CCI (Competition Commission of India) on Monday imposed a the penalty of Rs 200 crore on Maruti Suzuki for restricting discounts offered byits dealers and directed the country's largest carmaker to cease and desistfrom indulging in unfair business practices.
Passing an order, the fair trade regulator also flaggedpractices like appointing 'Mystery Shopping Agencies' and preparing 'MysteryAudit 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 SuzukiIndia Ltd (MSIL) indulged in anti-competitive conduct of Resale PriceMaintenance (RPM) in the passenger vehicle segment by way of implementingdiscount control policy vis-a-vis dealers, an official release said on Monday.
MSIL had an agreement with its dealers whereby the dealers wererestrained from offering discounts to the customers beyond those prescribed byit. In other words, the company had a discount control policy and dealers whowanted to offer additional discounts were required to compulsorily seek thecompany's prior approval, as per the regulator.
According to the CCI, any dealer found violating the policy wasthreatened with the imposition of penalty, not only upon the dealership but alsoupon its individual persons, including direct sales executive, regional managerand showroom manager.
To enforce the discount control policy, the watchdog said thecompany appointed 'Mystery Shopping Agencies' (MSAs) who used to pose ascustomers to MSIL dealerships to find out if any additional discounts werebeing offered to customers.
"If found offered, the MSA would report to MSIL managementwith proof (audio/ video recording) who, in turn, would send an e-mail to theerrant dealership with a 'Mystery Shopping Audit Report', confronting them withthe additional discount offered and asking for clarification," the releasesaid.
Further, the CCI noted that if the clarification offered by thedealer concerned was not satisfactory, then the penalty would be imposed on thedealership and its employees, accompanied in some cases, by the threat ofstopping supplies.
"MSIL would even dictate to the dealership where thepenalty had to be deposited and utilization of the penalty amount was also doneas per the diktats of MSIL," the release said.
The CCI found that the carmaker not only imposed the discountcontrol policy on its dealers but also monitored and enforced the same bymonitoring dealers through MSAs, imposing penalties on them and threateningstrict action like stoppage of supply, collecting and recovering penalty, and utilizationof the same.
Such activities have resulted in appreciable adverse effects oncompetition within India, it noted.