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Current Affairs

Maruti Suzuki fined by CCI

Date: 26 August 2021 Tags: Miscellaneous

Issue

The Competition Commission of India has fined Maruti Suzuki India Ltd. (MSIL) Rs 200 crores on charges of unfair business practices.

 

Background

The automaker was accused of punishing its dealers and employees for offering additional discounts to customers.

 

Details

  • The company has agreements with various dealers across the country for setting up limits for the maximum discounts that can be offered.

  • To ensure that the policy is adhered, steep penalties are imposed for violations. To check if their policies are followed, the company made use of mystery shopping agencies.

  • Fines were collected from dealers, managers, direct sales executive and the team leader if the company found out that they offered discounts higher than those authorized.

 

The policy

  • Dealers were sent a detailed penalty list for violation of the discount policy. The first violation attracted Rs 50,000 fine, followed by 1 lakh for the 2nd offence and 1 lakh more for additional offences subsequently.

  • In one instance, the dealer was fined Rs 50,000 and sales executive Rs 5,000 for giving additional discount of Rs 1,850 on a kit.

 

The proof

  • The CCI managed to get proof of the fine regime from emails sent by the company to various dealers across the country.

  • Sales executives found violating the policy more than twice were sacked from the position and blacklisted from the company network.

  • The proof of dealers requesting the company permission for giving additional discounts was also collected from emails.

  • The company had detailed policy for using the funds collected from penalties. They were often used for advertising purposes.

 

Price regulation

  • Controlling the price of the product would prevent inter-brand and intra-brand rivalry. This would not give customers the best price for the products and is considered anti-competition practice.

  • If a particular brand refuses to reduce its prices competitively, it would reduce pressure on other companies to set competitive prices.

 

Maruti Suzuki’s stance

  • The company says that it does not have any formal discount restriction agreement with its dealers.

  • CCI says that anti-competition law does not necessarily look at formal agreements. The emails establish the proof of wrong practice by the company.