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Maruti Suzuki penalised Rs 200 cr by competition regulator for restricting dealers from giving discounts

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A Rs 200 crore penalty has been imposed on carmaker Maruti Suzuki India Limited (MSIL) by India’s competition regulator—the Competition Commission of India (CCI). The penalty has been imposed for indulging in anti-competitive conduct by way of discount control policy and the carmaker has been ordered to put an end to the practice.

Notably, the regulator said that the conduct of MSIL resulted in an adverse effect on competition within India and is in contravention of the provisions of the Competition Act, 2002.

Agreement with dealers Maruti

According to a statement issued by the Ministry of Corporate Affairs,  the regulator found MSIL had an agreement with its dealers whereby the dealers were restrained from offering discounts to the customers beyond those prescribed by the company. It essentially means that MSIL had a ‘Discount Control Policy’ in place for its dealers through which they 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 such Discount Control Policy was threatened with a penalty, not only upon the dealership but also upon individuals, including direct sales executive, regional manager, showroom manager, team leader, etc.

Hired agencies to keep a tab

In order to impose the Discount Control Policy, MSIL 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 statement added.

If clarification was not offered by the dealership to the satisfaction of MSIL, the 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.

 

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