Maruti Suzuki, India’s largest carmaker, has been slapped with a Rs 200 crore fine by the Competition Commission of India (CCI). In a press release issued on 23 August, the CCI announced it was imposing this fine on the country’s biggest carmaker for indulging in unfair business practices.
Maruti Suzuki has been hit with the fine for “indulging in anti-competitive conduct of Resale Price Maintenance (RPM) in the passenger vehicle segment by way of implementing Discount Control Policy vis-à-vis dealers,” the regulator said in a release.
According to the CCI’s statement, Maruti Suzuki had an agreement with its dealers whereby the dealers were restrained from offering discounts to the customers beyond those prescribed by MSIL. In other words, MSIL had a ‘Discount Control Policy’ in place for its dealers whereby the dealers were discouraged from giving extra discounts, freebies, etc., to the consumers beyond what was permitted by MSIL. If a dealer wanted to offer additional discounts, prior approval of MSIL was mandatory.
Any dealer found violating the Discount Control Policy was threatened with the imposition of penalty, not only upon the dealership but also upon its individual persons, including Direct Sales Executive, Regional Manager, Showroom Manager, Team Leader, said the CCI.
As per the CCI, to enforce the Discount Control Policy, MSIL appointed Mystery Shopping Agencies (MSA) who used to pose as customers at MSIL dealerships to find out if any additional discounts were offered to customers. If found offered, the MSA would report to MSIL management with proof (audio/ video recording), who, in turn, would send an e-mail to the errant dealership with a ‘Mystery Shopping Audit Report,’ confronting them with the additional discount offered and asking for clarification.
Maruti Suzuki imposed the Discount Control Policy on its dealers and monitored and enforced the same by monitoring dealers through MSAs, imposing penalties on them, and threatening strict action like stoppage of supply, collecting, and recovering penalty, added the CCI statement. This, according to the CCI, resulted in an “appreciable adverse effect on competition within India.”
The watchdog has directed the company to cease indulging in anti-competitive practices.
In response to the CCI announcement, a Maruti Suzuki spokesperson said, “We have seen the order dated 23 August 2021 published by the Competition Commission of India. We are examining the order and will take appropriate actions under the law. MSIL has always worked in the best interests of consumers and will continue to do so in the future.”