CCI by its order dated July 27, 2015 has imposed a suspended penalty on HMIL. In continuation of the earlier order of CCI against car manufacturers, wherein the 14 car manufacturers were penalised for abusing their dominant position by restricting sale and supply of spare parts and maintenance services in their respective aftermarkets, the CCI vide its order dated July 27, 2015, penalised HMIL for similar conduct of restricting supply of services in the aftermarket of its cars. The CCI had not proceeded against HMIL through its earlier order, as HMIL had obtained a stay against it from the Hon’ble High Court of Madras.
The conduct relates to the aftermarkets of spare parts (including diagnostic tools, technical manuals, catalogues, etc.) and provision of maintenance services in the aftermarkets of the respective cars of each manufacturer. Each car manufacturer, including HMIL, has been found dominant in its respective aftermarket. In abuse of its dominant position, HMIL restricted sale of spare parts to independent services providers (from suppliers or through over-the-counter sales from dealers), thus restricting their ability to compete with the authorised dealers of car manufacturers in the aftermarket of HMIL cars. The warranty was considered void if the car was repaired by an independent repairer. Further, HMIL also unfairly escalated the price of spare parts for its cars.. The exclusive distribution agreements, as well as refusal to deal clauses, between car manufacturers and their original equipment suppliers as well as car manufacturers and authorised dealers were held to be violative of section 3(4) of the Act. Owing to the above findings against HMIL, the CCI imposed a penalty at the rate of 2% of the average turnover of the preceding three years, amounting to INR 420 crore. It should be noted that the penalty is suspended as the Madras High Court has directed the CCI not to pass final orders in the present case.
It should be noted that similar allegations were made against Mahindra Reva Electric and Premier Ltd. As regards Premier, the CCI considered that most of its cars were under warranty and hence the alleged abusive conduct could not be tested. Further, as regards Reva, the CCI found that the spare parts of said manufactures were available over-the-counter to some extent. The CCI considered the above mitigating factors to work in favour of Reva and Premier and decided not to impose penalty on them in the particular case.