Tuesday, August 26, 2014

Honda Siel Cars India, Volkswagen India, Fiat India Automobiles, BMW India, Ford India, General Motors India, Hindustan Motors, Mahindra & Mahindra, Mercedes-Benz India, Nissan Motor India, Skoda Auto India and Toyota Kirloskar Motor have also been penalised by the Competition Commission of India

THE COMPETITION COMMISSION OF INDIA IMPOSED A 

PENALTY TOTALING RS. 2.544.64 ON THE AFORESAID 14 CAR 


MANUFACTURERS FOR THE ALLEGED UNFAIR TRADE PRACTICES on a 


complaint by  Shri Shamsher Kataria against M/S.Honda Siel Cars India Ltd 


and others in the application 03/2011 and the order was delivered on                   

25-08-2011.




ORDER


COMPETITION COMMISSION OF INDIA



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 of 215
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
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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.
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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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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
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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
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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 215

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.
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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
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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.
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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.
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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:
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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,
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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:
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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,
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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
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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
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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
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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
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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).
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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
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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.
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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
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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
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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
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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
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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


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