‘Discount control policy violates competition norms’
New Delhi- Competition Commission of India (CCI) on Monday imposed a penalty of Rs 200 crore on Maruti Suzuki for restricting discounts offered by its dealers and directed the country’s largest car maker to cease and desist from indulging in unfair business practices.
Passing an order, the fair trade regulator also flagged practices like appointing ‘Mystery Shopping Agencies’ and preparing ‘Mystery Audit Reports’ as part of enforcing the company’s discount control policy.
The watchdog slapped the fine of Rs 200 crore as it found that Maruti Suzuki India Ltd (MSIL) indulged in anti-competitive conduct of Resale Price Maintenance (RPM) in the passenger vehicle segment by way of implementing discount control policy vis-a-vis dealers, an official release said on Monday.
MSIL had an agreement with its dealers whereby the dealers were restrained from offering discounts to the customers beyond those prescribed by it. In other words, the company had a discount control policy and dealers who wanted to offer additional discounts were required to compulsorily seek the company’s prior approval, as per the regulator.
According to the CCI, any dealer found violating the policy was threatened with imposition of penalty, not only upon the dealership but also upon its individual persons, including direct sales executive, regional manager and showroom manager.
To enforce the discount control policy, the watchdog said the company appointed ‘Mystery Shopping Agencies’ (MSAs) who used to pose as customers to MSIL dealerships to find out if any additional discounts were being offered to customers.
“If 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,” the release said.
Further, the CCI noted that if the clarification offered by the dealer concerned was not satisfactory, then penalty would be imposed on the dealership and its employees, accompanied in some cases, by the threat of stopping supplies.
“MSIL would even dictate to the dealership where the penalty had to be deposited and utilisation of the penalty amount was also done as per the diktats of MSIL,” the release said.
The CCI found that the car maker not only imposed the discount control policy on its dealers but also monitored and enforced the same by monitoring dealers through MSAs, imposing penalties on them and threatening strict action like stoppage of supply, collecting and recovering penalty, and utilisation of the same.
Such activities have resulted in appreciable adverse effect on competition within India, it noted.
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