)(a)(i) and 4(2)(c) of the Act, respectively. Further, Honda is
in violation of section 4(2)(a)(ii) for imposing unfair prices on the
consumers.
4.10 Honda uses its dominance
in one relevant market (i.e., supply of spare parts) to protect the other
relevant market (i.e. market for repair services) which is violative of section
4(2)(e) of the Act.
4.11 The DG has also found
Honda in violation of section 3(4)(c) and 3(4)(d) of the Act for not allowing
its authorized dealers to deal in competing brands of car and for not allowing
them to sell spare parts and diagnostic tools to the independent repairers.
C. No. 03 of 2011 Page 32 of
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4.12 Agreements with the
authorized dealers have restrictive clauses requiring dealers to source the
spare parts only from the Honda or its approved dealers. The DG has found these
agreements in the nature of exclusive supply agreements in violation of section
3(4)(b) of the Act.
5. Findings of the DG with
respect to Fiat
5.1 Fiat India Automobiles Ltd
(“Fiat India”) was incorporated on 4th February, 1997 and is a 50:50 joint venture between
Fiat Group Automobiles S.P.A. (Italy) (“FGA”) and Tata Motors Limited (“TML”).
Fiat is the licensed manufacturer of Fiat branded cars and engines in India.
Fiat India has entered into a joint venture with MSIL to supply one lakh
engines per annum. The company is authorized to manufacture motor cars,
internal combustion piston engines and other parts and accessories N.E.C. for
motor vehicles classified in this group and parts and accessories for transport
equipment NEC. The company’s manufacturing facilities is located within Ranjangaon
M.I.D.C., Maharashtra.
TML has entered into an
agreement with Fiat India for acting as the sole distributor of Fiat branded
cars and providing after sales service to the customers. Fiat India uses the
distribution network of TML’s approximately 171 dealerships and 198 authorized
service stations at 130 cities across India for the sale of Fiat branded cars
and providing after sale service. The DG has received information that the
arrangement between TML and Fiat India stands discontinued and Fiat India is in
the process of setting up its own distribution network.
5.2 The specific findings of
the DG against the alleged anti-competitive practices of Fiat are summarized
below:
C. No. 03 of 2011 Page 33 of
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5.2.1 Fiat imports spare parts
from FGA Spa (a group company). DG did not find any restrictive clauses in
Fiat’s overseas supplier agreements. DG concluded that on account of the link
between Fiat and SPAL there is a presumption of existence of an arrangement for
not selling spare parts directly in Indian aftermarket.
5.2.2 OES’s are restricted from
accessing the aftermarket for protecting the OEM’s IPRs.
5.2.3 The authorized dealer
agreement of Fiat expressly restricts over the counter sale of spare parts of
Fiat branded cars in the aftermarket.
5.2.4 Diagnostic tools are only
available to authorized dealers of the OEM.
5.2.5 Warranty conditions are
invalidated if a Fiat branded car is repaired by independent repairers.
5.2.6 Fiat does not have its
own dealership network.
5.2.7 Price mark up for top 50
spare parts by revenue generated is: 33.60% - 3020.29%. Price mark-up of top 50
spare parts on the basis of consumption is: 19.93% - 4817.17%.
5.2.8 It does not stand
established that Fiat possesses valid IPRs in India, with respect to all spare
parts for which restrictions are being imposed upon OESs.
5.2.9 As per DG, denial to
access diagnostic tools and spare parts amounts to denial of access to an
“essential facility” and amounts to abuse of dominant position of Fiat.
5.2.10 Since Fiat does not
allow over the counter sale of spare parts and since diagnostic tools are not
available to the independent repairers, Fiat imposes unfair terms and denies
market access to the independent repairers as per section 4(2)(a)(i) and 4(2)(c)
of the Act,
C. No. 03 of 2011 Page 34 of
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respectively. Further, Fiat is
in violation of section 4(2)(a)(ii) for imposing unfair prices on consumers.
5.2.11 Fiat uses its dominance
in one relevant market (i.e., supply of spare parts) to protect the other
relevant market (i.e. market for repair services) which is violative of section
4(2)(e) of the Act.
5.2.12 Fiat is in violation of
provisions of sections 3(4)(c) and 3(4)(d) of the Act because of imposition of
unreasonable restrictions with respect to its agreements with local OESs and
agreements with authorized dealers.
5.2.13 Agreements with the
authorized dealers have restrictive clauses requiring dealers to source the
spare parts only from Fiat or its approved dealers. The DG has found these
agreements in the nature of exclusive supply agreements in violation of section
3(4)(b) of the Act.
6. Findings of the DG with
respect to Ford
6.1 Ford India Pvt. Ltd.
(“FIPL”) was incorporated in 1995 and is a 100% subsidiary of Ford Motor Company,
U.S.A. FIPL is engaged in manufacturing of passenger cars and spare parts in
India. FIPL has its manufacturing plant at Maraimalai Nagar, Chennai. FIPL has
approximately 150 dealers through which it sells its cars. For after sale
services, there are approximately 170 authorized service centers in about 100
cities/towns.
6.2 The specific findings of
the DG against the alleged anti-competitive practices of Ford are summarized
below:
C. No. 03 of 2011 Page 35 of
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6.2.1 Ford does not have any
formal agreement with its overseas suppliers and imports spare parts from an
associate company. DG did not find any restrictive clauses in Ford overseas
supplier agreements. DG concluded that since the overseas supplier are
associates of Ford and in-fact only supplies spare parts to Ford in India,
there may exists an arrangement between Ford and such overseas supplier for not
supplying spare parts in Indian aftermarket.
6.2.2 OES’s are restricted from
accessing the aftermarket for protecting the OEM’s IPRs.
6.2.3 Based upon the
submissions of multi-brand retailers and independent repairers, the DG has
concluded that although the agreement between Ford and its authorized dealers
does not contain any clause dealing with the right of the authorized dealers to
sell spare parts over the counter, but in practice such sales are not
permitted.
6.2.4 Diagnostic tools are only
available to authorized dealers of the OEM.
6.2.5 Warranty conditions are
invalidated if a Ford branded car is repaired by independent repairers.
6.2.6 Ability of dealers to
deal in competing brands is restricted; however, Ford has submitted that 61
dealers have undertaken dealerships of competing brands.
6.2.7
Price mark up for top 50 spare parts by revenue generated is: 38.37% -1171.09%
(Q1, 2010-11); 35.62% - 1171.09% (Q2, 2010-11); 35.62% – 1171.09%(Q3, 2010-11);
Price mark-up of top 50 spare parts on the basis of consumption is: 64.1 –
1696.36 (Q1, 2010-11); 64.1 – 1696.36 (Q2, 2010-11); 58.68% - 1696.36% (Q3,
2010-11); 64.1% – 1696.36% (Q3, 2010-11).
6.2.8 Ford has submitted
details of patents over 11 body parts which have been granted in India and
applications for grant of patents over 30 body parts in India. However, Ford
does not
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have patent rights over all the
body parts over which restriction spare currently being imposed by Ford.
6.2.9 As per DG, denial to
access diagnostic tools and spare parts amounts to denial of access to an
“essential facility” and amounts to abuse of dominant position of Ford.
6.2.10 Since Ford does not
allow over the counter sale of spare parts and since diagnostic tools are not
available to the independent repairers, Ford imposes unfair terms and denies
market access to the independent repairers as per section 4(2)(a)(i) and
4(2)(c) of the Act, respectively. Further, Ford is in violation of section
4(2)(a)(ii) for imposing unfair prices.
6.2.11 Ford uses its dominance
in one relevant market (i.e., supply of spare parts) to protect the other
relevant market (i.e. market for repair services) which is violative of section
4(2)(e) of the Act.
6.2.12 Ford is in violation of
provisions of sections 3(4)(c) and 3(4)(d) of the Act with respect to its
agreements with local OESs and agreements with authorized dealers for imposing
absolute restrictive covenants and completely foreclosing the aftermarket for
supply of spare parts and other diagnostic tools.
6.2.13 Agreements with the
authorized dealers have restrictive clauses requiring dealers to source the
spare parts only from Ford or its approved dealers. The DG has found these
agreements in the nature of exclusive supply agreements in violation of section
3(4)(b) of the Act.
7. Findings of the DG with
respect to BMW
7.1 BMW India (P) Ltd (“BMW”)
was incorporated on August 26, 1997 and its manufacturing operations commenced
on March 2007. It is a 100% subsidiary of the
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BMW Holdings B.V. Netherlands
which in turn is held by BMW A.G., Germany. BMW is mainly concentrated in
assembling and distributing various models of BMW cars in India. It imports:
(a) constituent parts of BMW cars which it assembles at its plant in Chennai,
Tamil Nadu, (b) completely built cars and (c) spare parts. BMW has a dealer network
for it’s after sale operations in 22 cities in India. These 22 BMW accredited
service centers have been equipped and trained to handle the BMW products and
to service such products.
7.2 The specific findings of
the DG against the alleged anti-competitive practices of BMW are summarized
below:
7.2.1 BMW imports spare parts
from BMW AG which is its group company. The DG has not found any clause in such
importer agreements dealing with the right of BMW’s overseas suppliers, BMW AG,
to sell spare parts in the open market in India. In practice BMW AG does not
supply BMW spare parts in the Indian aftermarket. The DG contends that due to
link between BMW AG and BMW, presumption of a possible arrangement can be
drawn.
7.2.2 No clause in agreement
with respect to OES’s right to access the aftermarket.
7.2.3 Counter sale of spare
parts are not permitted.
7.2.4 Warranty conditions
honoured by BMW if defects do not arise directly from the defective performance
of an independent repairer.
7.2.5 Ability of dealers to
deal in competing brands is restricted.
7.2.6 Price mark up for top 50
spare parts by revenue generated is 101.38% - 488.98%. Price mark-up of top 50
spare parts on the basis of consumption is 76.24% - 484.04%.
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7.2.7 Since BMW only procures
seats for aftermarket purposes from BMW AG, hence no substantial IPR issues
have been raised.
7.2.8 As per DG, denial to
access diagnostic tools and spare parts amounts to denial of access to an
“essential facility” and amounts to abuse of dominant position of BMW.
7.2.9 Since BMW does not allow
over the counter sale of spare parts and since diagnostic tools are not readily
available to the independent repairers, BMW imposes unfair terms and also
denies market access to the independent repairers as per section 4(2)(a)(i) and
4(2)(c) of the Act, respectively. Further, BMW is in violation of section
4(2)(a)(ii) for imposing unfair prices.
7.2.10 BMW uses its dominance
in one relevant market (i.e., supply of spare parts) to protect the other
relevant market (i.e. market for repair services) which is violative of section
4(2)(e) of the Act.
7.2.11 BMW is in violation of
provisions of sections 3(4)(c) and (d) of the Act with respect to its
agreements with local OESs and agreements with authorized dealers for imposing
absolute restrictive covenants and completely foreclosing the aftermarket for
supply of spare parts and other diagnostic tools.
7.2.12 Agreements with the authorized
dealers have restrictive clauses requiring dealers to source the spare parts
only from BMW or its approved dealers. The DG has found these agreements in the
nature of exclusive supply agreements in violation of section 3(4)(b) of the
Act.
8. Findings of the DG with
respect to Mercedes Benz India Pvt Ltd
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8.1 Mercedes-Benz India Pvt ltd
(“MBPIL”) was incorporated in India in the year 1994 and is a 100 % subsidiary
of Daimler -Benz AG, Germany. MBIPL is engaged in assembling and selling of
Mercedes-Benz brand of passenger and commercial vehicles. The manufacturing
facilities for Mercedes branded cars and commercial vehicles are located at
Chankan, Pune. MBIPL has 35 authorized dealers across 31 cities in India.
8.2 The specific findings of
the DG against the alleged anti-competitive practices of Mercedes are
summarized below:
8.2.1 Mercedes imports spare
parts from Daimler AG and Daimler South Asia Pte Ltd, which are group
companies. The DG has not found any clause in such importer agreements dealing
with the right of Mercedes’ overseas suppliers, Daimler AG, to sell spare parts
in the open market in India. In practice Mercedes’s overseas suppliers do not
supply Mercedes spare parts in the Indian aftermarket. The DG contends that due
to link between Mercedes and Daimler Group there can be a presumption of an
arrangement.
8.2.2 OES’s are restricted from
accessing the aftermarket for protecting the OEM’s IPRs.
8.2.3 Over the counter sale of
spare parts are permitted.
8.2.4 Diagnostic tools are only
available to authorized dealers of the OEM.
8.2.5 Warranty conditions are
invalidated if a Mercedes branded car is repaired by independent repairers.
8.2.6 Ability of dealers to
deal in competing brands is restricted.
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8.2.7
Price mark up for top 50 spare parts by revenue generated is: 70.34 – 292.22%
(Q1, 2010-11); 67.31- 306.80% (Q2, 2010-11); 76.63- 301.71%(Q3, 2010-11);
84.86-2150.69% (Q3, 2010-11). Price mark-up of top 50 spare parts on the basis
of consumption is: 59.80- 284.88% (Q1, 2010-11); 11.25-1206.15% (Q2,
2010-11);76.63- 1207.20 %(Q3, 2010-11); 71.78 – 1245.87% (Q3, 2010-11)
8.2.8 Technology transfer
agreements between Mercedes and Dailmer Group do not specify the technologies
and IPRs covered under such agreements. It does not stand established that
Mercedes possesses valid IPRs in India, with respect to all spare parts for
which restrictions are being imposed upon OESs.
8.2.9 As per DG, denial to
access diagnostic tools and spare parts amounts to denial of access to an
“essential facility” and amounts to abuse of dominant position of Mercedes.
8.2.10 Since Mercedes restricts
the availability of diagnostic tools to its authorized dealers, it imposes
unfair terms and denies market access to the independent repairers as per
section 4(2)(a)(i) and 4(2)(c) of the Act, respectively. Further, Mercedes is
in violation of section 4(2)(a)(ii) for imposing unfair prices.
8.2.11 Mercedes uses its
dominance in one relevant market (i.e., supply of spare parts) to protect the
other relevant market (i.e. market for repair services) which is violative of
section 4(2)(e) of the Act.
8.2.12 Mercedes is in violation
of provisions of sections 3(4)(c) and (d) of the Act with respect to its
agreements with local OESs and agreements with authorized dealers for imposing
absolute restrictive covenants and completely foreclosing the aftermarket for
supply of spare parts and other diagnostic tools.
8.2.13 Agreements with the
authorized dealers have restrictive clauses requiring dealers to source the
spare parts only from Mercedes or its approved dealers. The DG has found
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these agreements in the nature
of exclusive supply agreements in violation of section 3(4)(b) of the Act.
9. Findings of the DG with
respect to General Motors India Pvt Ltd (“GMI”)
9.1 GMI was incorporated in
India in 1994. GMI is in the business of manufacturing Chevrolet brand of
vehicles in India and sells its vehicles through its affiliate company
Chevrolet Sales India Pvt Ltd (“CSIPL”).A group company of General Motors
(“GM”), General Motors Technical Center India Private Limited (“GMTCIPL”), is in
the business of selling automotive parts and accessories of various GM branded
cars under the trademark/trade name of AC Delco. GMI has further submitted that
there is no direct linkage between GMTCIPL and GMI in terms of shareholding.
GMI has submitted that SAIC General Motors India Private Limited (a joint
venture of GM (Hong Kong) company Limited (GMHK) and SAIC Motor HK Investment
Limited (“SAICHK”) holds 100% shares of GMI and CSIPL except for two shares,
one of each is held by GMHK and SAICHK respectively. It has been informed that
there are approximately 270 authorized dealers/workshops in 208 cities in India
catering to various models of General Motor cars.
9.2 The specific findings of
the DG against the alleged anti-competitive practices of GMI are summarized
below:
9.2.1 GMI imports spare parts
from GM Korea, which is a group company. The DG has not found any clause in
such importer agreements dealing with the right of GMI’s overseas suppliers, to
sell spare parts in the open market in India. In practice GM Korea only supply
GMI spare parts to CSIPL. The DG contends that due to link between GM Korea and
GMI there can be presumption of an arrangement.
9.2.2 OES’s are restricted from
accessing the aftermarket for protecting the OEM’s IPRs.
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9.2.3 Over the counter sale of
spare parts are permitted to only actual GMI customers.
9.2.4 Diagnostic tools are only
available to authorized dealers of the OEM.
9.2.5 Warranty conditions are
invalidated if a GMI branded car is repaired by independent repairers.
9.2.6 Ability of dealers to
deal in competing brands is restricted, however, GMI has submitted that several
dealers have undertaken dealerships of competing brands.
9.2.7
Price mark up for top 50 spare parts by revenue generated is: 1.66% – 871.56%
(Q1, 2010-11); (-)0.23% -871.56% (Q2, 2010-11); 3.39%- 871.56%(Q3, 2010-11);
66.92% -871.56% (Q3, 2010-11). Price mark-up of top 50 spare parts on the basis
of consumption is: (-)18.82% - 545.16% (Q1, 2010-11); (-)20.33% - 764.08% (Q2,
2010-11); 3.39%- 764.08% (Q3, 2010-11); 28.64%-545.16% (Q3, 2010-11)
9.2.8 Technology transfer
agreements between GM Korea and GMI do not specify the technologies and IPRs
covered under such agreements. It does not stand established that GMI possesses
valid IPRs in India, with respect to all spare parts for which restrictions are
being imposed upon OESs.
9.2.9 As per DG, denial to
access diagnostic tools and spare parts amounts to denial of access to an
“essential facility” and amounts to abuse of dominant position of GMI.
9.2.10 Since: (a) GMI allows
over the counter sale of spare parts only to actual GMI customers and not to
independent repairers and (b) GMI restricts the availability of diagnostic
tools to its authorized dealers only, GMI imposes unfair terms and denies market
access to the independent repairers as per section 4(2)(a)(i) and 4(2)(c) of
the Act, respectively. Further, GMI is in violation of section 4(2)(a)(ii) for
imposing unfair prices.
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9.2.11 GMI uses its dominance
in one relevant market (i.e., supply of spare parts) to protect the other
relevant market (i.e. market for repair services) which is violative of section
4(2)(e) of the Act.
9.2.12 GMI is in violation of
provisions of sections 3(4)(c) and (d) of the Act with respect to its
agreements with local OESs and agreements with authorized dealer for imposing
absolute restrictive covenants and completely foreclosing the aftermarket for
supply of spare parts and other diagnostic tools.
9.2.13 Agreements with the
authorized dealers have restrictive clauses requiring dealers to source the
spare parts only from GMI or its approved dealers. The DG has found these
agreements in the nature of exclusive supply agreements in violation of section
3(4)(b) of the Act.
10. Findings of the DG with
respect to Maruti Suzuki India Ltd (“MSIL”)
10.1 MSIL was incorporated as a
joint venture between the government of India and Suzuki Motor Corporation
(“Suzuki”), Japan in the year 1981. Suzuki is the majority shareholder of MSIL
with 54.2% equity stake in MSIL and MSIL is a subsidiary of Suzuki. MSIL is
primarily engaged in the business of manufacture/sales of automobiles/ motor
vehicles and automotive parts in India. It also oversees a network of
authorized dealers and service providers that cater to the maintenance and
servicing requirements of automobiles manufactured by MSIL. MSIL manufactures
automobiles in India through its manufacturing plants in Manesar, Haryana with
a combined manufacturing facility of over 1 million cars per annum. MSIL
operates its servicing segment through a network of 1058 authorized dealers,
1838 Maruti Authorized Service Stations and 50 Maruti Service Zones,
collectively called MSIL Authorized Service Stations. MSIL has submitted that
it has service workshops in 1,433 cities across India.
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10.2 The specific findings of
the DG against the alleged anti-competitive practices of MSIL are summarized
below:
10.2.1 MSIL does not enter into
importer agreements with its overseas suppliers. MSIL’s importer-purchase
orders do not contain any clauses with respect to the rights of the overseas
suppliers to supply spare parts in Indian aftermarket. DG has claimed that
there may be an arrangement between MSIL and its overseas suppliers for not
selling spare parts in Indian aftermarket.
10.2.2 OES’s are restricted
from accessing the aftermarket for protecting the OEM’s IPRs.
10.2.3 The DG on reviewing the
agreement entered into between the OEM and its authorized dealers did not find
any clauses dealing with the rights of the authorized dealers to undertake over
the counter sales of spare parts in the open market in India. The submissions
of the company, the authorized dealers and the independent repairers indicate
that spare parts of MSIL brand are readily available in the market.
10.2.4 Diagnostic tools are
only available to authorized dealers of the OEM. However, Maruti has contended
that independent repairers can repair about 99.5% of Maruti branded cars
without the help of Maruti’s diagnostic tools, manual etc.
10.2.5 Warranty conditions are
invalidated if a Maruti branded car is repaired by independent repairers.
10.2.6 There are no
restrictions on the ability of Maruti’s dealers to deal in other brands of
cars.
10.2.7 Price mark up for top 50
spare parts by revenue generated is: -77.98% - 433.59%. Price mark-up of top 50
spare parts on the basis of consumption is: -16.94% - 650%.
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10.2.8 Technology transfer
agreements between MSIL and Suzuki do not specify the technologies and IPRs
covered under such agreements. It does not stand established that MSIL
possesses valid IPRs in India, with respect to all spare parts for which
restrictions are being imposed upon OESs.
10.2.9 As per DG, denial to
access diagnostic tools and spare parts amounts to denial of access to an
“essential facility” and amounts to abuse of dominant position of MSIL for
imposing absolute restrictive covenants and completely foreclosing the
aftermarket for supply of spare parts and other diagnostic tools.
10.2.10 Since, as per the
investigation of the DG, the Commission is of the opinion that Maruti restricts
the availability of diagnostic tools to its authorized dealers, Maruti imposes
unfair terms and denies market access to the independent repairers as per
section 4(2)(a)(i) and 4(2)(c) of the Act, respectively.
10.2.11 Maruti uses its
dominance in one relevant market (i.e., supply of spare parts) to protect the
other relevant market (i.e. market for repair services) which is violative of
section 4(2)(e) of the Act.
10.2.12 Agreements with the
authorized dealers have restrictive clauses requiring dealers to source the
spare parts only from MSIL or its approved dealers. The DG has found these
agreements in the nature of exclusive supply agreements in violation of section
3(4)(b) of the Act.
11. Findings of the DG with
respect to Mahindra and Mahindra (P) Limited (“M&M”)
11.1 M&M is a flagship company
of the US$ 7.1 billion, Mahindra Group of companies which consists of 105
companies and has business interests across the world. In the automobile
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sector the M&M business
comprises of manufacturing of the cars, passenger vehicles, utility vehicles,
commercial vehicles, light commercial vehicles, three wheelers and two
wheelers. M&M has been also dealing in farm equipment like tractor and
Powergen (electricity generator). M&M has manufacturing facilities at Kandivali
(Mumbai), Chakan, Nasik, Zaheerabad and Haridwar. M&M has a network of
around 290 authorized dealers, 320 authorized dealer workshops and more than 72
authorized service stations in India to take care of the maintenance, service
and repair requirements of M&M branded vehicles.
11.2 The specific findings of
the DG against the alleged anti-competitive practices of M&M are summarized
below:
11.2.1 M&M does not have an
overseas supplier arrangement in place.
11.2.2 OES’s are restricted
from accessing the aftermarket for protecting the OEM’s IPRs.
11.2.3 The authorized dealer
agreement of M&M expressly restricts over the counter sale of spare parts
of M&M branded cars in the aftermarket.
11.2.4 Diagnostic tools are
only available to authorized dealers of the OEM.
11.2.5 Warranty conditions are
invalidated if an M&M branded car is repaired by independent repairers.
11.2.6 Ability of M&M’s
authorized dealers to deal in competing brands is restricted. However, M&M
has submitted that certain M&M dealers have been dealing in competing
brands.
11.2.7 Price mark up for top 50
spare parts by revenue generated is: 65.80%- 462.50%. Price mark-up of top 50
spare parts on the basis of consumption is: -108.58%-890.99%
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11.2.8 M&M’s dealers are
not permitted to deal in competing products in any manner without prior
permission of M&M. It does not stand established that M&M possesses
valid IPRs with respect to its top 50 spare parts.
11.2.9 As per DG, denial to
access diagnostic tools and spare parts amounts to denial of access to an
“essential facility” and amounts to abuse of dominant position of M&M.
11.2.10 Since M&M does not
allow over the counter sale of spare parts and since diagnostic tools are not
available to the independent repairers, the DG concluded that M&M imposes
unfair terms and denies market access to the independent repairers as per section
4(2)(a)(i) and 4(2)(c) of the Act, respectively. Further, M&M is in
violation of section 4(2)(a)(ii) for imposing unfair prices.
11.2.11 M&M uses its
dominance in one relevant market (i.e., supply of spare parts) to protect the
other relevant market (i.e. market for repair services) which is violative of
section 4(2)(e) of the Act.
11.2.12 M&M is in violation
of provisions of sections 3(4)(c) and (d) of the Act with respect to its
agreements with local OESs and agreements with authorized dealers for imposing absolute
restrictive covenants and completely foreclosing the aftermarket for supply of
spare parts and other diagnostic tools.
11.2.13 Agreements with the
authorized dealers have restrictive clauses requiring dealers to source the
spare parts only from M&M or its approved dealers. The DG has found these
agreements in the nature of exclusive supply agreements in violation of section
3(4)(b) of the Act.
12. Findings of the DG with
respect to Nissan Motor India (P) Limited (“Nissan”)
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12.1 Nissan is a 100%
subsidiary of Nissan Motor Ltd., Japan (“NML Japan”) through Nissan
International Holdings Netherlands and Nissan Asia Pacific Pvt. Ltd., Nissan
was incorporated on February 7, 2005. Nissan is engaged in the design, manufacture,
assembly and/or sale of certain motor vehicles and motor vehicle components.
Further, it caters to the after sales service of the vehicles which are sold
and manufactured by Nissan. It has been informed to the DG, that the company
has recently commenced the export of vehicle components and trial parts to its
group companies. Nissan has manufacturing facility at the SIPCOT Industrial
Park at the Kancheepuram district of Tamil Nadu and is in the process of
setting up an automobile manufacturing plant in Oragadam, Chennai. Nissan has a
network of approximately 40 dealers throughout India in around 25 cities. The
distribution network for spare parts of Nissan branded cars is stated to be
managed through such authorized dealer network.
12.2 The specific findings of
the DG against the alleged anti-competitive practices of Nissan are summarized
below:
12.2.1 Nissan does not have an
overseas supplier arrangement in place.
12.2.2 OES’s are restricted
from accessing the aftermarket for protecting the OEM’s IPRs.
12.2.3 The authorized dealer
agreement of Nissan expressly restricts over the counter sale of spare parts of
Nissan branded cars in the aftermarket.
12.2.4 Diagnostic tools are
only available to authorized dealers of the OEM.
12.2.5 Warranty conditions are
invalidated if a Nissan branded car is repaired by independent repairers.
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12.2.6 Ability of Nissan’s
authorized dealers to deal in competing brands is restricted. However, Nissan
has submitted that certain Nissan dealers have been dealing in competing
brands.
12.2.7
Price mark up for top 50 spare parts by revenue generated is: 84.96% - 201.98%.
Price mark-up of top 50 spare parts on the basis of consumption is:
85.81%-258.78%.
12.2.8 The Manufacturing
License Agreement between NML Japan and Nissan does not grant any license to
Nissan to use any of the registered IPRs of NML Japan. Nissan has contended
before the DG that it does not have any IPRs registered in India.
12.2.9 As per DG, denial to
access diagnostic tools and spare parts amounts to denial of access to an
“essential facility” and amounts to abuse of dominant position of Nissan.
12.2.10 Since Nissan does not
allow over the counter sale of spare parts and since diagnostic tools are not
available to the independent repairers, Nissan imposes unfair terms and denies
market access to the independent repairers as per section 4(2)(a)(i) and
4(2)(c) of the Act, respectively. Further, Nissan is in violation of section
4(2)(a)(ii) for imposing unfair prices.
12.2.11 Nissan uses its
dominance in one relevant market (i.e., supply of spare parts) to protect the
other relevant market (i.e. market for repair services) which is violative of
section 4(2)(e) of the Act.
12.2.12 Nissan is in violation
of provisions of sections 3(4)(c) and (d) of the Act with respect to its
agreements with local OESs and agreements with authorized dealers for imposing
absolute restrictive covenants and completely foreclosing the aftermarket for
supply of spare parts and other diagnostic tools.
12.2.13 Agreements with the
authorized dealers have restrictive clauses requiring dealers to source the
spare parts only from Nissan or its approved dealers. The DG has found these
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agreements in the nature of
exclusive supply agreements in violation of section 3(4)(b) of the Act.
13. Findings of the DG with
respect to Skoda Auto India (P) Limited (“Skoda”)
13.1 Skoda is a wholly owned
subsidiary of Skoda Auto a.s. (“Skoda Auto”), with its headquarters at Czech
Republic and was incorporated in India on 23rd
December 1999. Both Skoda and Skoda Auto
are part of the Volkswagen group of companies. Skoda manufacturers/assembles
and sells automobiles under the brand name “Skoda”, “Volkswagen” and “Audi”.
The company is also engaged in the business of after sales service for all such
Skoda branded cars. The cars manufactured by Skoda under the brand name ‘Skoda’
are sold by the company to its authorized dealers and the cars manufactured under
the brand name “Audi” and “Volkswagen” are sold to the Volkswagen Group Sales
India Private Limited. Skoda has its manufacturing plant located at Shendra
Industrial Area, Maharashtra and the company uses the Volkswagen India Pvt.
Ltd., plant at Chakan, Maharashtra to manufacture some specific models of Skoda
cars. Skoda currently has 81 dealerships across 56 cities in 18 states and 2
union territories of India for the retail sales, marketing and after sale
services of Skoda branded cars.
13.2 The specific findings of
the DG against the alleged anti-competitive practices of Skoda are summarized
below:
13.2.1 Skoda imports spare
parts from Skoda Auto a.s. (a group company). Importer agreement of Skoda
expressly restricts its overseas suppliers from accessing the Indian automobile
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aftermarket. As per DG since
Skoda’s overseas suppliers is a part of the Volkswagen group and in-fact does
not supply to the Indian aftermarket.
13.2.2 OES’s are restricted
from accessing the aftermarket for protecting the OEM’s IPRs.
13.2.3 The authorized dealer
agreement of Skoda expressly restricts over the counter sale of spare parts of
Skoda branded cars in the aftermarket.
13.2.4 Diagnostic tools are
only available to authorized dealers of the OEM.
13.2.5 Warranty conditions are
invalidated if a Skoda branded car is repaired by independent repairers.
13.2.6 Ability of Skoda’s
authorized dealers to deal in competing brands is restricted. However, Skoda
has submitted that certain Skoda dealers have been dealing in competing brands.
13.2.7
Price mark up for top 50 spare parts by revenue generated is: 85.06- 265.88%
(Q1, 2010-11); 79.15- 280.75% (Q2, 2010-11);76.29 – 248.54%(Q3, 2010-11);
-0.92-260.40% (Q3, 2010-11). Price mark-up of top 50 spare parts on the basis
of consumption is: -31.6 - 230.83% (Q1, 2010-11);-33.78 - 254.18% (Q2,
2010-11);-34.84- 248.54%(Q3, 2010-11); -35.81 - 218.42% (Q3, 2010-11)
13.2.8 The Technology transfer
Agreement and the Trademark Agreement between Skoda Auto a.s., and Skoda does
not specify the technologies and IPRs granted to Skoda for its Indian
operations. It does not stand established that Skoda possesses valid IPRs in
India, with respect to all spare parts for which restrictions are being imposed
upon OESs.
13.2.9 As per DG, denial to
access diagnostic tools and spare parts amounts to denial of access to an
“essential facility” and amounts to abuse of dominant position of Skoda.
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13.2.10 Since Skoda does not allow
over the counter sale of spare parts and since diagnostic tools are not
available to the independent repairers, Skoda imposes unfair terms and denies
market access to the independent repairers as per section 4(2)(a)(i) and
4(2)(c) of the Act, respectively. Further, Skoda is in violation of section
4(2)(a)(ii) for imposing unfair prices.
13.2.11 Skoda uses its
dominance in one relevant market (i.e., supply of spare parts) to protect the
other relevant market (i.e. market for repair services) which is violative of
section 4(2)(e) of the Act.
13.2.12 Skoda is in violation
of provisions of sections 3(4)(c) and (d) of the Act with respect to its
agreements with local OESs and agreements with authorized dealers for imposing
absolute restrictive covenants and completely foreclosing the aftermarket for
supply of spare parts and other diagnostic tools.
13.2.13 Agreements with the
authorized dealers have restrictive clauses requiring dealers to source the
spare parts only from Skoda or its approved dealers. The DG has found these
agreements in the nature of exclusive supply agreements in violation of section
3(4)(b) of the Act.
14. Findings of the DG with
respect to Tata Motors Limited (“Tata”)
14.1 Tata was incorporated on 1st September,
1945 under the Indian Companies Act of 1913. Tata entered the passenger car
segment in 1998 and since then it has introduced various models of passenger
cars and utility vehicles in the Indian automobile market. Tata has informed
that it is a majority stakeholder in the company’s holdings in Jaguar Land
Rover. Tata is in the business of manufacturing of commercial and passenger
vehicles. Through its subsidiaries, the company is engaged in engineering and
automotive
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solutions, manufacturing of
construction equipment and automotive vehicle components, supply chain
activities, machine tools and factory automation solutions, high precision
tooling and plastic and electronic components for automotive and computer
applications and automotive retailing and service operations. Tata also conducts
after sale services and distribution of spare parts through its authorized
dealers, authorized distributors and authorized service centers. Tata also has
a joint venture with Fiat India Automobiles (P) Ltd for selling and providing
after sale services of Fiat branded cars. Tata exports its Indica, Safari.
Indigo and Sumo models of cars to Sri Lanka, Nepal, Italy, Spain, Poland,
Turkey, South Africa, Ghana, Nigeria, Congo, Tanzania and Bhutan etc. Tata has
manufacturing facilities at Sanand (Gujrat), Pune (Maharastra) and Pantnagar
(Uttarkhand) for manufacturing passenger cars. Tata has approximately 800
service centers under various models to cater to the company brand of vehicles.
Further the company has 250 dealers and 22 whole sale distributors catering to
approximately 2000 retailers.
14.2 The specific findings of
the DG against the alleged anti-competitive practices of Tata are summarized
below:
14.2.1 Tata does not have an
overseas supplier agreement in place.
14.2.2 OES’s are restricted from
accessing the aftermarket for protecting the OEM’s IPRs.
14.2.3 Based upon the
submissions of multi-brand retailers and independent repairers, the DG has
concluded that although the agreement between Tata and its authorized dealers
does not contain any clause dealing with the right of the authorized dealers to
sell spare parts over the counter, but in practice the sale of such spare parts
are not permitted.
14.2.4 Diagnostic tools are
only available to authorized dealers of the OEM.
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14.2.5 Warranty conditions are
invalidated if a Tata branded car is repaired by independent repairers.
14.2.6 Ability of dealers to
deal in competing brands is restricted.
14.2.7
Price mark up for top 50 spare parts by revenue generated is: -60.76% - 658.80%
. Price mark-up of top 50 spare parts on the basis of consumption is: 64.60%-
858.90%
14.2.8
Although Tata has some registered IPRs (Trademarks) in India, it does not stand
established that Tata possesses valid IPRs in India, with respect to all spare
parts for which restrictions are being imposed upon OESs.
14.2.9 As per DG, denial to
access diagnostic tools and spare parts amounts to denial of access to an
“essential facility” and amounts to abuse of dominant position of Tata.
14.2.10 Since Tata restricts
the availability of spare parts and diagnostic tools to its authorized dealers,
it imposes unfair terms and denies market access to the independent repairers
as per section 4(2)(a)(i) and 4(2)(c) of the Act, respectively. Further, Tata
is in violation of section 4(2)(a)(ii) for imposing unfair prices.
14.2.11 Tata uses its dominance
in one relevant market (i.e., supply of spare parts) to protect the other
relevant market (i.e. market for repair services) which is violative of section
4(2)(e) of the Act.
14.2.12 Tata is in violation of
provisions of sections 3(4)(c) and (d) of the Act with respect to its
agreements with local OESs and agreements with authorized dealers for imposing
absolute restrictive covenants and completely foreclosing the aftermarket for
supply of spare parts and other diagnostic tools.
14.2.13 Agreements with the
authorized dealers have restrictive clauses requiring dealers to source the
spare parts only from Tata or its approved dealers. The DG has found these
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agreements in the nature of
exclusive supply agreements in violation of section 3(4)(b) of the Act.
15. Findings of the DG with
respect to Volkswagen India Private Limited (“Volkswagen”)
15.1 Volkswagen is a fully
owned subsidiary of the Volkswagen a.g., Germany. Volkswagen was incorporated
in India on 6th February 2007. Volkswagen is engaged in the
manufacturing activity of the ‘Volkswagen’ and ‘Skoda’ brand of cars.
Volkswagen Group Sales India Pvt. Ltd (“VGSIL”) is also a fully owned
subsidiary company of the Volkswagen a.g., Germany. VGSIL was incorporated in
India on 7th March 2007. VGSIL is in the business of sales,
marketing and after sales services of both Volkswagen and Audi branded cars.
VGSIL through various contracts purchases cars (Passat and Jetta models of
Volkswagen branded cars and certain models of Audi brand of cars) from Skoda
Auto India Pvt Ltd (“SAIPL”) and (Polo and Vento models of Volkswagen) from
Volkswagen. VGSIL has entered into contracts with dealers from both the brands
across India for the sales and servicing of cars. The manufacturing activities
of Volkswagen are being undertaken from its plant located at MIDC Industrial
Area, Chakan, Pune. VWIPL has submitted that there are 95 authorized dealers
across India. Further there are 15 other workshops dealing with Audi branded
cars across India.
15.2 The specific findings of
the DG against the alleged anti-competitive practices of Volkswagen are
summarized below:
15.2.1 During the course of the
DG’s investigation, Volkswagen has informed the DG that it does not import
spare parts for aftermarket use but procures them from SAIPL. The DG has
reviewed an agreement between SAIPL and VGSIL (for supply of Volkswagen and
Audi brand spare parts) and could not find any clauses regarding the ability of
SAIPL to directly sell spare parts in the open market with respect to
Volkswagen branded cars.
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15.2.2 DG claims that since
overseas suppliers of Volkswagen are its affiliate companies and does not as a
matter of fact supply spare parts directly into the Indian aftermarket, an
arrangement between them can be inferred.
15.2.3 OES’s are restricted
from accessing the aftermarket for protecting the OEM’s IPRs.
15.2.4 Based upon the
submissions of multi-brand retailers and independent repairers, the DG has
concluded that although the agreement between Volkswagen and its authorized
dealers does not contain any clause dealing with the right of the authorized
dealers to sell spare parts over the counter, but in practice such sales are
not permitted.
15.2.5 Diagnostic tools are
only available to authorized dealers of the OEM.
15.2.6 Warranty conditions are
invalidated if a Volkswagen branded car is repaired by independent repairers.
15.2.7 Ability of dealers to
deal in competing brands is restricted, however, Volkswagen has submitted that
certain dealers of Volkswagen are dealing in competing brands.
15.2.8
Price mark up for top 50 spare parts by revenue generated is: 54.36% -995.55
(Q1, 2010-11); 61.41% - 995.55% (Q2, 2010-11);58.17%-995.55% (Q3, 2010-11);
58.17%-995.55% (Q3, 2010-11). Price mark-up of top 50 spare parts on the basis
of consumption is: 62.27%-995.55% (Q1,2010-11); 62.27%-995.55% (Q2, 2010-11);
22.54%-995.55% (Q3; 2010-11); 62.27%-995.55% (Q4, 2010-11).
15.2.9 Neither VWIPL nor VGSIPL
confirmed that they have any valid IPRs registered in India. The license agreement
does not specify the technologies and IPRs granted to Volkswagen for its
business operations in India.
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15.2.10 As per DG, denial to
access diagnostic tools and spare parts amounts to denial of access to an “essential
facility” and amounts to abuse of dominant position of Volkswagen.
15.2.11 Since Volkswagen
restricts the availability of spare parts and diagnostic tools to its
authorized dealers, it imposes unfair terms and denies market access to the
independent repairers as per section 4(2)(a)(i) and 4(2)(c) of the Act,
respectively. Further, Volkswagen is in violation of section 4(2)(a)(ii) for
imposing unfair prices.
15.2.12 Volkswagen uses its
dominance in one relevant market (i.e., supply of spare parts) to protect the
other relevant market (i.e. market for repair services) which is violative of
section 4(2)(e) of the Act.
15.2.13 Volkswagen is in
violation of provisions of sections 3(4)(c) and (d) of the Act with respect to
its agreements with local OESs and agreements with authorized dealers for
imposing absolute restrictive covenants and completely foreclosing the
aftermarket for supply of spare parts and other diagnostic tools.
15.2.14 Agreements with the
authorized dealers have restrictive clauses requiring dealers to source the
spare parts only from Volkswagen or its approved dealers. The DG has found
these agreements in the nature of exclusive supply agreements in violation of
section 3(4)(b) of the Act.
16. Findings of the DG with
respect to Toyota Kirloskar Motors Private Limited (“Toyota”)
16.1 Toyota is a subsidiary and
an authorized distributor of Toyota Corporation, Japan (“TMC”) with 89% of
Toyota’s shares held by TMC and 11% held by Kirloskar Group, India. Toyota was
incorporated on 6th October, 1997. Toyota manufactures ‘Toyota’
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brand of cars in India with the
help of technical assistance received from TMC. Toyota Motor Asia Pacific Pvt
Ltd in Singapore (“TMAP”) is a wholly owned subsidiary of TMC. The role of TMAP
is to support and guide the planning and implementation of distribution, sales
and marketing strategies in India, where required. Toyota is involved in
manufacturing, importing, marketing and sales and service of Toyota brand
automobiles in India. The company has its manufacturing plant in Bidad,
Karnataka. Toyota has three (3) categories of dealership networks. The first
model is for dealers which are dealing exclusively with sales of motor vehicles
(1S model), second kind of dealership is the 2S model, where dealers cater to
both sale of various models of Toyota cars as well as provide aftersale
services of particular brands of Toyota cars and the third model of Toyota
dealers is the 3S model, where the dealer conducts the sale of Toyota cars,
provides aftersale services of TKM cars and sell spare parts of various models
of Toyota branded cars. Toyota has 173 dealers in its various models of
dealership networks. The 2S and 3S models are stated to be spread over in 102
cities/towns in India. Toyota has submitted that it has plans to reach a
network of 330 authorized dealerships by 2015.
16.2 The specific findings of
the DG against the alleged anti-competitive practices of Toyota are summarized
below:
16.2.1 Toyota sources several
parts from overseas suppliers which include the Toyota Motor Corporation in
Japan (“TMC”), Toyota affiliates in other countries and other overseas
companies approved by Toyota. No clause in such overseas supplier agreements could
be discovered that restricted the rights of such suppliers from accessing the
Indian aftermarket. Since Toyota’s overseas suppliers are its affiliates and
they do not as a matter of fact supply spare parts in the Indian aftermarket,
an arrangement could be presumed.
16.2.2 OES’ are restricted from
accessing the aftermarket for protecting the OEM’s IPRs.
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16.2.3 Based upon the
submissions of multi-brand retailers and independent repairers, the DG has
concluded that although the agreement between Toyota and its authorized dealers
does not contain any clause dealing with the right of the authorized dealers to
sell spare parts over the counter, but in practice the sale of such spare parts
are not permitted.
16.2.4 Diagnostic tools are
only available to authorized dealers of the OEM.
16.2.5 Warranty conditions are
invalidated if a Toyota branded car is repaired by independent repairers.
16.2.6 Ability of dealers to
deal in competing brands is restricted.
16.2.7
Price mark up for top 50 spare parts by revenue generated is: 79.61%-1305.85%
Price mark-up of top 50 spare parts on the basis of consumption is: 38.26%
-510.43%.
16.2.8 It does not stand
established that Toyota possesses valid IPRs in India, with respect to all
spare parts for which restrictions are being imposed upon OESs.
16.2.9 As per DG, denial to
access diagnostic tools and spare parts amounts to denial of access to an
“essential facility” and amounts to abuse of dominant position of Toyota.
16.2.10 Since Toyota restricts
the availability of spare parts and diagnostic tools to its authorized dealers,
it imposes unfair terms and denies market access to the independent repairers
as per section 4(2)(a)(i) and 4(2)(c) of the Act, respectively. Further, Toyota
is in violation of section 4(2)(a)(ii) for imposing unfair prices.
16.2.11 Toyota uses its
dominance in one relevant market (i.e., supply of spare parts) to protect the
other relevant market (i.e. market for repair services) which is violative of
section 4(2)(e) of the Act.
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16.2.12 Toyota is in violation
of provisions of sections 3(4)(c) and (d) of the Act with respect to its
agreements with local OESs and agreements with authorized dealers for imposing
absolute restrictive covenants and completely foreclosing the aftermarket for
supply of spare parts and other diagnostic tools.
16.2.13 Agreements with the
authorized dealers have restrictive clauses requiring dealers to source the
spare parts only from Toyota or its approved dealers. The DG has found these
agreements in the nature of exclusive supply agreements in violation of section
3(4)(b) of the Act.
17. Findings of the DG with
respect to Hindustan Motors Limited (“HML”)
17.1 HML was incorporated on 11th February, 1942
and was promoted by M/s National Bearing Co. (Jaipur) Ltd., M/s National
Engineering Industries Ltd., M/s SooryaVanijya and Investment Ltd., and M/s
Central India Industries Ltd. The company isengaged in the business of
assembling and manufacturing of Ambassador and Mitsubishi brands of cars, and
providing after sales services etc., for the various HML brands of cars. For
the Mitsubishi brand of vehicles, the company has technical assistance
arrangement with Mitsubishi Motors Corporation (“MMC”), Japan. The company
imports technology from MMC after paying the requisite fees. Components for
Mitsubishi branded vehicles are imported from MMC and Shandong Shifend, China.
The company has three plants located at Uttarpara, West Bengal, Thiravallur, Tamilnadu
and Pithampur, Madhya Pradesh.HML has submitted that for Ambassador branded
cars manufactured at HML’s Uttarpara plant, it has 101 authorized vehicle
dealers, 17 authorized service dealers and 28 authorized spare parts dealers.
No such similar information was provided by HML for its Tamilnadu and Madhya
Pradesh plants.
17.2 The specific findings of
the DG against the alleged anti-competitive practices of HML are summarized
below:
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17.2.1 HML imports parts for its
Mitsubishi branded cars from MMC, a technical collaborator under a license
agreement. HML does not import any parts for its Ambassador brand of cars. The
license agreement between MMC and HML does not contain any clauses dealing with
the rights of MMC to supply spare parts directly to Indian aftermarket. Since
MMC is also in a license agreement with HML, the DG drew presumption of a
restrictive arrangement between them.
17.2.2 OESs dealing in HML’s
Mitsubishi branded cars are restricted from accessing the aftermarket for
protecting the OEM’s IPRs. OES agreements for Ambassador branded cars were not
provided to the DG for review.
17.2.3 Based upon the
submissions of multi-brand retailers and independent repairers, the DG has
concluded that although the agreement between HML and its authorized dealers
does not contain any clause dealing with the right of the authorized dealers to
sell spare parts over the counter, but in practice the sale of the spare parts
of Mitsubishi branded cars of HML are not permitted. HML has not provided the
required information for its Ambassador branded cars.
17.2.4 Diagnostic tools are
only available to authorized dealers of the OEM.
17.2.5 Warranty conditions are
invalidated if a Mitsubishi branded car of HML is repaired by independent
repairers.
17.2.6 Ability of dealers to
deal in competing brands is restricted, and the OEM has submitted that such
actions are discouraged.
17.2.7 The DG has concluded
that it has not come across any instance of AAEC of the policies of HML with
respect to its ambassador brand vehicles in the aftermarket for repair and
maintenance.
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17.2.8 Price mark up for top 50
spare parts by revenue generated (for Ambassador branded cars): 79.25% -
133.32%. Price mark-up of top 50 spare parts on the basis of consumption (for
Ambassador branded cars): 86.47% - 206.25%.
17.2.9 HML has confirmed that
they do not have any valid IPRs registered in India.
17.2.10 As per DG, denial to
access diagnostic tools and spare parts amounts to denial of access to an
“essential facility” and amounts to abuse of dominant position of HML.
17.2.11 Since HML restricts the
availability of spare parts and diagnostic tools to its authorized dealers, it
imposes unfair terms and denies market access to the independent repairers as
per section 4(2)(a)(i) and 4(2)(c) of the Act, respectively. Further, HML is in
violation of section 4(2)(a)(ii) for imposing unfair prices.
17.2.12 HML uses its dominance
in one relevant market (i.e., supply of spare parts) to protect the other
relevant market (i.e. market for repair services) which is violative of section
4(2)(e) of the Act.
17.2.13 HML is in violation of
provisions of sections 3(4)(c) and (d) of the Act with respect to its
agreements with local OESs and agreements with authorized dealers for imposing
absolute restrictive covenants and completely foreclosing the aftermarket for
supply of spare parts and other diagnostic tools.
17.2.14 Agreements with the
authorized dealers have restrictive clauses requiring dealers to source the
spare parts only from HML or its approved dealers. The DG has found these
agreements in the nature of exclusive supply agreements in violation of section
3(4)(b) of the Act.
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18. Replies of the Parties
18.1 The Commission, after
considering the investigation report submitted by the DG, decided to forward
copies thereof to all the concerned parties for filing their replies/objections
thereto vide its order dated September 4, 2012.
18.2 All OPs filed their
replies/objections to findings of the DG and appeared before the Commission for
making oral submissions. The counsel for the Informant also made oral
submissions before the Commission.
18.3 The Commission also sought
additional replies/submission from the parties, with respect to certain
specific questions/issues; vide orders dated March 5, 2013 and May 28, 2013.
OPs provided additional submissions/replies to the queries raised by the
Commission.
18.4 The replies of such
parties have been summarized in the following paragraphs. The Commission notes
that 14 OPs have made detailed submissions. Although, the Commission has
considered in detail the submissions/replies of OEM, only the relevant common
and specific submissions of the OPs have been summarized below.
18.5 Common Replies of all
OEMs
18.6 The OPs have taken
following common pleas in their submissions before the Commission:
(i) The relevant market
is a ‘systems market’
18.7 The OEMs have submitted
that the DG has completely misunderstood the relevant market in which the OEMs
operate and has erred by defining the relevant product market on two levels: i)
The primary market has been defined as the market for manufacture and
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sale of cars; and ii) The
secondary market consisting of the aftermarket for cars i.e. (i) for spare
parts, diagnostic tools and manuals; and (ii) the repair, servicing and
maintenance.
18.8 In contrast to what has
been held by the DG, the OEMs submitted that there is no separate relevant
market for spare parts distinct from the primary market for sale of cars. The
OEMs have submitted that the relevant market in the instant case is that of an
indivisible, unified ‘systems market’. As per the OEMs that complementary
products (like a car and its spare parts) cannot function without the use of
the other and the consumers of cars, buy the primary product and the secondary
products at the same time (purchasing as a system), i.e., a ‘systems market’.
Since by their very nature, complementary products can function only when used
in tandem, competitive constraints that apply to the primary product would
necessarily apply to the secondary product.
18.9 The OEMs have further
submitted that for durable products like cars, a ‘systems market’ for
complementary products is appropriate since customers, typically engage in
‘whole-life costing’, i.e., compute life-cycle cost of a car at the time of
purchasing the car and the customers anticipate the future costs of ownership
of the primary product by taking into account probable expenditure on
aftermarket products. Such life-cycle costs include the purchase price,
relationship between vehicle age and depreciation rate, insurance cost, driving
patterns including mileage etc. Where the customers undertake a life-cycle cost
analysis, at the time of purchasing the primary product, the relevant markets
of the primary and the secondary consists of a unified ‘systems market’ and
cannot be divided in the manner undertaken by the DG. The OEMs have submitted
that due to significant increase in publications (both print and online)
dealing with automobiles, substantial information about aftermarket cost of
vehicles is available with customers and these resources enable prospective car
buyers to assess life-cycle costs of the various OEM branded cars and compare
these costs with those of rival brands.
18.10 Further, the OEMs have
submitted that for durable products like cars, where ‘reputation effects’ mean
that setting a supra-competitive price for the secondary product would
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significantly harm a OEM’s
profits on future sales of the primary product, it would not be economically
prudent for the OEMs to set such supra-competitive prices for spare-parts and
repair services in the aftermarket and hamper their reputation in the robust
primary market for the sale of cars. Further, there is a high probability that
an increase in prices in the aftermarket for cars i.e., the market for
spare parts will be accompanied by a decrease in profits in the primary market
i.e. the market for sale of cars. Hence, a unified market consisting of both
the primary product as well as its aftermarket may be considered as one unified
systems market.
18.11 OEMs further submitted
that the aftermarket i.e. the market for spare parts cannot be separated from
the primary market i.e. the sale of cars and that applying the test of
interchangeability and substitutability as the DG has done, will lead to absurd
results where every unique nut and bolt of a car will constitute a separate
product market and manufacturer of even one piece of equipment will qualify as
an absolute monopolist in the market.
18.12 OEMs have submitted that
the DG’s conclusion about customers in India being ‘locked in’ and not being
able to shift to alternate OEMs is misconceived, as the customers makes his
choice to buy the OEM branded cars, being fully aware of the expenditure he may
have to incur on after sales service, repairs and maintenance etc. Also, due to
booming used car/second-hand car market for the OEM cars, existing owners can
easily sell of their cars and switch to alternate OEM branded cars, without
incurring substantial switching costs. OEMs have therefore stated that the
relevant product market is the “market for sale of cars and its spare parts”.
(ii) Submissions of OEMs
that they are not dominant in the relevant systems market and their business
practices are not abusive under section 4(2) of the Competition Act
18.13 OEMs have submitted that
the DG’s definition of the relevant market is incorrect. Thus, given the
incorrect identification of the relevant market by the DG, its claim that the
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OEMs are dominant also fails.
OEMs have stated that the relevant market in which they operate is the systems
market for sale of cars and spare parts in India. Thus, the OEMs position of
strength must be assessed in the relevant market for sale of cars and its spare
parts in India.
18.14 OEMs have submitted that
in the unified relevant market of sale of cars and its spare parts, they
are not in a dominant position and that such market is robust with several
competitors. The OEMs have submitted that due to the limited market share of
each such OEM and the combined relative size and resources of their competitors
and the level of competition in the unified systems markets, each OEM is unable
to operate independently of the competitive forces prevailing in the relevant
market and consequently, cannot be dominant in the unified “systems market”.
The OEMs have further submitted that the lack of market power in the primary
market for the manufacture and sale of cars gives them little market power in
the inter-related secondary market for spare parts and after sales repair
services.
18.15 The OEMs have also
reiterated that their relative position in the unified systems market, as
identified above, in light of the factors (market share, market structure and
market size, size and importance of competitors, dependence of consumers on the
enterprise and countervailing buying power) laid out in Section 19(4) of the
Competition Act, makes it abundantly clear that the OEMs are not in a dominant
position in the relevant systems market. Thus, the OEMs’ conduct and business
practices cannot be considered as an abuse of dominant position, since
dominance is a sine qua non to establish an infringement of section 4 of
the Competition Act. OEMs have further supported their submissions with past
decisions of the CCI in cases like Consumer Online Foundation and Automobile
Dealers Association to support the proposition that if an enterprise is not
dominant in the primary market, it cannot be held as a dominant player in the
aftermarket.
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18.16 OEMs have also submitted
that they encourage their respective customers to only purchase genuine parts
from the respective OEM authorized dealers and that such a requirement is
entirely in consumer interest and cannot be said to result in imposition of
unfair or discriminatory conditions in the sale of goods and services under
Section 4(2)(a)(i) of the Competition Act.
18.17 OEMs have submitted that
the DG’s analysis of their pricing structure is grossly incorrect. As per the
OEMs, the DG has only taken into consideration the absolute cost difference
between the cost at which the OEMs buy its spare parts from its OESs and the
cost at which the end consumer gets the product. OEMs have submitted that the
DG has failed to take into consideration the various statutory levies and other
costs incurred by OEMs in facilitating the sale of its spare parts. As per the
OEMs, the DG, has failed to consider the factors which are necessary for
assessing the ‘economic value’ of a product and has not understood the concept
of what may constitute as ‘excessive’ and hence an ‘unfair price’ within the
meaning of section 4(2)(a) of the Act.
18.18 OEMs have submitted that
no infringement under section 4(2)(e) of the Competition Act can be made out in
the present case. Under section 4(2)(e) of the Competition Act a dominant
enterprise is prohibited from using its dominant position in one relevant
market to enter into or protect other relevant market. The DG has held that the
users of the OEM branded cars intending to purchase spare parts and after sales
service, repairs and maintenance have to necessarily avail the services of
authorized dealers which amounts to such OEMs using its dominant position in
one relevant market i.e. in the supply of spare parts of to enter and protect
the other relevant market i.e. the market for after sales service, repair and
maintenance of cars which in violation of section 4(2)(e) of the Competition
Act. The OEMs have contended that since they are not dominant in their
individual unified systems market for sale of cars and spare parts, such OEMs,
cannot be held to be liable for violating the provisions of section 4(2)(e) of
the Act.
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(iii) Submission of OEMs
on the applicability of the Essential Facilities Doctrine to their business
practices
18.19 OEMs have submitted that,
contrary to DG’s findings the conditions necessary for invoking the ‘essential
facility doctrine’ are not fulfilled in the present case. As per the OEMs,
firstly, the OEMs are not in a dominant position, in a unified systems market
for cars and spare parts/repair services. The second condition requires that the
competitors of the enterprise who is in control of the essential facility will
be incapable of practically or reasonably duplicating the essential facility.
OEMs have submitted that it does not prevent anyone from developing spare parts
and tools which are compliant with the spare parts of their respective branded
cars and the only restriction is imposed upon OESs who use OEM’s proprietary
information to manufacture the spare parts. Thirdly, it needs to be shown that
the monopolist has denied the access to the essential facility. OEMs have
submitted that it does not deny access of spare parts to any independent
repairers. Finally, it needs to be shown that it is feasible for the monopolist
to make the essential facility available to competitors. OEMs have submitted
that it is not feasible for it to make spare parts available in the open market
through other distribution channels. Therefore, as per the OEMs in the light of
the above submission, the DG’s analysis regarding the applicability of the
‘essential facility doctrine’ to the OEMs business practices is completely
baseless.
(iv) Submissions of the
OEMs with respect to their agreements with overseas supplier
18.20 OEMs have relied upon a
decision of the Commission in Exclusive Motors case (Case No: 52/2012)
concerning an alleged anti-competitive agreement between a foreign company and
its Indian group company. The Commission in Exclusive Motors case has
held that an agreement between entities constituting one enterprise cannot be
assessed under the provisions of the Competition Act, in accordance with the
internationally accepted doctrine of ‘single economic entity’. OEMs have
submitted that in light of the above decision, it is clear that an agreement
between OEMs and its overseas suppliers,
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which are its group/associate
companies, cannot be construed as an agreement for the purposes of scrutiny
under section 3 of the Competition Act. OEMs have submitted that the DG has
therefore erred in establishing the existence of an agreement between OEMs and
its overseas suppliers of spare parts for the purpose of section 3(4) of the
Act.
(v) Submissions of OEMs
regarding their agreements with OESs and Authorized Dealers
18.21 OEMs have further
submitted that vertical agreements are considered anti-competitive under
section 3(4) of the Competition Act, only if they cause an AAEC in India. OEMs
have submitted that in order for the DG to adjudge such adverse effect on the
market, an investigation has to be made, whether such OEMs possesses
significant market power or not. OEMs have further submitted that under the
‘rule of reason’ adopted under section 3(4) of the Competition Act, the DG is
required to consider the various factors listed in section 19(3) of the
Competition Act to determine if the alleged agreement causes or is likely to
cause an AAEC on competition within India. OEMs have stated that a plain
reading of section 19(3) of the Competition Act as well as established case
laws, suggest that while assessing whether an agreement causes an AAEC on
competition, it is incumbent upon the DG to consider and evaluate the likely
anti-competitive and the pro-competitive effects arising out of an agreement
before arriving at a finding of net impact on competition. OEMs have submitted
that, in the present case, the DG has failed to carry out a meaningful analysis
of AAEC on competition in line with the requirement under section 3(4) of the
Competition Act, read with the provisions of section 19(3) of the Competition
Act.
18.22 OEMs have submitted that
even if one were to assume that the agreements between the OEMs on one hand and
the OESs and the OEMs’ authorized dealers, on the other, impose exclusivity
conditions or are in the nature of refusal to deal, such agreements, based upon
the factors mentioned in section 19(3) of the Competition Act, do not cause an
AAEC on competition within India. The aftermarket of cars in India is flooded
with cheap and spurious spare parts and there are no ‘matching quality’
legislations in India,
C. No. 03 of 2011 Page 70 of
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unlike in other developed
jurisdictions which regulate the standard and quality of spare parts to be used
by independent repairers. Thus, OEMs by imposing certain reasonable
restrictions in its agreements with OESs and authorized dealers ensure that
spare parts that carry its trademark are procured only from its authorized
dealers, are genuine, have passed rigorous safety checks to ensure the safety
of their customers and the reputation of their brands. As per the OEMs, restrictions
imposed in their respective OESs and authorized dealer agreements ensure
customer safety by restricting the ability of unskilled independent repairers,
to repair such OEM branded cars, without being aware of the sophisticated
technology used in manufacturing such cars. The OEMs have claimed that the DG
has failed to take into account such benefits accruing to the automobile
customers under section 19(3) of the Competition Act.
18.23 As per the OEMs, the
imposition of restrictions in their agreements with the OESs and authorized
dealer is justified on the following grounds: (a) the technologically advanced
vehicles require specialized skills, infrastructure, regular training which is
available only at the authorized centers; (b) the restrictions improve the
distribution mechanism for the OEM branded cars, as such OEMs can reach a
larger customer base through authorized dealers and such market penetration
allows consumers more choice of various brands of cars, (c) training service
personnel is not a one time job, but a continuous process as new vehicles
models are launched and more advanced technologies are employed by OEMs on a
regular basis; (d) the independent repairers do not possess the expertise and
any mishandling of cars would be a hazard to public safety and environment; and
(e) lack of law or regulation requiring road side mechanics or garages to
register themselves with the government or to get any license to operate.
18.24 Additionally, OEMs have
referred to past decisions of the Commission to reiterate that for a vertical
restraint to adversely affect the competitive conditions at different levels of
production-supply chain, under section 3(4) of the Competition Act, it is
imperative for the parties to the agreement to possess some market power in
their respective market spheres. The OEMs have contended that they have
miniscule market shares in India’s
C. No. 03 of 2011 Page 71 of
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automobile market and have no
ability to cause any anti-competitive harm to the Indian automotive industry.
(vi) Submissions with
respect to Intellectual Property Rights of the OEMs and exemption under section
3(5) of the Competition Act
18.25 OEMs have submitted that
the DG in its reports, has failed to appreciate that the various OESs,
manufacture the spare parts of the respective OEMs with the aid of design,
drawings, technical specification, technology, know-how, tooling, quality
parameters etc., provided by the OEMs. Consequently, the proprietary interest
in the product will lie solely with the OEMs and their respective OESs are
precluded in law to deal in any other manner in terms of contract/agreement inter
se the parties. OEMs have submitted that section 3(5)(i) of the Competition
Act, expressly permits a person or enterprise to impose reasonable restrictions
as may be necessary for protecting any of his IPRs which have been or may be
conferred upon him under the provisions of the statutes specified in the
section. As per the OEMs, the restrictions imposed in their contracts with
their respective OESs and authorized dealers are permissible under Section 3(5)
of the Competition Act, wherein a person may be allowed to impose conditions
that are reasonable and necessary for protecting its IPRs in its commercial
dealings with other enterprises. OEMs have submitted that such restrictions are
further justified under the provisions of section 3(5) of the Competition Act inter
alia, to: (a) safeguard the buyers from purchasing spurious and counterfeit
spares; (b) to maintain the quality of the spare parts; (c) to ensure that the
spare parts meet the quality standards through quality and safety tests carried
out by the OEM; (d) to ensure organized system of warranty support to end
consumers.
18.26 OEMs have stated that
even if they are not the actual owner of certain IPRs, their respective parent
company are the owners of the same and they are entitled to protect the IPRs
through their subsidiaries in India pursuant to the various technology
agreements entered into between the overseas parent company and the Indian
subsidiary company. OEMs have stated that such technology agreements need not
mention each spare part but
C. No. 03 of 2011 Page 72 of
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it gives the right to their
Indian subsidiary to use and regulate the IPRs in India for the benefit of the
parent company. Further, OEMs have stated that even by assuming that the IPRs
of its parent companies are territorial, the same by virtue of the provisions
of the Copyright Act, 1957, can be enforced and regulated by their subsidiaries
in India and that the OEMs are entitled, under section 3(5) of the Competition
Act to impose reasonable contractual restrictions to protect the IPRs held by
their parent overseas companies, in India.
18.27 OEMs have submitted that
the DG has patently erred in its analysis of the restrictions placed by section
15 of the [Indian] Copyright Act. While the OEMs admit that certain spare parts
of their branded cars enjoy design protection in India, not all spare parts are
protected as designs, since spare parts are not a homogeneous group of
mechanical parts. Such spare parts range from complex mechanical and electronic
items to simple mechanical products, hence, all spare parts cannot be protected
under the [Indian] Designs Act. OEMs have submitted that for all such spare
parts, copyright protection is available and the restriction of section 15(2)
of the Copyright Act is not applicable in such instances. Hence, the OEMs have
submitted that the decision of the DG that the OEMs may not secure IPR
protection for all its spare parts, under India’s copyright laws is incorrect.
OEMs have argued that the designs of their respective spare parts are protected
either under the Designs Act or under the Copyright Act and further, since such
spare parts are manufactured using the OEM’s trade secrets and confidential
information, OEMs would still be entitled to protection under the established
common law principles.
(vii) Submissions of OEMs
on ‘Single Branding’ clauses of their agreements with authorized dealers
18.28 OEMs have denied the DG’s
assertion that they have placed restrictions on their respective authorized
dealers from taking up dealerships of other OEMs and that such restrictions
violate the provisions of the Competition Act. As per the OEMs, they have
authorized dealers whose promoters have dealerships of competing OEMs and that
the
C. No. 03 of 2011 Page 73 of
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restrictions placed on the
authorized dealers are only of taking prior approval. OEMs have submitted that
such restrictions are reasonable and allow the OEMs to assess the risk appetite
of the dealer and to protect the brand of the OEM from being diluted. OEMs have
stated that in situations where the same dealer is dealing in multiple brands,
it is difficult for an OEM to assess the performance of the dealer and also
assess the demand in relation to each vehicle as well as the sale of spares and
repair and maintenance. Therefore, as per the OEMs, the single branding clauses
of their authorized dealer agreements are merely reducing the risk of brand
erosion and losses in the existing dealership structure. As per the OEMs prior
consent requirement for competing dealerships is necessary to prevent other
OEMs from free-riding on the significant investments made to develop an
authorized dealer network.
(viii)Distinctness of the
Indian automobile market has not been considered by the DG
18.29 OEMs have submitted that
the DG while preparing its report(s) have erroneously compared the Indian
market (developing market) vis-a-vis the European market and the U.S. market
(developed markets) and the DG has relied upon the statutory provisions as
prevalent in such advanced economies to reach the conclusion that the OEMs are
acting in violation of the provisions of the Competition Act. OEMs have
submitted that the DG has failed to consider the distinctive factors between
the developed and the developing countries, such as the market share of
passenger vehicles, awareness of an automobile product (such as safety, effect
of use of genuine parts, etc) amongst consumers, certification authorities to
certify the quality of a repairer, service skill sets available to independent
repairers, legislative and regulatory framework etc. OEMs have submitted that
while considering the practice prevalent in the developed countries, it was
incumbent upon the DG to ascertain the practices of the OEMs operating in these
countries; the nature of agreements entered into by them with their dealers,
suppliers etc. OEMs have submitted that where the DG’s report(s) admittedly
lacks such statistical and analytical
C. No. 03 of 2011 Page 74 of
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data, any comparison with the
practices in such developed countries will create an adverse effect on the
country’s economy.
18.30 Specific Replies of
OPs
Reply of M&M
18.30.1 M&M has further
stated that the DG has incorrectly and selectively relied on international
developments (legislative and judicial precedents of foreign courts) without
adequately assessing the state of the market in India and the market realities
that distinguish the Indian market place from the rest of the world’s
automobile sector. In doing so, M&M claims, the DG has pre-empted the state
of development and growth of the automobile market in India and has wrongly
found M&M in violations of the provisions of the Competition Act. M&M
claims that the DG has not been able to make out a case of consumer benefit
that would mandate an intervention by the Commission given the state of
development of the automobile sector of India.
18.30.2 Pursuant to the
Commission’s order dated May 28, 2013, M&M has submitted additional
information in response to certain queries raised by the Commission. The
Commission had asked M&M to indicate which of its cars fall under the
following categories: low-end (price below Rs. 5 lakhs), medium range (Rs.5-10
lakhs), executive (Rs.10-20 lakhs) and luxury (Rs. 20 lakhs and above). M&M
categorized its various models in the abovementioned categories and has
submitted that most of its cars (based on ex-showroom price in Delhi) would
fall primarily under the category of Medium-range (Rs.5 -10 lakhs). Some variants
of M&M cars, such as “Scorpio VLX” and “XyloE9”, XUV 500 (F12) and “Rexton”
fall within the executive-range (Rs.10-20 lakhs). Another variant of “Rexton”
would fall under the luxury range (above Rs.20 Lakhs).
C. No. 03 of 2011 Page 75 of
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18.30.3 M&M provided its
response to the queries raised by the Commission in the course of hearing. Such
queries related to broad customer profile of M&M car owners, based upon
educational background, occupation, income level, age and gender. The M&M
also submitted its response regarding percentage of customers who seek M&M
services in the post warranty period in each of the abovementioned segments. It
was claimed that M&M invests regularly in the growth of its service network
ensuring that its customers are largely satisfied and that M&M has not
received any complaints about the inadequacy of its service network.
18.30.4 Further, M&M during
their oral submissions before the Commission on 04.02.2013 submitted that 100%
of M&M’s spare parts are available through its distribution network and 85%
of such spare parts are also available in the open market (bazaar channels)
and the remaining 15% can be accessed through authorized dealers. M&M
further submitted that switching costs of cars can be ascertained only after
the expiry of the warranty period, i.e., four years later, taking into
account the depreciated value of the vehicle. It was pointed out that after the
warranty period, the consumer can sell the car in the thriving second hand
market.
Reply of MSIL
18.30.5 MSIL has submitted that
the Informant has not raised any allegations against MSIL of any violation of
the provisions of the Act. Further, MSIL has submitted that the supplementary
information filed by the Informant on 28th
January 2012 specifically alleges a
contravention of the Act by Honda, Toyota, Skoda, General Motors, Ford,
Volkswagen, Nissan and “premium brand cars like Mercedes, BMW, Audi etc.”MSIL
has further submitted in paragraph 5 of the information that “he was
previously the owner of a Maruti vehicle and was easily able to take it to
independent repair workshops or the authorized dealers
C. No. 03 of 2011 Page 76 of
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as he deemed fit.” MSIL has further stated that the Informant was so
satisfied with MSIL’s after sale services that he had used MSIL’s practices as
the benchmark to assess the practices adopted by the Original Respondents
(Honda, Volkswagen and Fiat) in the aftermarket. MSIL has further stated that,
neither the DG nor the Commission has provided any reasons for expanding the scope
of the investigation to include MSIL. Therefore, MSIL has maintained that the
scope of investigation is not sustainable and the proceedings against MSIL
should be closed.
18.30.6 MSIL has submitted that
the Commission has not passed a valid prima facie order against MSIL and
that the DG was not empowered to enquire into MSIL’s conduct in the first
place. MSIL maintains that the order of the Commission, dated April 26, 2011
expanding the scope of the investigation beyond the Original Respondents is not
a reasoned order as required by the Supreme Court in Competition Commission
of India v. Steel Authority of India &Ors. In MSIL’s view, it is only
the Commission that has the power to initiate an investigation and by stating
that the DG shall have the power to unilaterally expand the scope of the
investigation with the prior permission of the Commission is an instance of
‘excessive delegation’, which is ultra vires to the provisions of the
Act and in violation to the principles of natural justice.
18.30.7 MSIL has submitted that
the DG has fundamentally misconstrued the nature of MSIL’s relationship with
its OESs. MSIL’s agreements with its OESs are ‘subcontracting’ arrangements.
Such sub-contracting agreements have created a new industry and have inherent pro-competitive
efficiencies. MSIL further stated that the DG has failed to appreciate that, in
absence of such exclusivity; MSIL would either shift the production of spare
parts in-house or cease its investments in developing OESs which would result
in the OESs having to make these investments themselves. Either scenario would
result in higher prices of spare parts.
C. No. 03 of 2011 Page 78 of
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MSIL
has further submitted that the abovementioned segmentation set by the
Commission is based purely on the basis of price and does not accurately
reflect the actual segmentation of MSIL cars. MSIL has submitted that this was
because different models of MSIL cars may fall in the same price range but are
targeted at different customer groups, are based on different expectations and
are meant for different uses.
18.30.11 The Commission asked
MSIL to provide its customer profile in each segment based upon educational
qualifications, occupation, income level, age and gender. Commission had
further asked MSIL to submit details of what percentage of its customers seek
its services post warranty period. MSIL has submitted such details regarding
MSIL vehicles out of the warranty period for the years 2010-11, 2011-12 and
2012-13. However, MSIL has claimed confidentiality over the contents of such
submissions. Regarding the question if the current service network was adequate
to handle all aftermarket requirements (service/repairs) of the car owners,
MSIL has submitted that 99.5% of all repair/maintenance functions on an MSIL
vehicle can be carried out by third-party manufactured diagnostic tools and as
a result independent repairers could easily repair an MSIL branded vehicle.
Consequently, MSIL has submitted that its current service network for all MSIL
cars is more than adequate to meet the aftermarket requirements.
Reply of GMI
18.30.12 Pursuant to the
Commission’s order dated May 28, 2013, GMI has submitted additional information
in response to certain queries raised by the Commission. The Commission had
asked GMI to indicate which of its cars fall under the following categories:
low-end (price below Rs. 5 lakhs), medium range (Rs.5-10 lakhs), executive
(Rs.10-20 lakhs) and luxury (Rs. 20 lakhs and above). GMI
C. No. 03 of 2011 Page 81 of
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VWIPL
was further asked to provide a broad profile of its car owners in each segment,
based upon educational qualifications, occupation, income level age and gender.
VWIPL has submitted such information, but VWIPL has claimed confidentiality
over the contents of such information.
18.30.15 VWIPL was further
asked by the Commission to submit details regarding what percentage of
Volkswagen’s customers seek the services of its authorized dealers post
warranty and what percentage of its customers are repeat customers. VWIPL has
submitted such information but has claimed confidentiality over such
disclosures. The Commission has further asked VWIPL if its current service
network is adequate to handle all its aftermarket requirements (service/spares)
of car owners. VWIPL has submitted that its current service network is adequate
to handle all after market requirements (service and spares) of cars owners.
Reply of Fiat
18.30.16 Pursuant to the
Commission’s order dated May 28, 2013, Fiat has submitted additional
information in response to certain queries raised by the Commission. The
Commission had asked Fiat to indicate which of its cars fall under the
following categories: low-end (price below Rs. 5 lakhs), medium range (Rs.5-10
lakhs), executive (Rs.10-20 lakhs) and luxury (Rs. 20 lakhs and above). Fiat
categorized its various models in the abovementioned categories, in the
following manner. Models of Fiat cars falling in the medium range vehicles
(Rs.5-10 lakhs) include, Punto and Linea. Fiat was further asked to provide a
broad profile of its car owners in each segment, based upon educational
qualifications, occupation, income level age and gender. Fiat has submitted a
profile of its customers based upon occupation, average age and gender.
However, since the Commission has not relied upon such information in order
C. No. 03 of 2011 Page 82 of
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to reach its decision in the
present case, the same has not been reproduced in this order.
18.30.17 Fiat was further asked
by the Commission to submit details regarding what percentage of Fiat’s
customers seek the services of its authorized dealers post warranty and what
percentage of its customers are repeat customers. Fiat has submitted that about
42% of its customers use its authorized service centres in the post warranty
period. The Commission has further asked Fiat if its current service network is
adequate to handle all its aftermarket requirements (service/spares) of car
owners. Fiat has submitted that, keeping in view the small number of Fiat cars
sold, its current service network is adequate enough to handle all after market
requirements (service and spares) of cars owners.
Reply of Nissan
18.30.18 Nissan has submitted
that it had started commercial production in May 2010 and all of its cars are
under the warranty period. Nissan has further submitted that since April 1,
2012, it is engaged only in distribution of cars and sale of spare parts (after
sale services) and from the aforementioned date Nissan is no longer acting as
an OEM or car manufacturer, it should not be treated at par with the other
OEMs.
18.30.19 Further, pursuant to
the Commission’s order dated May 28, 2013, Nissan has submitted additional
information in response to certain queries raised by the Commission. The
Commission had asked Nissan to indicate which of its cars fall under the
following categories: low-end (price below Rs. 5 lakhs), medium range (Rs.5-10
lakhs), executive (Rs.10-20 lakhs) and luxury (Rs. 20 lakhs and above). Nissan
categorized its various models in the abovementioned categories, in the
following manner. Models of Nissan cars falling in the range of low end
vehicles include few models of Micra, those under the medium range vehicles
C. No. 03 of 2011 Page 83 of
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(Rs.5-10 lakhs) include, some
models of Micra, Sunny and Evalia. Those models of Nissan cars falling under
the executive class (Rs.10-20 lakhs) include one model of Evalia. Nissan was
further asked to provide a broad profile of its car owners in each segment,
based upon educational qualifications, occupation, income level age and gender.
Nissan has submitted that it does not maintain any such data in the above
categories. Nissan has submitted results of a sample survey of 355 of its
customers which was conducted by New Car Buyer Survey (owned by International
Research Consultants Limited). Since the Commission has not relied upon such
information in order to reach its decision in the present case, the same has
not been reproduced in this order.
18.30.20 Nissan was further
asked by the Commission to submit details regarding what percentage of Nissan’s
customers seek the services of its authorized dealers post warranty and what
percentage of its customers are repeat customers. Nissan has submitted that it
does not have such data at present. Nissan has submitted that it has started
selling cars in India only in July 2010 and most of the owners of Nissan cars
are first time owners. The Commission has further asked Nissan if its current
service network is adequate to handle all its aftermarket requirements
(service/spares) of car owners. Nissan has submitted that its current service
network is adequate enough to handle all after market requirements (service and
spares) of cars owners keeping in view number of cars sold by it so far.
Reply of BMW
18.30.21 Pursuant to the
Commission’s order dated May 28, 2013, BMW has submitted additional information
in response to certain queries raised by the Commission. The Commission had
asked BMW to indicate which of its cars fall under the following categories:
low-end (price below Rs. 5 lakhs), medium range (Rs.5-10 lakhs), executive
(Rs.10-20 lakhs) and luxury (Rs. 20 lakhs and above). BMW has submitted that
all BMW branded automobiles fall under the ‘luxury’ segment. BMW was further
asked to provide a broad profile of its car owners in
C. No. 03 of 2011 Page 84 of
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each segment, based upon
educational qualifications, occupation, income level age and gender. BMW has
submitted a profile of its customers, however, since the Commission has not
relied upon such information in order to reach its decision in the present
case, the same has not been reproduced in this order.
18.30.22 BMW was further asked
by the Commission to submit details regarding what percentage of BMW’s
customers seek the services of its authorized dealers post warranty and what
percentage of its customers are repeat customers. BMW has submitted that such
data is not available, however, approximately 78% of BMW branded automobiles
have availed post warranty services from BMW authorized workshops. BMW has
submitted that no separate data is available regarding repeat customers. The
Commission has further asked BMW if its current service network is adequate to
handle all its aftermarket requirements (service/spares) of car owners. BMW has
submitted that its current service network is adequate enough to handle all
after market requirements (service and spares) of cars owners.
Reply of Hindustan Motors
18.30.23 Pursuant to the
Commission’s order dated May 28, 2013, Hindustan Motors has submitted
additional information in response to certain queries raised by the Commission.
The Commission had asked Hindustan Motors to indicate which of its cars fall
under the following categories: low-end (price below Rs. 5 lakhs), medium range
(Rs.5-10 lakhs), executive (Rs.10-20 lakhs) and luxury (Rs. 20 lakhs and
above). Hindustan Motors categorized its various models in the abovementioned
categories, in the following manner. Models of Hindustan Motors cars falling in
the range of low end and medium range vehicles include different models of
Ambassador. Those models of Hindustan Motors cars falling under the luxury
class (above Rs.20 lakhs) include Pajero Sports vehicles. Hindustan Motors was
further asked to provide a broad profile of its car owners in each segment,
based upon educational qualifications, occupation,
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income level age and gender.
Hindustan Motors has submitted such information, however, since the Commission
has not relied upon such information in order to reach its decision in the
present case, the same has not been reproduced in this order.
18.30.24 Hindustan Motors was
further asked by the Commission to submit details regarding what percentage of
Hindustan Motor’s customers seek the services of its authorized dealers post
warranty and what percentage of its customers are repeat customers. Hindustan
Motors has submitted that about 27% of its customers use the services of its
authorized workshops post warranty period. The Commission has further asked
Hindustan Motors if its current service network is adequate to handle all its
aftermarket requirements (service/spares) of car owners. Hindustan Motors has submitted
that its current service network is adequate to handle all after market
requirements (service and spares) of cars owners for both Ambassador and Pajero
models of cars.
Reply of Tata Motors Limited
18.30.25 Tata has submitted
that even those spare parts which are used only in Tata branded cars are also
available from different sources, other than Tata’s authorized outlets. Tata
has stated that there are large number of parts which are known as ‘proprietary
parts’ which are manufactured by various manufacturers of parts who supply such
parts to Tata and who are also referred to as OESs. In respect of such
proprietary parts there is no condition in the OES agreement to obtain ‘prior
consent’ of Tata before selling them to any party and such spare parts are
freely supplied to the aftermarket without obtaining prior consent from Tata.
Further, Tata has submitted that such OESs which supply ‘build to print’ spare
parts to Tata and who are required to obtain consent before selling the same
directly to any other party, also supply a large number of such part directly
to the aftermarket. Tata has submitted that most of the spare parts that are
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supplied by OESs to Tata are
also supplied directly by OESs to the aftermarket and are available in
abundance in the aftermarket.
18.30.26 Pursuant to the
Commission’s order dated May 28, 2013, Tata has submitted additional
information in response to certain queries raised by the Commission. The
Commission had asked Tata to indicate which of its cars fall under the
following categories: low-end (price below Rs. 5 lakhs), medium range (Rs.5-10
lakhs), executive (Rs.10-20 lakhs) and luxury (Rs. 20 lakhs and above). Tata
has categorized its various models in the abovementioned categories, in the
following manner.
Price range
|
Segment referred to in the
query
|
Cars falling under the
respective price ranges
|
Price below Rs. 5.00 lakhs
|
Low End
|
Nano, Indica and Venture
|
Price (Rs.5 laks-10 lakhs)
|
Medium range
|
Indica, Vista, Indigo, CS,
Indigo, Manza, Sumo, Sumo Grande, Safari
|
Price (Rs.10 lakhs-20 lakhs)
|
Executive range
|
Xenon, Aria
|
Price (above 20 lakhs)
|
Nil
|
Nil
|
